The "Law of Unintended Consequences" and "Plain Packaging"

Despite a wave of regulation in Europe to ban branding on cigarette packages, tobacco shares have outperformed

Excerpt:

As with other major tobacco legislation—from advertising restrictions to bans on smoking in public—authorities hope plain packaging will reduce smoking rates. That means sales volumes at tobacco companies are likely to fall, as they have for many years across the industry. ... But with volumes in long-term decline, tobacco companies invest less in production facilities and new machinery. Not to mention the millions of dollars saved every year through advertising restrictions. That frees up cash, which is largely returned to investors. Europe’s three major listed tobacco companies have averaged dividend yields of just over 4% in the last three years, compared with 2.7% on the pan-European Stoxx Europe 600 index, according to FactSet. Some tobacco investors say plain packaging—which requires large, graphic health warnings on packs—could even benefit the companies because it will lock in market share. “Regulation has made it almost impossible to build a new brand,” said Simon Raubenheimer, a portfolio manager at Allan Gray Proprietary Ltd., a top British American Tobacco PLC shareholder. “The barriers to entry are massive. That’s probably the biggest positive.”

Comment: Imagine .... "Plain Packaging" advantages tobacco companies because it saves them money on advertisting and hinders competition. Image source. I do not invest in tobacco stocks despite their attractive dividends.

The stocks: