Investors in tobacco stocks should closely monitor the potential implications of a proposed UK legislation that would gradually raise the legal age for consuming cigarettes. The plan, introduced by UK Prime Minister Rishi Sunak, aims to eventually ban smoking through a series of one-year increases in the age requirement to purchase cigarettes. While the proposal does not impact current smokers’ rights, it could prompt tobacco companies to reassess their strategies.

If implemented, this type of restriction could set a precedent for other European countries. Consequently, it is crucial for nicotine producers to develop a solid smoke-free strategy. According to Bank of America analyst Lisa Lewandowski, it is likely that other Western European nations may take a similar course of action due to rising healthcare costs. Public health and environmental advocates have already called for a broad European ban on cigarette filters to combat pollution and discourage smoking.

Major tobacco companies, such as Philip Morris International (NYSE:PM), have already begun diversifying their portfolios by offering smoke-free alternatives like heated tobacco and tobacco-free oral nicotine pouches. However, the proposed UK legislation could require these companies to reassess their timelines for implementing such alternatives.

In the UK cigarette market, Imperial Brands PLC (OTCQX:IMBBY) currently holds the largest market share by pounds, followed closely by Japan Tobacco Inc. (OTCPK:JAPAF) due to its acquisition of Gallagher, the owner of Benson & Hedges and Camel Brands. British American Tobacco (BTI) lags behind in third place, with Philip Morris International ranked fourth. While revenue from the UK contributes only 1-2% of Philip Morris’ total sales, it is still a significant market.

The UK is also considering stricter regulations on vaping. Proposed measures include restricting flavors and marketing descriptions of vaping products to discourage youth usage, regulating point-of-sale displays in stores, and standardizing vapor packaging and product presentation.

The proposed smoking and vaping restrictions have faced pushback from the Tobacco Manufacturers Association, who argue that they disproportionately infringe on adults’ rights and could contribute to the growth of the black market.

News of the proposed UK legislation has caused tobacco stocks to decline in recent weeks as investors digest the potential impact on the industry.