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  • Bullish on BAT

    Bullish on BAT

    “British American Tobacco (BAT), trading at €35.14 per share with a market cap of €77.45 billion and a 7.97% dividend yield, presents a compelling case for income-focused investors,” Ricardo Pillai wrote for Yahoo! Finance. “Despite modest growth expectations and ongoing regulatory risks, BAT’s strong cash flow, leadership in emerging categories like vapor and modern oral products, and attractive valuation make it an appealing defensive play. The stock trades at a forward P/E of approximately 7x, significantly discounted compared to peers like Philip Morris (PMI) and Altria, signaling potential undervaluation for a company with consistent earnings and robust dividend sustainability.”

    Pillai said BAT’s strategy was to reduce dependance on combustible products, and pivot to being 50% smokeless by 2035. Its Vuse brand e-cigarette holds 40.3% value share of top markets, and is making strides with Velo in the modern oral market. Analysts are bullish on BAT’s future because it appears to be striking a middle ground that investors seek in terms of products and markets.

    “The overarching investment thesis hinges on BAT’s ability to accelerate growth in new categories at a pace exceeding the decline of its smoke products,” Pillai said. “While the strategy is ambitious, its execution thus far has been promising. For investors seeking a reliable dividend stock with modest growth potential, BAT offers a stable and defensive portfolio addition. With regulatory challenges already factored into its valuation, the next financial release will be pivotal in confirming its strategic trajectory. BAT remains a ‘Buy for Income,’ not a growth play, but a compelling option for those prioritizing steady returns.”

  • PMI Considers Expansion in Egypt

    PMI Considers Expansion in Egypt

    Philip Morris International (PMI) has enjoyed success in Egypt with its IQOS heated tobacco product and is looking to expand to other smoke-free products in the market, said Tommaso Di Giovanni, vice president for International Communication and Engagement at PMI. With an estimated 15 million adult smokers in the country, IQOS has already made significant progress in providing a reduced-risk alternative to traditional cigarettes.

     “We were—and we are—selling a product that causes diseases and is addictive: cigarettes,” Di Giovanni said. “Anyone who sells a product that causes disease and is addictive would like to do better,” stressing PMI’s dual responsibility to society and to the company itself.

    He further emphasized that improving the health of adult smokers is not only a moral obligation but also a sound business strategy. “It’s a win-win for our company and for public health,” he explained, adding that addressing societal concerns can help PMI stay ahead of the competition while positively impacting global health.

    “For us, the first goal of sustainability is to address the public health issues posed by cigarettes. The ultimate goal is to offer a portfolio of products that meets the diverse needs of the market while supporting sustainability goals.”

  • FDA Tobacco Case Heads to Supreme Court

    FDA Tobacco Case Heads to Supreme Court

    The Supreme Court will hear oral arguments on Tuesday in a clash between RJR Vapor and the U.S. Food and Drug Administration (FDA) centered around the rules in which the FDA can be challenged in court. The FDA argues that the Tobacco Control Act allows cases to be argued in one of three areas: in the D.C. Circuit, in the place where the plaintiff resides, or in the place where it has its principal place of business. RJR Vapor, a subsidiary of British American Tobacco based in North Carolina, however, is trying to challenge the FDA in the conservative U.S. Court of Appeals 5th Circuit based in Louisiana.

    RJR Vapor filed a petition for review along with Avail Vapor, a Texas retailer, and by a trade association for Mississippi gas stations and convenience stores that sell RJR Vapor’s products— states that reside in the 5th Circuit. RJR’s North Carolina home resides in the 4th Circuit, which had previously turned their appeal against the FDA denial of applications aside. The 5th Circuit, however, previously ruled against the FDA denials, saying the government agency was sending companies on “a wild goose chase.”

    RJR Vapor and the retailers argue the law states “any person adversely affected” can challenge the FDA, to include retailers within the 5th Circuit trying to sell RJR Vapor’s popular menthol-flavored Vuse brand e-cigarettes who could potentially go out of business. In 2016, the FDA rejected RJR Vapor’s application, saying the product would not be “appropriate for the protection of the public health.”

    The FDA argues that its rulings are “always or nearly always” regulating the manufacturer and that any effects on retailers are indirect and thus irrelevant, and that allowing this case in the 5th Circuit would allow “ready evasion” and create incentives for “forum-shopping.” The FDA contends the stakes are high in this case, as the 5th Circuit’s previous ruling would allow manufacturers to get around federal restrictions and cherry-pick the courts where its cases would be heard.

    The FDA approached the Supreme Court, and in October 2024, it agreed to hear the case. RJR Vapor argues the Supreme Court doesn’t have the authority to rule over “non-final” cases like this one to begin with, and wants the case dismissed without decision.

  • PMI Expands in Medical Cannabis

    PMI Expands in Medical Cannabis

    At the end of last week, Avicanna Inc., a commercial-stage, international biopharmaceutical company based in Canada, announced a “scientific and medical affairs” collaboration agreement with Vectura Fertin Pharma, a subsidiary of Philip Morris International (PMI). Avicanna, who specializes in cannabinoid-based medicine, has a clinical R&D department that has led to the commercialization of more than 30 proprietary, evidence-based finished products.

    The two companies formed a Scientific and Medical Affairs Committee that will focus on improving the understanding of medical cannabis access and applications in Canada.

    “PMI has consistently shown interest in the medical side of cannabis,” Aaron Grey, managing director at Alliance Global Partners, an investment firm highly active in the cannabis space, told Forbes. “Their 2016 investment in Syqe Medical was medical-focused, and this Avicanna partnership continues in that vein. PMI’s public-facing interest in cannabis has been more about the medical side than recreational or consumer products.

    “I think this is a multi-decade strategy. Usage trends among young adults are shifting—they’re moving away from tobacco and alcohol and toward cannabis. Big Tobacco sees this and wants to capture that new, growing consumer base. Companies like British American Tobacco have divisions like ‘Beyond Nicotine’ to address these trends, and cannabis is part of that vision. This isn’t just about hedging; it’s about preparing for a long-term consumer shift.”

    Forbes’ Javier Hasse wrote that PMI’s entry into Canada’s well-regulated cannabis market gives it a strategic testing ground with an eye on the U.S. market.

    “For big tobacco in general, most of the major players have made investments in cannabis,” said Grey. “For example, Altria invested $1.8 billion in Cronos Group, and Imperial Brands invested CAD 125 million in Auxly. In November 2023, BAT invested CAD 125 million in Organigram, forming an investment pool and an R&D partnership. These are all ways Big Tobacco is exploring the cannabis space, and I see PMI’s partnership with Avicanna as part of that broader trend.”

  • China’s E-Cigarette Exports Slide in 2024

    China’s E-Cigarette Exports Slide in 2024

    China’s e-cigarette exports declined to $11 billion in 2024 according to the nation’s General Administration of Customs, a decline of 1.1% from the previous year.

    The United States accounted for 36% of China’s exports ($3.7 billion), followed by the U.K. ($1.2 billion), South Korea ($717 million), and Germany ($677 million).

    Chinese exports peaked at $19 billion in 2021 but have declined each year since due to comprehensive worldwide regulations. 

  • No Vape Ban in Luxembourg

    No Vape Ban in Luxembourg

    While several neighboring countries and the European Commission are working toward banning vapor devices, Luxembourg is not.

    “We are adopting an approach based on observation and analysis of measures taken abroad,” the nation’s Ministry of Health said. “This enables us to assess the impact of these initiatives and to determine what further action, if any, could be envisaged in Luxembourg.”

    “From a health point of view, these products contain high doses of nicotine, encouraging rapid dependence, particularly among young people, and potentially leading them to other forms of tobacco consumption.”

    However, the Ministry believes that “a ban targeting disposable vapes alone would be limited in its effectiveness,” and is instead calling for a global approach that would include all electronic cigarettes and thus be “more coherent in addressing these issues.” The ministry says no studies have been carried out on the potential effect of vape sale bans in neighboring countries, and as it is, lower taxes mean that tobacco tourism is still very popular in Luxembourg.

    A 2023 bill to change the law on tobacco products is currently in committee. The bill specifically concerns the withdrawal of certain exemptions for heated tobacco products and was amended to include regulation on nicotine pouches. The text aims to ban certain flavors and limit the nicotine content of these products, however, disposable electronic cigarettes are not included in the bill.

  • TIMB Sets New Deadlines for Tobacco Licenses

    TIMB Sets New Deadlines for Tobacco Licenses

    The Tobacco Industry and Marketing Board (TIMB) in Zimbabwe has revised its deadlines for buying A-class licenses from December 31 to March 31 for buying and October 31 for renewing of each year. This applies to contractors who directly buy unprocessed tobacco from growers and to individuals or entities who purchase self-financed unprocessed leaf at the auction floors.

    An A-class buying license allows holders to buy self-funded unprocessed tobacco at licensed auction floors without requiring prior contractual obligations with the growers.

    “The new deadline dates are meant to align with the Contractors Compliance Administration Framework which all contractors must sign before they get a contracting license,” TIMB said in a statement. “The review of deadline dates will also address longstanding challenges such as delayed input delivery and non-compliance with minimum input package requirements, which have historically disadvantaged farmers.

     “Renewing or applying for a new A-class buying license by October 31 will also allow buyers to timeously secure funding so they can purchase tobacco in the next marketing season.”

    Tobacco is Zimbabwe’s second major foreign currency earner after gold predominantly produced by smallholder farmers who were allocated land under the land reform program the country embarked on in 2000. In 2024, the country’s tobacco export earnings increased by 16.6 percent to US$1.4 billion from the export of 243.3 million kilograms.

  • New EPR Requirements for Companies Selling Tobacco and Nicotine Products

    New EPR Requirements for Companies Selling Tobacco and Nicotine Products

    A wave of new “Extended Producer Responsibility” (EPR) programs is beginning to impact companies placing packaged products, including tobacco products, on the market in U.S. states, including California, Colorado, Maine, Minnesota, and Oregon. 

    Kathryn C. Skaggs, a partner with Keller and Heckman, writes “The five EPR programs for packaging enacted thus far have different facets. However, at their core, each of the EPR programs requires companies that sell packaged products (with some limited exceptions) to join a newly formed, state-recognized organization (typically called a “Producer Responsibility Organization” or “PRO”) and pay annual dues based on the amount and type of packaging placed on the market in that state. California’s PRO, for one, must collect $500,000,000 annually from producers of covered products, like single-use packaging. Producers also will need to eventually meet certain sustainability goals for single-use packaging, such as ensuring compostability or recyclability of packaging or meeting minimum post-consumer recycled content targets. What is more, the EPR programs encompass not just primary packaging that directly contacts a good, but often shipping and display packaging as well.”

    EPR program obligations typically fall on the “producer” of the covered product, generally defined to be the brand owner that places a packaged good on the market. Accordingly, it is the companies marketing the finished products, not packaging companies, that will need to register as producers of tobacco product packaging in the states with packaging EPR programs.

    Certain state EPR programs – including Colorado’s and Minnesota’s – also include “paper products” as a covered product. While tobacco companies making roll-your-own (RYO) papers and other such paper-based products may be able to avail themselves of certain exemptions, they must assess this on a case-by-case basis.

    Skaggs says the existing EPR laws do not include any explicit exemptions for tobacco product packaging or paper used in tobacco products. Accordingly, absent another applicable exemption, tobacco product manufacturers are likely to meet the producer definition under the state EPR laws, and thus will need to register with applicable state PROs, pay dues based on the product packaging sold in the state, and eventually meet certain goals for the packaging.

    In complying with the state EPR schemes, the tobacco and nicotine product industries can expect to face not only supply chain challenges (e.g., the availability of post-consumer recycled content), but also possibly significant regulatory hurdles under the Family Smoking Prevention and Tobacco Control Act. Under the EPR programs, producers may need to make changes to product packaging to meet sustainability targets. Changes to the container-closure system for a legally marketed tobacco product may well require a new premarket authorization from the U.S. Food and Drug Administration (FDA), which can be a costly and timely endeavor. 

  • Stock Buybacks Underway

    Stock Buybacks Underway

    Several large tobacco industry stalwarts have continued with stock buyback programs this week.

    British American Tobacco announced the repurchase of 134,079 ordinary shares at an average price of 2,904.6775 pence per share as part of its ongoing buyback program. This move is aimed at reducing the number of shares in circulation, potentially increasing the value of remaining shares and benefiting shareholders. Following the completion of this transaction, the company will have 2,208,154,745 shares outstanding, with 133,266,206 held in treasury, thereby impacting shareholders’ notifications under regulatory guidelines.

    Imperial Brands PLC announced the repurchase and cancellation of 152,276 of its ordinary shares as part of its GBP 1.25 billion share repurchase program. This transaction, executed through Morgan Stanley on the London Stock Exchange, aims to reduce the overall number of shares in circulation, potentially enhancing shareholder value by increasing earnings per share.

  • Hawaii Introduces Generational Bill Against Tobacco Products

    Hawaii Introduces Generational Bill Against Tobacco Products

    The Hawaii State Senate introduced a bill on January 16 that would seek to implement a generational ban on tobacco and nicotine product purchases for anyone born after January 1, 2005.

    The bill, SB429, introduced by Sens. Karl Rhoads and Stanley Chang, would prohibit the possession or consumption of a tobacco product in a public place by a person born after that date. Violations for the consumer would include having their products seized and destroyed and would receive a fine ranging from $10 to $50, while the retailers who sold the products would face fines between $500 and $2,000. The bill has not yet been assigned to a committee, but if passed as written, would go into effect on Jan. 1, 2026.

    The bill states “’tobacco product, means any product made or derived from tobacco that contains nicotine or other substances and is intended for human consumption or is likely to be consumed, whether smoked, heated, chewed, absorbed, dissolved, inhaled, or ingested by other means.  ‘Tobacco product’ includes but is not limited to a cigarette, cigar, pipe tobacco, chewing tobacco, snuff, snus, or an electronic smoking device. ‘Tobacco product’ does not include drugs, devices, or combination products approved for sale by the United States Food and Drug Administration, as those terms are defined in the Federal Food, Drug, and Cosmetic Act.”

    The bill further explains, “The legislature also finds that a prohibition based on a person’s date of birth is fair to everyone—those who have not yet attained the age of twenty-one and cannot presently purchase tobacco will never be able to buy it, while the right to purchase tobacco will remain available to those who are legally permitted to do so and who may have already formed addictive habits as a result.”