Business & Finance - Tobacco Reporter

Supreme Shares Soar After Elf Bar Agreement

Shares in the U.K. vaping company Supreme rose 5 percent after the company announced it is now the “master distributor” for two leading U.K. vaping brands—Elf Bar and Lost Mary, reports City AM.

The London-listed company expects the partnership to generate revenues of £25 million ($36.06 million) to £30 million over the next fiscal year ending March 2024.

The news comes amid a political crackdown on vape products—especially for those underage.

Sandy Chadha, CEO of Supreme, said the agreement will allow the group to “fully leverage its unique technical, regulatory, compliance and quality assurance capabilities within the vaping sector.”

“We have seen a hugely positive response from both established and new retailers who view Supreme as an ideal partner to supply these products across the U.K.,” Chadha added.

Supreme says its strong market presence, distribution network and compliance capabilities provide Elf Bar and Lost Mary with a “ready-made blueprint” distribution strategy.

The company will report sales of the newly added brands separately from its existing vaping category, which includes Supreme’s proprietary 88Vape brand.

Supreme nearly doubled revenues to £76.1 million this year, while posting an £8.6 million increase in gross profit.

July 7, 2023

KT&G Receives AAA Credit Rating

KT&G has obtained the highest grade of AAA in all three major domestic corporate credit ratings: Korea Ratings, Korea Credit Rating and NICE Credit Rating.

Among domestic private companies excluding financial and telecommunications companies, KT&G is the only company to achieve a corporate credit rating of AAA.

The corporate credit rating agencies have assessed KT&G’s business stability as extremely excellent based on its high market position in key business sectors. The agencies have given high evaluations to the company’s solid domestic market dominance, built on its long history, high brand recognition as well as its strong presence in the global tobacco and e-cigarette industries.

Furthermore, with plans for dividend payments, share buybacks and investments aimed at shareholder returns and expanding domestic and international production facilities, it is expected that KT&G will maintain excellent financial stability by ensuring smooth cash generation to meet funding requirements in the future.

A KT&G representative stated, “Amid increased uncertainties in both domestic and international markets, such as recent interest rate hikes, many companies have faced challenging business environments. In this context, we believe that KT&G’s achievement of the highest AAA rating from the three credit rating agencies is a recognition of our company’s stability and profitability by external entities.” They further added, “We will continue to strive to maintain a stable financial structure based on our excellent creditworthiness and make every effort to ensure financial stability in the future.”

June 30, 2023

BAT Opens Innovation Hub in Italy

BAT opened a new innovation hub in Trieste, Italy. The innovation hub cost €500 million ($548 million) over five years.

The Hub incorporates laboratories, production offices, technical rooms and 12 production lines for new category products, making BAT the first company in the tobacco industry to distribute a full range of new category products in Italy.

The site also contains a digital boutique and innovation lab, focusing on digital transformation, sustainability and open innovation through external collaborations and partnerships.

The new complex was completed in 21 months and has been designed according to the most advanced sustainability criteria. It uses 100 percent energy from renewable sources and aims to achieve carbon neutrality certification by the beginning of 2024.

A photovoltaic array and biomass plant will produce much of the complex’s energy needs, with the remaining energy purchased from certified sustainable providers.

It is estimated that the innovation hub will create 2,700 future jobs—600 jobs directly and a further 2,100 jobs in the local and national economy and supply chain. BAT Italy already works with around 400 companies in its agricultural supply chain, employing more than 6,000 people.

“The completion of the Trieste innovation hub marks a milestone in BAT’s global strategy for innovation and sustainability. I am proud that BAT is the first company in the industry to distribute its full range of new category products. The hub represents a significant contribution to the country’s employment and economic growth,” said Fabio de Petris, CEO of BAT Italy.

June 27, 2023

BAT Changes Management Board

Following the appointment of Tadeu Marroco as CEO on May 15, 2023, BAT has announced changes to its management board. According to BAT, the new structure, roles and composition of the management board will support Tadeu’s commitment to a sharpened focus on improved execution and operational excellence; enhanced capabilities critical to BAT’s strategic development and transformation; and a progressive and agile organization with a collaborative and inclusive culture.

This refreshed management board structure is critical to my commitment to build a progressive and agile organization with a collaborative and inclusive culture, enabling simultaneous performance and transformation.

Tadeu Marroco, CEO, BAT

Johan Vandermeulen will be appointed to the new role of chief operating officer, reporting to the CEO, effective July 1, 2023. This role will be accountable for driving business performance, operational excellence and best-in-class execution, with a focus on both short-term and sustainable delivery. Reporting to Vandermeulen will be David Waterfield, promoted to the management board as president and CEO of Reynolds American Inc. effective July 1, 2023; Fred Monteiro (director of Americas and Europe) and Michael Dijanosic (director of Asia-Pacific, the Middle East and Africa); Zafar Khan (director of operations) and Javed Iqbal (director of digital and information). Iqbal also currently serves as interim finance director.

Kingsley Wheaton will be appointed to the new role of chief strategy and growth officer, reporting to the CEO, effective Sept. 1, 2023. This role will be accountable for continued strategic development and delivery of sharper consumer focus through an integrated approach to brands together with shaping enablers for long-term sustainable growth and driving the company’s robust ESG agenda. Reporting to Wheaton will be Luciano Comin, appointed to the new role of marketing director of combustibles and new categories effective July 1, 2023—this role will be accountable for a more integrated approach to insights, innovation, brand-building, consumer experience and activation and revenue growth management across the combustibles and new categories portfolios; Paul McCrory, promoted to the management board to the new role of director of corporate and regulatory affairs effective Sept. 1, 2023—this role will be accountable for shaping regulatory strategy and leading regulatory engagement to secure sustainable access to markets and categories; and James Barrett, promoted to the management board to the new role of director of business development effective Sept. 1, 2023—this role will be accountable for strategy development, M&A, the Wellbeing and Stimulation portfolio and BAT’s venturing unit, Btomorrow Ventures; James Murphy, director of research and science, and Jerome Abelman, director of legal affairs and general counsel, continue in their roles reporting directly to the CEO.

Guy Meldrum, currently president and CEO of Reynolds American Inc., and Paul Lageweg, currently director of new categories, will step down from their roles and from the management board effective June 30, 2023, and will facilitate a transition with their successors.

Hae In Kim will step down from the management board effective June 30, 2023, to take up the role of strategic talent director, reporting to the CEO. As an integral part of her responsibilities in this leadership role working alongside the board and the management board, Kim will oversee the execution of several key projects as part of BAT’s talent agenda.

The existing roles of chief transformation officer, chief growth officer, director of new categories and director of combustibles will be removed from the management board as their accountabilities transfer within the new structure.

A comprehensive process is underway to identify and appoint the successors for the roles of finance director and director of talent, culture and inclusion, reporting to the CEO.

“This refreshed management board structure is critical to my commitment to build a progressive and agile organization with a collaborative and inclusive culture, enabling simultaneous performance and transformation,” said Marroco in a statement. “To that end, I am delighted to be welcoming David, Paul and James to the management board. They are all highly collaborative leaders who have the depth of experience to enable the continued strategic and cultural transformation of BAT.

“I would like to thank Guy for his significant contribution across many markets and geographies over the last two decades and Paul for his role in helping to create a new category business that continues to drive BAT’s transformation. I also look forward to working with Hae In as strategic talent director.”

June 19, 2023

Kingsway in Talks Over AIR Stake Sale

Kingsway Capital has begun meetings with big tobacco firms as the company prepares to sell its stake in Dubai-based tobacco business Advanced Inhalation Rituals (AIR), reports Reuters.

Kingsway is the majority owner of AIR, and the company has held talks with potential investors, including BAT and Japan Tobacco, as part of a dual-track process where a seller pursues a sale and an initial public offering at the same time.

Al Fakher, which manufactures flavored molasses for shisha pipes, is AIR’s most valuable business. An investment in AIR would provide access to the shisha and e-shisha market in the Middle East and elsewhere.

June 9, 2023

BAT Malaysia First-Quarter Profits Down

BAT Malaysia’s first-quarter net profits were MYR40.32 million ($8.76 million) compared to MYR52.28 million a year prior, according to the New Straits Times. Group revenue declined 25 percent.

The decline in revenue was due to lower volume prompted by the increase in vape usage and persistent tobacco black market, according to BAT Malaysia.

The company’s total market share was 51.5 percent, a decline of 0.4 percent compared to the first quarter of 2022.

“BAT Malaysia is maintaining the growth trajectory of its strategic brands within its premium, aspirational premium and value-for-money segments,” said Nedal Salem, managing director of BAT Malaysia.

“This is in tandem with the company’s aim to deliver combustible value growth to support its multicategory portfolio of reduced-risk products.”

“[W]e aim to continue growing our tobacco-heating product, Glo, which represents our efforts to offer a choice of reduced-risk alternatives to adult smokers,” Salem said. “We will also focus on investing in our VFM [value-for-money] brands and maintaining leadership in the premium segment.”

Short term, the company expects the economic environment to continue exerting pressure on financial performance. “We expect this challenging operating landscape to stretch disposable income, leading to downtrading from legal products to tobacco black market options.

“Nevertheless, in the medium term, we are confident that economic conditions will improve whilst the government looks at introducing balanced regulations on vapor and accelerating their interventions to reduce the tobacco black market,” according to the company.

May 31, 2023

New Company Offers Tobacco-Free Nicotine Products

The Public Investment Fund (PIF) has launched Badael, a new company offering tobacco-free nicotine products, reports the Saudi Gazette. Badael will offer its products across Saudi Arabia by the end of 2023 with an aim to expand regionally and internationally in the long term.

The PIF announced the establishment of Badael in the run-up to the World Health Organization’s World No Tobacco Day. The company aims to develop, manufacture and distribute innovative products targeted to reduce smoking prevalence and promote healthier lifestyles by offering tobacco-free and less harmful alternatives.

Badael will also aim to deliver on the PIF’s localization mandate by supporting domestic manufacturing, sourcing raw materials, knowledge transfer and development of intellectual property.

The company’s products will be manufactured in Saudi Arabia. Badael aims to provide new economic opportunities and create jobs in the area.

May 30, 2023

PMI Holds Virtual Annual Meeting

Philip Morris International held its 2023 annual meeting of shareholders. Andre Calantzopoulos, executive chairman of the board, addressed shareholders and answered questions. Jacek Olczak, CEO, gave a business presentation, which included an overview of PMI’s strong performance in 2022 and encouraging start to 2023; robust business fundamentals and rapid progress on its smoke-free transformation; excellent momentum in the heat-not-burn and nicotine pouch categories; further progress on sustainability, with continued recognition by leading external stakeholders; and commitment to rewarding shareholders over time.

“Our smoke-free transformation continued apace in 2022, with the growth of smoke-free products to nearly one-third of total net revenues for the year and the achievement of two important milestones—the acquisition of Swedish Match and the agreement to gain the full rights to commercialize IQOS in the U.S. in April 2024,” said Olczak.

“As a global smoke-free champion with leading brands IQOS and Zyn, we are well positioned to further accelerate our transformation in the years to come to the benefit of the company, our shareholders, other stakeholders and public health,” he said.

Approximately 81 percent of the shares entitled to vote were represented at the meeting in person or by proxy. The shareholders elected 12 nominees for director; approved, on an advisory basis, the compensation of named executive officers; approved, on an advisory basis, a one-year interval for the vote on the compensation of named executive officers; ratified the selection of PricewaterhouseCoopers SA as independent auditors; and voted against the shareholder proposal. Final voting results will be included in a Form 8-K that PMI will file with the SEC in the coming days.

An archived copy of the webcast of the meeting will be available for approximately one year from the date of the meeting. The presentation slides and script will be available as well.

May 4, 2023

22nd Century Signs Deal with Old Pal

22nd Century announced its second exclusive license, manufacturing and distribution agreement in the hemp/cannabis industry, signed with Old Pal, a consumer company started in California and now operating in eight U.S. states.

“Old Pal is the second leading consumer hemp/cannabis brand to adopt 22nd Century’s innovative strategic license, manufacturing and distribution agreement. This model enables brands to focus on product development, customer engagement and marketing while we provide expansive access to mass market channels urgently seeking new, high-margin, high-velocity products to meet growing consumer demand,” said James A. Mish, CEO of 22nd Century.

Initially launched in California in 2018, Old Pal gained recognition for its nostalgic branding. In addition, Old Pal’s continuously growing line of apparel, accessories and home goods has firmly established it as a prominent cultural figure in the world of cannabis, according to 22nd Century.

The exclusive license with 22nd Century covers Old Pal branded non-delta-9 THC, hemp-derived cannabinoid consumer products and accessories. Similar to 22nd Century’s first single-source integrated production, sales and distribution agreement in hemp/cannabis, signed with Cookies, the Old Pal agreement will leverage 22nd Century’s formulation, ingredient and manufacturing infrastructure plus the company’s turn-key sales and distribution platform for alternative consumer products in a complete go-to-market solution.

Combined, the company estimates that its agreements with Cookies and Old Pal represent more than $140 million in revenue opportunity with attractive margins over the terms of the contracts. 22nd Century is now advancing its initial mass market retail efforts for these products across the United States, leveraging a network of more than 200 wholesale distributors. The company continues to pursue additional exclusive license opportunities with industry brands interested in its innovative integrated solution.

May 2, 2023

BAT Partners with Charlotte’s Web

BAT has partnered with CBD firm Charlotte’s Web to develop a drug for an undisclosed neurological condition, reports Bloomberg. The partnership is part of BAT’s plan to diversify away from cigarettes.

A joint venture between BAT’s subsidiary AJNA BioSciences PBC and Charlotte’s Web, which BAT invested in last year, plans to seek approval from the U.S. Food and Drug Administration for a treatment made from hemp extract. AJNA invested $10 million in the deal. Charlotte’s Web and AJNA each own 40 percent of the entity while BAT controls the remaining stake, according to a statement.

April 7, 2023

Category: Business & Finance