According to data provided by S&P Global Market Intelligence, shares of BAT (NYSE:BTI) gained 11.6% in March, and this is being mostly attributed to the way the tobacco company is diversifying from its traditional tobacco and nicotine products. When BAT reported its fiscal 2020 results in mid-February, it updated its investors on several aspects of its “new categories” segment. Its Vuse vapor revenue grew by 85%, and there were significant developments in the cannabis-related products sector.
“In January 2021, BAT launched a pilot program in Manchester, U.K. for its first cannabidiol (CBD) vaping product, Vuse CBD Zone. And on March 11, the company announced it has entered into a strategic partnership with Canadian cannabis company Organigram Holdings (NASDAQ:OGI),” reported an article on The Motley Fool.
“The Manchester CBD vaping product aims to offer adults BAT’s Vuse brand that “caters to a variety of moods and moments in their busy lifestyles,” according to the company. With its traditional vape products, BAT says it is growing market share already. In the U.S., BAT said it had over 60% market share by volume in the last quarter of 2020. It said Vuse is now the market leader in 15 U.S. states,” added the article.
Imperial’s five-year business plan
Meanwhile, Imperial Brands has recently released a five-year business plan, as part of the strategy set in place by its new CEO. Stefan Bomhard, who joined Imperial Brands in July 2020. Bornhard has set in motion a plan which will mainly invest in the world’s top five cigarette markets: Australia, Germany, Spain, the United Kingdom and the United States. Moreover the plan aims to fine-tune next-generation products to consumer preferences, boost the company’s sales force by bringing in new talent and changing incentive structures.
The plan, is the culmination of a six-month review, and also stated that the company would exit some smaller markets where no further growth is forseen. Moreover, Imperial will be resetting its next-generation products (NGP) strategy, to redirect resources to develop such products in Europe and the United States.
HTPs generate higher margins in Europe
Bomhard said that given that heated tobacco products are gaining traction in Europe, and generate higher margins than in the US, Imperial would specifically focus on its Pulze device in Europe and the development of vaping products in the US. The targets for next generation products, mainly e-cigarettes, have been lowered after missing several sales targets over the last five years. “The company wrote down the value of that business by 124 million pounds ($170.02 million)last year after sales fell 27% in 2020,” reported Reuters.
“The new strategy will have a renewed emphasis on a more focused group of priority tobacco markets and a more disciplined execution in NGP,” said Bomhard. “We expect the new plan will deliver a gradually improving trajectory in net revenue over the five years with a compound annual growth rate of 1-2% from FY2020-2025,” added the company.