British American Tobacco (BAT), one of the leading producers of cigarettes in the world, has to be content with doubling down on its new categories including vaping amidst a shrinking tobacco industry. But all is not lost for the industry. BAT has reported growth in revenue this year despite an effort by governments across the world to help people stop smoking.
The Covid-19 pandemic has helped accelerate the shift away from smoking in both the USA and Europe. With the coronavirus affecting the respiratory many smokers have to rethink their smoking habits to be healthier. It is for these reasons that the BAT leadership expect cigarette sales to drop by 2% across the world this year.
The efforts by governments across the world have discouraged new smokers from taking up the habit had threatened to push cigarette sales even further down. However, the Covid-19 recovery has helped increase tobacco sales in the last few months, especially in emerging markets. This has helped save the numbers for the leading tobacco industry players.
It is reported that BAT recorded an increase in sales volume of about 2-4% in the second quarter of the year. The actual figures are expected to be confirmed when the financial report is out. BAT’s chief executive officer Jack Bowles says that his company will keep investing in vaping products and all its other new categories. This is happening while the company is working hard to cut its operating losses.
However, while the company is discounting new categories such as vaping it is still confident that these new categories will continue to grow in 2022. The company also expect these new categories will be profitable by 2025 and that this will help the company meets its revenue targets. This is good news because, despite the current downtown in the tobacco industry, the vaping industry is still being cited for its ability to help former smokers turn a page. It is therefore expected that the vaping category will be an important player in the company’s future as governments try to put an end to smoking traditional cigarettes.
According to Bowles, BAT is expected to have improved operating margins despite increased inflation affecting the supply chain. This he says is due to the company’s decision to offer robust prices and increase its marketing activities throughout the different regions in the past. Its past investments in increasing its brand scales are also paying dividends as the company can out sale competitors with limited brand offerings. The CEO further revealed that the company’s quantum program will help the company save about £1.5bn each year for the three years it will be implemented.
These revelations are far better than what is being experienced in the industry at large. In the United States, the leading e-cigarette makes Juul Labs has had the worst year. It has to settle thousands of cases arising from its marketing tactics targeting teens. The FDA has also banned its products from being on shop shelves until a proper review is done. The same has been the case in China where leading e-cigarette makers have faced some major setbacks since the government ban the sale of e-cigarettes in the country.
