Shift to Vapes
British American Tobacco (BAT), the largest cigarette firm in Britain, has announced its commitment to becoming a "smokeless" company as it shifts its focus to vaping products. The company, known for brands like Dunhill and Lucky Strike, plans to write off £25 billion from the expected value of its cigarette business over the next 30 years due to the rapid rise of vaping.
Revenue Goals
BAT aims to make 50% of its revenues from "non-combustibles" like vapes and nicotine pouches by 2035. Currently, the division responsible for these products generates £3 billion in sales, compared to £25 billion from cigarettes. BAT expects its vape arm to break even on profits two years ahead of schedule and become profitable next year, thanks to strong sales this year.
Growth Potential
BAT already holds a 46% share of the US vape market and sees significant growth potential. With only 10% of the world's one billion smokers using vapes or pouches, the company believes there is a vast opportunity for expansion.
Concerns Over Alternative Smoking Products
The rise of alternative smoking products like nicotine pouches, such as snus, has raised concerns. In September, the Professional Footballers' Association launched an investigation into the use of snus by players. Last month, BAT called for tougher laws to prevent the rise of young vapers and brands targeting children with sweet flavors.
Analyst's View
Rae Maile, an analyst at Panmure Gordon, stated that BAT's view on the 30-year useful life of cigarette brands in the US is attention-grabbing. However, he noted that 30 years is still a long time to generate a considerable amount of cash. Some critics argue that BAT's strategy throws smokers "under the bus."
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