Vaping products heat up British American Tobacco’s bottom line

(Photo: Luke MacGregor / Bloomberg via Getty Images)

By Neesa Moodley

27 Jul 2022

Vaping and ‘non-combustible’ products saw revenue growth of 45% to £12.8-billion for the half year to June, British American Tobacco said on Tuesday.

British American Tobacco (BAT) chief executive Jack Bowles says the tobacco manufacturer has seen strong operational performance in the first half of the year, with more than 20 million consumers now using its non-combustible brands.

“Our A Better Tomorrow purpose, partnered with our well-established multicategory strategy, continues to drive growth. Our three strong, global new category brands underpinned our revenue performance, with non-combustibles now representing 14.6% of revenue,” he says.

The three new category brands are Vuse (vapour products), Velo (modern oral products) and tobacco heating products, glo, all of which saw an investment of £1.1-billion in the first half of the year.

Bowles says the company is confident that it will be able to deliver £5-billion in revenue in the new categories by 2025.

(Photo: Luke MacGregor / Bloomberg via Getty Images)

BAT launched its new glo system, hyper X2, in Japan this week, and in the next six months will also launch a new consumables range in the tobacco heating products (THPs) category, where it is already enjoying strong growth.

THP products are typically devices that heat tobacco to generate an aerosol. BAT’s flagship product in this category, glo, comprises an electronic handheld device that contains a lithium-ion battery which powers a heating chamber.

Taking a page out of rival PMI’s book, BAT is now positioning itself as a consumer products company with a stronger focus on “reduced-risk products” such as hyper X2.

In line with this strategy, the disposable vape, Vuse Go, will be scaled up and rolled out into a number of new markets following a successful UK pilot launch in the first half of 2022.

Bowles says based on more than 135 internal studies and third-party data across emissions, toxicology, and the growing body of clinical and population studies, the company believes its products are scientifically substantiated as reduced risk compared with smoking.

“Studies show that, for Vuse and glo, harmful components are 90-99% less than cigarettes, with toxicology between 95% to 99% less.”

Asanda Gcoyi, chief executive of Vapour Products’ Association of South Africa (VPASA), says the South African economy would benefit significantly from an inclusive harm-reduction strategy.

“Such a strategy could drive economic transformation by introducing policies that address the country’s multiple socioeconomic imbalances, starting with fair vaping industry regulations and acknowledging vaping as a less harmful alternative to smoking cigarettes,” she says.

A study commissioned by the VPASA and carried out by NKC African Economics showed that the South African vape industry contributed R2.49-billion in “gross value added” to the economy, employed about 9,500 people across direct, indirect and induced channels of impact, and that more than 350,000 South Africans use vapes. BM/DM

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