NEW YORK -- One of the major tobacco regulatory trends of the past year has been increasing the tobacco purchasing age to 21. While Hawaii has been the only state to successfully move to 21, 16 states are currently looking at proposals to do the same.
With California likely to do so, the 21 “movement” seems to be gaining momentum—although Cowen Group analyst Vivien Azer noted that both Vermont and Tennessee rejected 21 measures.
“Indeed, we have seen five states already reject similar proposals this year, which gives us confidence that a change to the national age for tobacco purchases will occur over time,” Azer wrote in a research note. "[It’s] similar to the rollout that we have seen for indoor smoking bans in the U.S.”
To better understand how minimum age increases might roll out and affect the industry, Azer examined the history of indoor smoking bans in the United States. Utah was the first state to implement an indoor smoking ban in 1995, with that ban applying specifically to restaurants; California was next, with a more comprehensive smoking ban in 1998.
“While those two states were early movers, most of the state level activity did not begin to occur until 2002,” said Azer. “And, between 1998 and 2008, we saw that only 60% of states (in volume terms) had widespread smoking restrictions, a good reminder that tobacco regulation tends to come in fits and starts.”
Assuming minimum purchase age restrictions also follow the pattern of taking 10 years for 60% of the country to adopt 21 laws, Azer predicted the industry would lose an incremental 0.1% volumes over the next five years as a result. Should 21 laws move at a faster pace (with 60% of the country moving to 21 in five years instead of 10), Azer predicted a 0.24% loss in industry volumes.
“Given our expectation for industry volumes to fall 3%, absent disruptive regulation or taxation, we view this incremental headwind as quite manageable,” she said.
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