Source: Cowen and Company
The Cowen Insight
In 2017, more than 20 states have introduced bills to increase the minimum age to purchase tobacco products to 21. We continue to benchmark the roll-out of states increasing the tobacco purchasing age to indoor smoking bans, and maintain our estimate for states raising the tobacco purchasing age to have a ~10 bps volume impact on a progressive compound basis, over the next 5 years.
Where We Stand Today
In 2016, Hawaii and California became the first two states to raise the minimum age to purchase tobacco to 21, with Washington D.C. passing a similar measure last year. As such, 7% of U.S. cigarette volumes are now in states with a minimum purchase age of 21. Outside of states, we've also seen 212 cities and counties raise the minimum age to 21 according to tobacco21.org, including major cities such as Boston, Chicago and New York.
Tobacco 21 Legislative Proposals Heating Up
In 2017, we've already seen 22 states introduce measures to raise the tobacco purchasing age to 21, though bills have already failed in 4 states. Indeed, we've seen similar legislation introduced at the state level over the past few years, but that pace of bill introduction has increased meaningfully, as just 15 states introduced bills to increase the tobacco purchasing age in 2016. Of these states with proposals introduced this year, many have not seen a tobacco 21 bill proposed in recent years, including Florida (6.5% of volumes).
Volume Impact Continues to Be Manageable
We maintain our belief that policy change raising the minimum tobacco purchasing age will progress similar to what we have seen for indoor smoking bans. While California was also the second state to pass comprehensive smoking bans in 1998, we saw other states follow California a few years after passage, with ~60% cigarette volumes being covered by states with comprehensive smoking bans by 2008. Similarly, we hold our assumption that ~60% of cigarette volumes will be covered in states with a minimum purchase age of 21 in 10 years. As such, we maintain our estimate for states raising the minimum age to 21 to have a ~10 bps impact on the 5-year volume CAGR, though we reflect a deterioration in youth incidence, offset by a stabilization in per capita consumption.
Outside of the U.S. we've seen a bigger focus on utilizing excise taxes and graphic health warnings to fight against tobacco use, but initiatives to raise the tobacco age could gain momentum. Earlier this month, Thailand raised the minimum age to purchase tobacco products to 20, while Health Canada said that it would consider raising the tobacco purchasing age to 21. Meanwhile in Russia, we've seen a proposal this year to ban smoking for anyone born after 2015 and have seen proposals to raise the tobacco purchasing age in the past.