Broker snap: Tobacco industry has strong case against plain packaging, says Berenberg

29th Nov 2013 09:48

The share prices of London-listed Imperial Tobacco and British American Tobacco rebounded slightly on Friday morning after being hit by concerns over plain packaging (PP) the day before, as analysts at Berenberg said that the industry has a 'very strong case to fight in the courts'.Reports on Thursday said that the UK government was to push ahead with a study on PP after finding enough evidence to support the measure, representing a U-turn by Prime Minister David Cameron after an initial study was abandoned.Unsurprisingly, Berenberg said that the move was "negative for the sector" but singled out Imperial Tobacco and Japan Tobacco as the most vulnerable as they have the most exposure to the UK.However, the broker said it was "surprised" by the news and argued that data after nearly a year still does not support the premise that PP makes any difference in smoking consumption or prevalence.Meanwhile, Berenberg also highlighted that PP could provide an incentive for increased sales in the illicit tobacco market."If the UK does pass PP legislation, we believe it will be sued under EU property protection statutes and UK law," the broker said."We think the tobacco industry has a very strong case to fight in the courts; even if the courts defer to 'public health' concerns and allow the policy to be implemented, we are convinced that the tobacco companies could win hundreds of millions to billions of pounds by arguing that the taking of their property requires 'just compensation'."Imperial Tobacco was trading 0.17% higher at 2,320p on Friday morning, while larger rival British American Tobacco was up just 0.08% at 3,253p.BC