Tobacco Companies See Clouds in Germany

It seems that everywhere you turn nowadays in Europe, smoking is under attack.

Norway, Italy, Ireland and most recently, Sweden, have introduced bans on smoking in bars and restaurants. Higher tobacco taxes are leading to declining sales, as are EU-wide limits on tobacco advertising. Leading German politicians and European organizations have now begun campaigning for smoking to be off limits to the expected 3.37 million fans expected to file into World Cup stadiums next June for the month-long tournament.

And the world's major tobacco companies seem worried not just about the decline in sales and ads, but in the flourishing black market for tobacco goods streaming in from eastern Europe. In the eastern part of Germany, 30 percent of the total number of cigarettes sold are no longer taxed.

Ad and declining sales more damaging

"In Frankfurt an der Oder, on the Polish border, around 80 percent of the cigarettes no longer are taxed," said Lars Grosskurth, spokesman for Reemtsma, the daughter company of Imperial Tobacco, the fourth largest tobacco company in the world.

The black market puts a dent in sales, but potentially more damaging long term are the measures to stifle cigarette consumption. Packs in all EU countries now carry glaring black headlines warning smokers that nicotine can, among other things, reduce their sex drive, or kill them.

Such measures are already starting work. According to the German Cancer Research Institute in Cologne, the number of cigarettes smoked dropped from 168 billion in 2002 to 148 billion 2004, a reduction of 12 percent, the biggest in German history.

Germans lag behind

But the German government itself is not helping much, say anti-tobacco organizations. The country is one of the few to have not completely complied with the EU directive on tobacco advertising. The Social Democrats blame the Christian Democratic party for blocking legislation in the upper house of parliament, but have also filed suit against the EU directive in the European Court of Justice saying such a directive is not within the Union's jurisdiction.

But the government has signed an agreement with hotel and restaurant organizations that, while not completely banning it, will seek to curb smoking in those places. Anti-smoking advocates seem to have increasing support for their work. A recent survey revealed that 51 percent of Germans are against a smoking ban. In 2003, it was 62 percent.

Is it time for tobacco companies to begin looking around for other ideas? British American Tobacco is already diversified, having invested in paper factories, insurance firms and department stores in the 1960s and 1970s. But spokesman Rainer Stubenvoll says his company is not running up the white flag just yet.

"We're a shareholder company, and the shareholder doesn't want to see a mix from us," he said. "They want to see the clear orientation of BAT as a tobacco company."