No more minting it with menthol

The 1970s slogan “Alive with pleasure” sold the allure of Newport menthol cigarettes to young Americans. Now the catchphrase could hardly sound less apt. The US Food and Drug Administration (FDA) reportedly wants to ban menthol cigarettes.

Cue £7bn of market value in British American Tobacco (BAT), owner of the Newport brand, going up in smoke on Monday. As much as a quarter of BAT’s profits are drawn from menthols. That explains why its share price dropped 10%, more than double that of rivals such as Imperial Brands. An FDA ban, if confirmed, would add to the industry’s intensifying regulatory and competitive pressures. BAT’s shares trade on 11 times next year’s earnings, about half the multiple they commanded in 2016.

In the short run, the shares might claw back some of their losses. Even if the FDA opts for a ban, it is likely to be some way off. Changing regulations is a lengthy process, requiring debates over scientific evidence. Tobacco companies are likely to sue the FDA, as they did in 2011 when told to put graphic health warnings on fag packets. The last gasp for menthol is at least three years away.

Meanwhile, the tobacco giants might benefit from an immediate crackdown on flavoured e-cigarettes. That is likely to particularly hit Juul, the trendy vaping upstart. It could be an opportunity for real tobacco to retake market share. But for all the fug surrounding the issue, menthol cigarettes are rightly threatened. They make smoking less irritating to the lungs, which makes them popular with youngsters. Canada has already imposed a ban and the EU is set to follow in 2020.

Tobacco firms will not cede more ground on cigarettes without a fight. But the regulators are serious about a crackdown. Cigarettes, the FDA says, are the only legal consumer product that, when used as intended, will kill half of all long-term users. The health warning on tobacco stocks can only get louder. /London, November 12