British American Tobacco (BATs) and their peers have been plagued over recent years by concerns over pro- health legislation threatening parts of the industry. Thus far, tobacco giants have survived tax hikes, nasty packet coverings and most recently competition from Next Generation Products (NGPs).
NGPs come in the form of e-cigarettes and heated (rather than burnt) tobacco. It had been thought that NGPs were going to be more pro table for tobacco companies. However, uncertainty has since crept into analysts’ forecasts following increased regulatory scrutiny, like the banning of new products with nicotine salts in the US. This leaves the incumbents (such as vaping company JUUL) in an enviable position.
The main attraction to the tobacco space used to be high margins which rose each year thanks to pricing power and an absence of new entrants, as it was extremely difficult to advertise. The landscape is now going through structural change and new companies are starting to enter into the fold with NGPs sold as the “healthier” alternative.
JUUL, which has a 70% market share of the US e-cigarette market, launched in the UK in July 2018 with the mission to “eliminate combustible cigarettes from the face of the earth”. BATs has an impressive track record of dealing with change in the industry but it appears there is one more hurdle for them to overcome