British American Tobacco (BAT) gave updates on its U.S. vapor, modern oral nicotine and cigarette business at its half-year earnings results, released July 26.
This was Tadeu Marroco’s first call as chief executive, a role he took on May 15 as part of a management board restructure.
“Having been in my new role for 10 weeks, I’m pleased with the resilient performance of BAT in the first half of 2023 and the renewed sense of energy across the organization. It is a challenging external environment,” Marroco said. “High inflation and slower global growth are impacting consumers and business. Yet our revenue, profit from operations and earnings are all up.”
He said BAT is making progress in new categories, which it defines as vapor, tobacco heating products (THP) and modern oral. Revenues are up 29%, Marroco said, and consumers of non-combustible products are up by 1.5 million versus fiscal year 2022, reaching 24 million total for the first six months of the year. The London-based company’s goal is to have 50 million consumers of its non-combustible products by 2030.
“While it’s encouraging to see continued good performance in vapor and modern oral, we recognize more work is required in heated tobacco,” he said. “I remain confident that new categories will deliver a positive contribution in 2024; however, we do not expect contribution growth to be linear, as levels of investment will align with the phasing of our big innovation platforms. While more focus is required in the U.S., our sequential performance improvement in the critical premium U.S. combustibles business since January 2023 is encouraging,”
In the United Sates, Vuse, BAT’s e-cigarette from subsidiary R.J. Reynolds Vapor Co., saw increased revenues of 29.4% for the six months ending June 30 compared to 2022. This is despite a decrease in consumables volume, due to the growth of the illicit synthetic nicotine disposables market, which BAT estimates to be more than half of the total vapor market, the company said.
“We welcome the recent FDA actions with regards to the illicit synthetic nicotine disposables in the U.S. and we continue to engage with stakeholders to facilitate the removal of unauthorized products,” BAT said. “Furthermore, we remain confident in our premarket tobacco product application (PMTA) submission for Vuse Alto, which further built on the foundational science of our successful applications for Solo, Ciro and Vibe tobacco flavor.”
Volume for BAT’s Velo modern oral product was down 37.7% as promotional support was redirected behind Vuse in the much larger vapor category, BAT said. It also awaits the outcome of a PMTA submission for a new Velo product.
In U.S. combustibles, which BAT defines as cigarettes and other tobacco products, revenue declined 7.4% as moderated pricing was more than offset by a reduction in volume of 12.4%. This was due to several factors, BAT said. The pressure of macro-economic headwinds in the U.S., with industry volume down 8.4%; the flavored tobacco ban in California, which had a negative affect on Newport menthol cigarette sales; and a lap of the prior year’s inventory build.
R.J. Reynolds Tobacco Co., Winston-Salem, North Carolina, filed a lawsuit against California state officials in May over allegations that certain Camel and Newport cigarettes violate the state’s flavored tobacco sales ban. California’s flavored tobacco sales ban took place on Dec. 21, and includes menthol-flavored cigarettes.
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