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You’ve probably noticed the steady downward trend in smoking over the past 50 years. In a note today, Citi says this trend will continue, causing smoking to “virtually disappear in 30-50 years.”But there’s also negative short-term data that prompted Citi to downgrade large cap tobacco stocks (BTI, PM and IMT) to Hold from Buy.
Tobacco companies were forced to cut prices facing declining sales around the world. Cigarettes also faced big tax increases in Spain, Russia and Japan, a trend that may continue in other countries. Citi warns about the effects of generic packaging in the EU and Australia and of health warnings that will cover 75% of packs in Canada.
However, there are a few places keeping sales from crashing. First, the U.S., where taxes are relatively low, prices high and health warnings small. Second, China, where 50,000 cigarettes are consumed every second.