E-Cigarettes, Momentum to Legalize Marijuana Could Revive Tobacco Industry, According to The Boston Company Asset Management

NEW YORK and LONDON, April 16, 2014 /PRNewswire/ -- E-cigarettes and growing momentum to legalize marijuana in the United States could dramatically revive growth for major tobacco companies, which have not introduced a major new product since light cigarettes in 1970, according to The Boston Company Asset Management (TBC), BNY Mellon's Boston-based equity investment boutique.

The growing popularity of electronic nicotine-delivery systems (ENDS) has been increasing significantly over the last two years, according to David M. Sealy, senior equity research analyst at TBC and the author of the report, Up in Smoke: Changes Sweep the Tobacco Industry.

While the ENDS industry initially was dominated by small entrepreneurial companies, TBC estimates that the largest three tobacco companies in the U.S. now hold approximately 25 percent of the global market.

"The global market for ENDS is substantial, and we estimate that it now amounts to $3 billion in annual revenue, with roughly half in the U.S. and the other half in Europe, primarily in the UK," said Sealy.  "But this means that the ENDS market share is a mere 0.5 percent of the $670 billion global cigarette industry."

Sealy added that he does not expect regulatory scrutiny to meaningfully slow the growth of e-cigarettes.

Regarding marijuana, Sealy said, "Legalization in the U.S. could be closer than most people think."

The TBC paper notes that the current marijuana policies as measured by consumption are a failure, with consumption growing consistently over the last 40 years. In addition, the costs of current policies including incarceration, enforcement, and loss of taxation are large and growing amid budget woes, the report said.

The report cites growing popular support for legalization and notes the trend for decriminalization in more states.

"Until now the markets have focused primarily on the impact of legalization on speculative small cap stocks, but if legalization becomes official federal policy, the big tobacco companies will end up dominating the market," Sealy said. 

Declining sales of traditional cigarettes has been driving the big tobacco companies to diversify into related products, and marijuana would be a natural evolution of this strategy, the report said.  The report also notes that the tobacco industry also is well adapted to an environment of high taxation, regulation and litigation, which are expected to accompany any commercialization of marijuana.

"From a regulator's point of view, tobacco companies may be the most desirable entrants in the industry as they may be the most controllable players in the commercialization of marijuana," said Sealy.  

Notes to Editors:

The Boston Company Asset Management, LLC, a BNY Mellon Investment Management boutique, provides investment management services for corporate, public, mutual funds and union sponsored and jointly trusteed retirement plans, endowments and foundations.  Assets are managed by The Boston Company as well as its personnel acting as dual officers of either The Dreyfus Corporation or The Bank of New York Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.6 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of December 31, 2013, BNY Mellon had $27.6 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation BK. Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

All information source BNY Mellon as of December 31, 2013. This press release is qualified for issuance in the UK, Europe and US and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. Any views and opinions contained in this document are those of the author as at the date of issue; are subject to change and should not be taken as investment advice. BNY Mellon Investment Management EMEA Limited and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. This press release is issued by BNY Mellon Investment Management (US) and BNY Mellon Investment Management EMEA Limited (ex-US) to members of the financial press and media and the information contained herein should not be construed as investment advice.    The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements.  When you sell your investment you may get back less than you originally invested. Registered office of BNY Mellon Investment Management EMEA Limited: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorized and regulated by the Financial Conduct Authority. A BNY Mellon Company.    

SOURCE BNY Mellon