US vaping backlash dents British American Tobacco revenues
A backlash against vaping in US has dented revenue growth at the cigarettemaker British American Tobacco.
BAT said revenues in its “new category” arm – which includes vaping – would grow at the lower end of its previously announced range of 30% to 50% for the 2019 financial year.
The overall US vaping market has declined by about a quarter, according to Tadeu Marroco, BAT’s finance director, since the health concerns emerged centred on sometimes fatal lung injuries. Those concerns, as well as others about underage vaping, were enough to catch the attention of Donald Trump.
Speaking on a call with investors, Marroco said: “We saw a reduction in terms of sales to retail. The problem that we find in the vaping [in the] US was driven by both consumer uptake and consumer confidence.”
He added that early data appeared to show a partial recovery in vaping sales in November.
Shares in BAT gained more than 2%, however, as investors welcomed strong sales of traditional cigarettes in the US and globally.
The FTSE 100 company earns the majority of its revenues from traditional cigarettes, including the Lucky Strike and Dunhill brands. However, it and other tobacco companies have sought to capitalise on a boom in cigarette alternatives, particularly in wealthy markets such as the US and the UK, where users have turned towards products they deem to be less likely to harm them. Tobacco kills more than 8 million people worldwide each year.
In September, BAT announced plan to cut 2,300 jobs by 2020, as it prepares to shift away from cigarettes. Its flagship vaping product is Vype; it also sells tobacco heating products and oral products. Competitor products include Juul, which is part-owned by Altria, the maker of Marlboro cigarettes.
Vaping products, which deliver nicotine via an aerosol rather than smoke, have faced a backlash as the technology has come under increased scrutiny. While the products do not expose users to the tar and some other harmful substances contained in traditional cigarettes, the longer-term effects are unclear.
The US Centers for Disease Control and Prevention last week identified 2,290 cases of lung injuries associated with vaping in US states and territories, as well as 47 deaths. Most of those were linked to products to which users had added THC, one of the active ingredients of cannabis.
In September, Trump said his administration would propose the Food and Drug Administration (FDA) ban on all flavoured electronic cigarette devices amid concerns about a surge in underage vaping.
Marroco told investors the FDA’s position was “still very uncertain”. In a separate written statement, BAT’s chief executive, Jack Bowles, said the controversy in the US should lead to a better and stronger regulatory environment, in which “we are well placed to succeed”.