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  • Imperial’s CEO, Bomhard, Retires

    Imperial’s CEO, Bomhard, Retires

    Imperial Brands announced today (May 14) that CEO Stefan Bomhard will retire after five years in the job. He will continue to serve on the company’s board until December 31 and be available until May 2026 to support the transition. Chief financial officer Lukas Paravicini will be promoted to CEO October 1.

    “While Bomhard’s retirement is disappointing, this doesn’t imply any change to the plans laid out at the company’s recent investor event,” Panmure Liberum analyst Rae Maile wrote. “The transition will be seamless given Paravicini’s skills.”

    Paravicini, CFO since May 2021, has been instrumental in driving consistent growth over the past four years and leads the long-term program to transform the company’s tech and data capabilities, the company said. Chief strategy and development officer, Murray McGowan, will replace Paravicini as CFO.

    With the news, Imperial’s shares dropped more than 7% as investors reacted to the unexpected loss of a leader credited with turning the company around. The company recently reported a 1.8% rise in first-half adjusted operating profit and reaffirmed its annual forecast after reporting market share growth in its five priority markets.

    “Prior to Bomhard’s arrival, Imperial had lost market share in its core tobacco business and failed to gain any real traction with new products like vapes, resulting in years of missed sales targets and a 2020 write-down,” Shashwat Awasthi and Emma Rumney wrote for Reuters. “Bomhard restored that market share, sales growth, and healthy investor returns by retreating to focus on traditional tobacco in Imperial’s key markets.

    “He also fine-tuned the company’s strategy on smoking alternatives – a portfolio which delivered double-digit growth in the first half of this year.”

    Paravicini told investors on an analysts’ call he was committed to Imperial’s five-year strategy set out in March and a capital allocation framework based around healthy returns for shareholders. Under that strategy, Paravicini is tasked with stepping up growth in smoking alternatives, where Imperial lags competitors, and compounding progress on tobacco in difficult markets like Germany, where Imperial has struggled to regain lost share amid stiff competition.

    Bomhard said he did not plan to take any other executive role and was retiring, and that his departure was “a very personal decision” related to freeing up personal time for himself and his family after 11 years leading large UK companies. He was previously CEO of car distributor and held senior roles at Unilever and Bacardi.

  • JTI and Others Close to Concluding Canadian Lawsuit

    JTI and Others Close to Concluding Canadian Lawsuit

    JTI-Macdonald Corp. (JTI-MC) announced that last week it, along with co-defendants Imperial Tobacco Canada (ITC), and Rothmans, Benson & Hedges (RBH), filed materials with the Ontario Superior Court of Justice in joint support of plans to settle all pending tobacco-related claims in Canada, subject to proposed amendments being approved by the court.  

    The filings stem from a 2019 class-action lawsuit, where in October 2024 the court-appointed mediator proposed the three companies pay a total of 32.5 billion Canadian dollars to settle all litigation. In January, JTI-MC reached an agreement with the other co-defendants on the terms of allocation of payments that were then filed with the Ontario Superior Court Feb. 27, which now awaits court approval.

    As a result, JTI-MC intends to record a provision for litigation losses related to the payment of the settlement amount as an operating expense in fiscal year 2024, for an adjusting subsequent event.

  • Imperial Releases Full-Year Results

    Imperial Releases Full-Year Results

    Imperial Brands has released its full-year results for the year ended Sept. 30, 2024.

    The company’s net revenue was up 4.6 percent from tobacco and next-generation products. It saw aggregate market share gains in its five priority markets with four out of five markets in share growth.

    Next-generation product net revenue was up 26 percent with growth from all three regions and improved gross margins. Growth at Logista reflected strong tobacco pricing and benefits of prior-year acquisitions.

    Adjusted earnings per share were up 10.9 percent, driven by profit growth and share count reduction. Reported earnings per share were up 19.1 percent.

    The company saw a free cash flow of £2.4 billion.

    Capital returns of approximately £2.8 billion are underway for full-year 2025 with £1.25 billion buyback and full-year 2024 dividend up 4.5 percent.

    “As we enter the final year of our current strategy, the investment we have made in consumer capabilities, cultural transformation and agile ways of working has supported another year of accelerated financial delivery and growing capital returns,” said Stefan Bomhard, CEO. “These results demonstrate how we are fulfilling our role as an effective challenger for the industry, able to deliver consistently against operational and financial expectations.

    “In tobacco, investment in our brands and sales force initiatives have delivered aggregate market share gains across our five priority markets while delivering strong pricing. This was supported by an encouraging stabilization in German market share for the first time under our strategy.

    “In next-generation products (NGP), we continue to build scale across our footprint with net revenues up 26.4 percent at constant currency driven by growth from all three regions and market share growth in all three categories. Our partnership approach to product innovation has enabled us to launch new products across all three categories during the year. This included our successful entry to the fast-growing modern oral category in the U.S. with our brand Zone.

    “Our operational delivery coupled with consistently strong cash flow generation has supported enhanced shareholder returns with increases to both our ordinary dividend and share buyback. We are on track to deliver five-year capital returns of c. £10 billion, representing 67 percent of our market capitalization in January 2021 when we launched our strategy. We look forward to presenting the next phase of our strategy at a Capital Markets Day on 26 March 2025.”

  • Imperial Reports Trading In Line with Expectations

    Imperial Reports Trading In Line with Expectations

    Photo: Igor Golovnyev

    Imperial Brands reported trading in line with expectations for fiscal 2024.

    “We are pleased to report another year of operational and financial delivery against our five-year strategy to transform the business,” the company wrote on its website ahead of the Nov. 19 announcement of its annual results.

    “At constant currency, we are on track to deliver in line with our full-year guidance with an acceleration in tobacco and NGP [next-generation products] net revenue growth versus last year and group adjusted operating profit growth close to the middle of our mid-single digit range.

    “Constant currency tobacco and NGP net revenue growth has strengthened over the same period last year underpinned by strong combustibles pricing and further growth in our NGP business. Our investment activities in our five priority markets continue to deliver stable aggregate market share with gains in the U.S., Spain and Australia, broadly offsetting declines in Germany and the U.K.

    These results are consistent with our medium-term objective to hold or grow aggregate share across these markets. At the same time, we have delivered strong pricing, while industry volume pressures have eased across the majority of our wider market footprint.”

    Imperial Brands expects NGP net revenue to grow in the range of 20-30 percent at constant currency, with increases across all three regions as we build scale in our existing footprint. “Our results this year have benefited from the launch of innovative products with new formats under the Blu brand, new iSenzia non-tobacco heat sticks and new flavors in the modern oral segment,” the company wrote. “Our entry in the U.S. oral nicotine category with the launch of the Zone range of pouches has been well received and supported a stronger NGP performance in our U.S. business.”

    Imperial Brands’ constant currency group adjusted operating profit growth improved in the second half of the year driven by strong results across all three regions, including the group’s Africa, Asia, Australasia and Central & Eastern Europe region where shipment timings in the Middle East affecting the first half have now been resolved.

    “Our profit performance also reflects reduced NGP operating losses as we build scale while continuing to invest in line with our plans,” Imperial wrote. “Group adjusted operating profit has benefited from growth at Logista, the Spanish-based distribution business in which we have a 50.01 percent stake.”

    Along with its trading update, Imperial Brands announced a further £1.25 billion ($1.64 billion) share buyback, which it expects to complete before Oct. 29, 2025. This represents approximately 7 percent of the current share capital and is a 13.6 percent increase on the 2024 share buyback of £1.1 billion. The company says it  is on track to deliver total share buyback returns of £3.35 billion since we started the buyback program in 2022.

  • Imperial Sued Over Zone Trademark

    Imperial Sued Over Zone Trademark

    Photo: Olivier Le Moal

    2ONE Labs and Performance Plus Marketing have filed both a trademark infringement lawsuit and a preliminary injunction against Imperial Brand subsidiaries Zone nicotine pouch trademark.

    The suit alleges that Imperial’s Zone products willfully infringe the 2ONE nicotine pouch brand. In addition to seeking an award for damages, 2ONE is also seeking cancellation of Imperial’s Zone mark.

    According to the plaintiffs, the 2ONE brand has been continuously marketed and sold to adult consumers through thousands of U.S. convenience chain and independent grocery and smoke shop stores for the last five years.

    The suit alleges Imperial Brands made false statements by claiming a significantly earlier use of their mark in commerce than had occurred. The suit further alleges the false statements allowed Zone to be granted a fraudulent mark.

    “We have experienced numerous instances of consumer confusion since Imperial launched its Zone brand in 2024 and we intend to vigorously fight this type of blatant infringement, no matter how big the corporate bully,” said 2ONE Labs founder and partner Vincent Schuman in a statement.

    The case is before the U.S. District Court for the Central District of California.

  • Imperial: Strongest Growth in Decade

    Imperial: Strongest Growth in Decade

    Photo: Casimirokt | Dreamstime.com

    Price hikes and growing demand for cigarette alternatives boosted Imperial Brands’ half-year results.

    Adjusted operating profit for the six months that ended March 31 increased 2.8 percent in constant currency to £1.67 billion. Adjusted tobacco and next-generation product (NGP) revenue was £3.64 billion, also up 2.8 percent over the comparable 2023 period.

    Sales of Imperial’s NGP brands, which include Pulze heated tobacco and Blu e-cigarettes, grew by 16.8 percent.

    After years of slow growth and market share losses, Imperial outlined a turnaround plan in 2021 focusing on its five top markets and beefing up investments in NGPs, which are deemed less harmful to health. That strategy is paying off, according to Imperial Brands CEO Stefan Bomhard.

    “Investment in consumer capabilities, more agile ways of working and further progress with our performance culture have made Imperial Brands a stronger business better able to deliver an acceleration in financial delivery,” said Bomhard in a statement. “This is demonstrated in the first half with the strongest organic top-line growth in more than 10 years, amid a challenging external environment.

    “In tobacco, stronger brands and improved sales execution have enabled us both to consolidate the market share gains in our priority markets achieved in recent years and to deliver a strong price mix of 8.6 percent.

    “In next generation products, we are steadily building scale within our footprint and these efforts have resulted in net revenue growth of 16.8 percent on a constant currency basis. In the past six months, we have launched new products in all categories, including our entry into the U.S. oral nicotine market with the new Zone brand. Our improved innovation capabilities, which now include three ‘Sense Hubs’ in Liverpool, Hamburg and Shenzhen, mean we are well set up to adapt to changing consumer preferences and regulatory requirements.

    “Pricing actions in tobacco taken in the first half and good momentum in NGP gives us confidence in our ability to deliver full-year results in line with our guidance.”

    The company said its turnaround plan would result in further improvement to adjusted operating profit growth, supporting mid-single-digit percentage constant currency compound annual growth rate over the final two fiscal years of the plan.

  • Imperial on Track to Meet Guidance

    Imperial on Track to Meet Guidance

    Photo: Igor Golovnyev

    Imperial Brands continues to make progress toward its five-year strategy to transform the business and remains confident it will deliver the full-year accelerated adjusted operating profit growth in line with its previously stated medium-term guidance, the company wrote in a press release.

    For the full year, on a constant currency basis, tobacco and next-generation product (NGP) Imperial Brands expects net revenue to grow at a low single-digit rate with group adjusted operating profit growing at a rate close to the middle of the company’s mid-single-digit range.

    Constant currency tobacco and NGP net revenue growth has strengthened over the same period last year underpinned by strong combustibles pricing and growth in the company’s NGP business. In combustibles, focused investment in Imperial’s five priority markets continues to support resilient aggregate market share with gains in the U.S., Spain and Australia, broadly offsetting declines in Germany and the U.K. These results are consistent with Imperial’s medium-term objective to hold or grow aggregate share across these markets. At the same time, Imperial says it has delivered strong pricing, more than offsetting wider industry volume pressures in certain markets.

    The company expects NGP first-half net revenues to grow in the mid-teens to high-teens at constant currency. Imperial is now present in more than 20 European markets and the U.S., and in the first half, Imperial launched innovative products in all three categories, including new single-use formats under the Blu brand, new iSenzia nontobacco heat sticks and entry in the U.S. oral nicotine category with the Zone range of pouches.

    The company projects growth in first-half group adjusted operating profit to be at low single digits on a constant currency basis, reflecting the anticipated second-half weighting of performance. In the first half, constant currency tobacco adjusted operating profit will be ahead of last year with good performances in Europe and Americas more than offsetting a softer performance in the AAACE region, which benefited from a very strong comparator period.

    Imperial says it is also improving its NGP gross margins as it builds scale and is reducing NGP operating losses alongside continued investment in line with the company’s plans. First-half group adjusted operating profit has also benefited from growth in distribution, reflecting performance at Logista, the Spanish-based distribution business in which Imperial has a 50.1 percent stake.

    The interim results for the six months ended March 31, 2024, will be announced on May 15, 2024.

  • Mapping Milestones

    Mapping Milestones

    Photo: Imperial Brands

    Three years into its five-year strategy, Imperial Brands reports progress on multiple fronts.

    By George Gay

    The U.K. government looks set to ban outright the sale of disposable vapes largely on the grounds that these products, which can be bought with a relatively modest outlay, are said to appeal to those under the age of 18. Currently, arguments are raging around this issue, but no matter on what side of the fence you sit, it cannot be denied that there is something less than coherent about the reasoning behind the proposed ban because it is already illegal in the U.K. to sell vapes to those under 18. The legal position in respect of disposable vapes and the underaged will not change because of the ban, though it will in respect of the rest of the population, so the argument that the proposal is aimed at protecting the underaged does not stand up to scrutiny.

    It is odd, too, that another, more reasoned argument against disposable vapes—that their disposal, whether careless or authorized, is too environmentally damaging—seems to be of only secondary concern to the government. But it is of concern, and some industry players are taking steps to address at least some of the issues raised.

    In its 2023 annual report, Imperial Brands said that it had launched its Blu Bar disposable vape brand in 11 European markets, so I took the opportunity of asking it for its views on these products. “We have long called for action to prevent the deliberate marketing of vaping products to young people,” Imperial said in an emailed reply. “It is important, however, that new restrictions do not compromise the ability of vaping products to transition adult smokers away from combustible cigarettes.

    “Disposable vapes are currently used by more than half of adult vapers in the U.K., and a ban threatens to undermine the country’s significant progress to reduce smoking. There’s also a risk it will fuel the illegal trade of unregulated products, already a sizeable problem for enforcement authorities.

    “We recognize the sustainability challenges associated with disposable products. We have been working hard to address this in our portfolio and have just launched a new version of Blu Bar (Blu Bar 1000) in the U.K. (other European markets to follow) with a removable battery.”

    The use of a removable battery is presumably an important step in disposable vape design because it makes the dismantling of used products in qualified waste disposal facilities safer and more efficient, and therefore more likely to happen. It doesn’t, I guess, address the important question of the number of batteries being used and disposed of across the country, but then this can be partially addressed by increasing the number of puffs that products deliver. In any case, apparently, at Imperial, this is not the end of the story. “Expect to see more innovation—all built on our consumer insights—from us later this year,” Imperial added.

    The reference to consumer insights harks back three years to the launch of Imperial’s five-year strategy to transform itself into what it describes as a consumer-led challenger business. As part of this strategy, it set up in 2021 a Global Consumer Office, and it now has two Sense Hubs at which it interacts with consumers to understand their expectations. “We are placing the consumer at the center of our decision-making by building our capabilities in consumer insights, portfolio and brand management, innovation, and through our portfolio of next-generation products (NGPs),” Imperial said.

    This is all well and good, but I had to admit that I was less than certain what was meant by a “challenger business” and what you had to do to qualify as such a business. “We are the smallest of the global businesses in our industry, and that means to succeed over the long term, we need to be a strong challenger,” Imperial said. “Being a challenger is about having the best understanding of our consumers and their choices. It is about having simple and efficient operations that enable us to be agile. It’s about building a culture where our people can perform their best work.

    “To give an example: We have had a disciplined, challenger approach to NGP market entry. We have launched products only in markets where the category (vaping, heated tobacco and/or modern oral) is a big proportion of overall nicotine consumption—and where we have strong existing routes to market.”

    The reference to a disciplined approach to NGP is not just managerial speak. In fact, as part of its five-year strategy, Imperial put in place the means not only to revive its combustible business but to reboot its NGP business completely. In its 2023 report, it describes how, during fiscal years 2021 and 2022, it first refocused the business by withdrawing from several markets, such as the heated-tobacco market in Japan, which it decided did not fit its challenger criteria. Presumably, withdrawing from Japan’s heated-tobacco market must have taken considerable thought and discipline.

    Having refocused, it then began a test-and-learn process introducing new products in pilot markets, closely studying reaction from consumers and customers, before scaling up.

    Which brings us to the 2023 financial year. “For our potentially reduced-harm business, this has been an important year, with product innovation and targeted market launches translating into accelerated revenue growth,” Imperial says in its report. “Following the introduction of new propositions in vape, heated tobacco and oral nicotine, we now have credible offerings in all three major categories. And consumers can now buy our NGP in more than 20 European markets as well as the United States.

    “This operational acceleration has translated into revenue growth of 26.4 percent globally, and 40.4 percent in Europe, where we have been focusing our investment.”

    Not everything has gone to plan, however. The U.S. Food and Drug Administration on Feb. 5 issued marketing denial orders to Imperial subsidiary Fontem U.S. for four Blu disposable and one Myblu brand of e-cigarettes, which means that these products may not be marketed or distributed in the U.S. While this and a previous failed attempt to get Imperial Brands through the FDA’s premarket tobacco product application (PMTA) process has been costly and is no doubt frustrating, it is not altogether surprising. The Fontem application joins those of many other companies that have come to grief against the gates of the FDA. “After reviewing the company’s PMTAs, FDA determined that the applications lacked sufficient evidence to demonstrate that permitting marketing of the products would be appropriate for the protection of the public health, which is the standard legally required by the 2009 Family Smoking Prevention and Tobacco Control Act,” the agency said in announcing its decision. It might have added, “No pasaran!”

    The list of Imperial’s main NGP markets seems to support the company’s claim to have launched products only in markets where vaping, heated tobacco and/or modern oral is a big proportion of overall nicotine consumption and where it already had strong existing routes to market. Its main vapor product markets are, in alphabetical order, Belgium, the Canaries, the Czech Republic, France, Germany, Greece, Ireland, Italy, Portugal, Spain, the U.K. and the U.S. In heated tobacco, they are Bulgaria, the Czech Republic, Greece, Hungary, Italy, Poland and Portugal. And in modern oral, they are Austria, Denmark, Estonia, Iceland, Norway and Sweden.

    Of course, while these lists look reasonably impressive following a major reboot, on the global stage, Imperial is smaller than its three main rivals, so it has developed a partnership approach to innovation. “This is exemplified by our three new innovation centers,” Imperial says in its report. “Our Sense Hubs in Liverpool and Hamburg bring together our own development teams with third-party partners and our consumers. Our Shenzhen site enables us to get closer to our supply chain partners.

    “Our new way of working has halved the time from initial concept to market launch and increased our capacity to work simultaneously on multiple projects. This is particularly important because of the need for us to take a multi-category approach, reflecting the way different markets are evolving different NGP preferences because of local culture and regulatory environments.”

    Although much progress has been made, these are early days yet in respect of the NGP side of the business, as Imperial readily admits. For instance, while its 2023 report included tobacco (cigarettes, RYO, cigars and snus) volumes, it gives no NGP volumes. When asked about this, Imperial said that NGP volumes had not been large enough to justify reporting. “But as the success of the reboot grows, this is something we’re keeping under review,” it said. “We do report on NGP revenue by region.”

    Fair enough. One thing that did seem odd to me, admittedly not someone trained in management of any kind, was that in its 2023 report, Imperial announced a £1.1 billion ($1.39 billion) share buyback scheme for 2024, up from a £1 billion scheme in 2023. Why, I wanted to know, was the money not invested in the business—perhaps in the company’s nascent NGP products?

    The answer was that Imperial was already delivering on its four priorities for the use of capital, namely: invest behind new strategy to support sustainable growth; maintain a strong and efficient balance sheet; a progressive dividend policy growing annually, taking into account underlying business performance; and surplus capital returns to shareholders.

    “We remain fully committed to investing in the business,” the company wrote. “It is the priority for capital, and we have been stepping up investment in NGP rollouts. But our NGP plan is targeted behind specific markets and products based on the market data and consumer insight.”

    George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.
  • Imperial Adds Hamilton as Non-Exec. Director

    Imperial Adds Hamilton as Non-Exec. Director

    Image: Mariakray

    Julie Hamilton will join the board of Imperial Brands as a non-executive director upon conclusion of the company’s annual general meeting on Jan. 31, 2024.

    Hamilton, who was chief commercial and global sales officer at Diageo until August 2023, has over 30 years’ experience in marketing, strategy and digital transformation. Prior to Diageo, she spent 25 years at the Coca-Cola Co. where she held a range of leadership positions, including chief customer and commercial leadership officer.

    “Julie is an experienced global leader who brings deep knowledge of delivering commercial change in multinational consumer businesses,” said Imperial Brands Chair Thérèse Esperdy in a statement. “Her understanding of digital transformation and global brands will be invaluable to the board as it continues to oversee Imperial’s strategy and transformation.”

    Hamilton will also join the People and Governance Committee upon appointment.

  • Imperial Calls for Better Targeted Regulation

    Imperial Calls for Better Targeted Regulation

    Photo: Casimirokt | Dreamstime.com

    Imperial Brands has called for a ban on vapes that are deliberately marketed to young people. In its response to the U.K. government’s consultation on “creating a smoke-free generation and tackling youth vaping,” the company argued for stronger enforcement of existing regulation.

    Among other provisions, the government’s plan includes a provision that would make it illegal for anyone born on or after Jan. 1, 2009, to ever legally buy cigarettes, and a ban on disposable vapes.

    “As the owner of the blu vape brand, we share the government’s concerns about the rise in youth vaping and call for a reform of vape flavor names and a ban on packaging that deliberately appeals to under-18s,” Imperial Brands wrote on its website.

    However, Imperial also noted that vaping has played a key role in reducing U.K. smoking levels to the lowest on record, referring to Public Health England’s finding that e-cigarettes are around 95 percent less harmful than normal cigarettes.

    “If a ban on disposable vapes is introduced—which more than half of adult vapers use—it could easily drive some nicotine users to return to cigarette smoking and reverse the positive downward trend,” Imperial wrote.

    The proposed generational tobacco ban, meanwhile, would be unworkable and unenforceable, according to the company. “The prohibition of tobacco products won’t deter tobacco users from smoking; rather, it will increase the already flourishing illicit trade—as was the case in South Africa when the government outlawed the sale of tobacco products during Covid—and lead to a decline in government revenues. Last year, receipts from tobacco duty contributed £10 billion [$12.52 billion] to the public purse,” Imperial wrote.

    “The government’s intention to put the U.K. on a path to a smoke-free future is one we all share; however, a generational smoking ban, coupled with a ban on disposable vapes, risks undermining the country’s progress,” said Oliver Kutz, general manager U.K. and Ireland at Imperial Brands. 

    “It is clear that prohibition does not reduce tobacco consumption; rather, it creates an illicit market, fuels organized crime and presents a real danger to retailers. Removing disposable vapes, the most widely used harm reduction alternative in the U.K., at the same time as prohibiting legitimate tobacco sales is illogical and counterproductive. 

    “If the U.K. wants to continue on its journey to reduce smoking whilst preventing the rise of youth vaping, greater enforcement of the current regulations at the point of sale is imperative. The introduction of a retailer licensing scheme, alongside Fixed Penalty Notices for breaches, would deter retailers from selling to under-18s, ensuring a crackdown on youth vaping that does not risk existing vapers reverting to smoking.”