Market Overview

How Much Of Big Tobacco's Sales Come From Vape Products?

Share:
How Much Of Big Tobacco's Sales Come From Vape Products?
Related MO
Jim Cramer Shares His Thoughts On Altria, Corning And More
Benzinga's Top Analyst Calls From April 30, 2018
50 Consumer Defensive Sector WallStar Stocks By Top Yields And Net Gains For May (Seeking Alpha)
Related RAI
Reality Reflects Art: World Puts Grisly Graphics On Cigarette Packs; US Tries Different Approach
Tobacco Reemerges As Hollywood Star, But Does The Screen Time Help?
The No. 1 Stock In The World (Revisited) - Visa And Apple Up, Kinder Morgan And Gilead Down (Seeking Alpha)

The $49 billion purchase by British American Tobacco PLC (ADR) (NYSE: BTI) of the remaining stake available in Reynolds American, Inc. (NYSE: RAI) comes in a tobacco market that’s a lot less hazy than before, with leading manufacturers investing in alternatives to the traditional cigarette.

Tobacco industry sales as a whole may have contracted by 2.5 percent in 2016, Wells Fargo analyst Bonnie Herzog was quoted as saying last week in the Winston-Salem Journal — and Herzog is forecasting a 3.4 percent decline for 2017.

At the same time, Herzog forecasts $400 million in growth in the e-cig and vaporizer sectors in 2017.

Growing Smokeless Revenue

Reynolds has its own electronic cigarette brand, Vuse, and holds about one-third of the American e-cigarette market. The Winston-Salem Journal reported in 2015 that while Reynolds’ e-cigarette revenue isn’t separately reported, but rather included in an “all other” revenue category. That category had $386 million in sales in fiscal 2015, according to Reynolds’ annual report — a 39.9 percent leap from $263 million in 2014.

The e-cigarette venture remains a fraction of Reynolds’ traditional tobacco business, which saw $8.6 billion in net sales in 2015 (24 percent of the U.S. market), according to the Motley Fool. Reynolds acquired Lorillard LLC (previously traded (NYSE: LO) for $25 billion in 2015, taking over the Newport cigarette brand in the process.

Reynolds is developing products such as e-cigarettes and nicotine gum under the umbrella of RAI Innovations Co., CEO Susan M. Cameron wrote in a letter to shareholders last year.

Competitor Altria Group Inc (NYSE: MO), which markets the MarkTen e-cigarette, has “single-digit shares” in the e-cigarette sector, according to the Motley Fool.

British American’s equivalent e-cigarette device, Vype, is sold overseas.

Posted-In: News Emerging Markets Eurozone Topics M&A Markets Trading Ideas General Best of Benzinga

 

Related Articles (BTI + MO)

View Comments and Join the Discussion!