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Europe: Where The Smoke Is Clearing


It's pouring rain on Friday evening in Cork city center, and pub owner Gareth Kendellen is thrilled to have a hole in his roof. In fact, it has saved his business. When Ireland became the first country in the world to ban smoking in all workplaces, including bars and restaurants, on Mar. 29, Kendellen watched customers dwindle and sales plunge 30% at his Paddy the Farmer's pub. Then he hit on a radical solution, spending $25,500 to cut a hole in the roof and create a 50-square-foot room beneath it, open to the sky but separated from the rest of the pub by brick and glass walls. His Players-puffing patrons flocked back, secure in the knowledge that an outdoor smoke hole was just a step away. "Takings are back to normal, although we have to keep a stock of free umbrellas behind the bar," he says.

Looks like a lot more European bar owners are going to have to pull out the saws pretty soon. Under pressure from medical organizations and restive nonsmokers, national governments around Europe are finally getting serious about tackling tobacco. Norway and Malta have already followed Ireland's lead, and Sweden will join the club next summer. This month, Britain is expected to announce its own curbs, which industry observers predict will outlaw smoking in restaurants and pubs that serve food. Even in France, where restaurants and Gauloise seem as indelible a partnership as croissants and coffee, enforcement of a largely ignored restriction on indoor smoking has been stepped up.

The anti-smoking campaigns are starting to work. Cigarette sales in Europe, excluding heavy smokers Greece and Portugal, have fallen 6.3% in the past two years, says British research group Euromonitor International, and they are expected to drop an additional 6.4% by 2009. "There has been a recent shift in public opinion against smoking," says Zora Milenkovic, Euromonitor's head of tobacco industry research. "More people than ever are aware that passive smoking can kill, and I think more countries will start cracking down."

Ireland's example gives European bar owners and tobacco companies plenty to worry about. Gallaher Group LLC (GLH), which holds half the Irish cigarette market and is Europe's third-largest tobacco company, says the ban helped push total cigarette sales in Ireland down 7.5% in the first six months of 2004. Gallaher is campaigning through the Tobacco Manufacturers Assn. for softer regulations in Britain, where it has 38% of the market. "We understand that restrictions need to be made, but I hope Britain stops short of pubs," says Tim Lord, chief executive of the Tobacco Manufacturers Assn.

GRUESOME PICS

Outright bans aren't the only weapons wielded by politicians. The European Union in October called on governments to put gruesome pictures of cancerous growths and blackened lungs on cigarette packs. Many countries are using tax hikes to suppress sales. Germany added 32 cents a pack in levies in March, 2004, bringing the average price of a pack of smokes to $4.90, and will hike taxes by the same amount in December and then in September, 2005.

But higher taxes don't always have the expected results. In France, tax hikes to cover a hole in the social security budget have raised the price of an average pack by 39% over the past two years, to $6.40. That has led to a 30% plunge in cigarette sales, but not an equivalent decline in smoking, as consumers turn to the Internet, cross-border, and black-market sources.

Perhaps harder-hit than the tobacco companies are Ireland's world-famous pubs. A survey by market-research firm Behaviour & Attitudes found that Dublin pub revenues fell by 16% in the first three months of the ban. Rural bars have seen receipts falling by a quarter. "I've seen countless pubs up for sale since March," says Seamus O'Donoghue, president of the Vintners' Federation of Ireland. An Ireland without pubs? Now that's an unintended consequence.

By Rachel Tiplady in Paris


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