BAT aims to ignite smokeless products

Cigarette group British American Tobacco (BAT) aims to more than double revenue from nextgeneration products by the end of 2018 to “substantially more than £1bn (R17.35bn)”.

These products comprise vapour and tobacco-heating products as well as oral tobacco and nicotine products such as snus and moist snuff.

These smokeless products are largely seen as “less risky” tobacco and nicotine offerings to traditional cigarettes.

Speaking at BAT’s annual general meeting in London on Wednesday, chairman Richard Burrows said BAT’s tobacco-heating product, “glo”, was already demonstrating this opportunity in Japan and had grown to a 4.3% share of the total market.

He said this was achieved despite capacity constraints limiting the supply of heating devices. “We remain confident that these constraints will be removed during the second quarter,” he said.

Burrows said BAT’s success in next-generation products had prompted a further increase in investment plans during 2018, with a number of roll-outs and launches planned towards the end of the third quarter.

Burrows, however, said that notwithstanding the progress BAT was making with the new products, traditional cigarettes would remain at the core of the business for years to come.

He said BAT’s market share, revenue and profit grew in 2017, with total group cigarette and tobacco-heating product volume growing 3.2% to £686bn compared to an industry decline of 3.5%. “We are the only company growing share in all key product categories – in vapour, tobacco heating, oral tobacco and combustible cigarettes.”

Looking ahead to 2018, Burrows said foreign currency exchange rates would be a headwind for the group. “If rates were to stay at current levels, BAT would face a translational foreign exchange headwind of 7% on organic operating profit and 8% on earnings per share.”