British American Tobacco CEO: Achieving Comprehensive Smoke-free Business By 2035, With An Expected Annual Growth Rate Of 4.6% For Smoke-free Products

British American Tobacco CEO: Achieving comprehensive smoke-free business by 2035, with an expected annual growth rate of 4.6% for smoke-free products

British American Tobacco CEO Maroko stated that BAT has developed a strategic vision to fully transition to smoke-free products by 2035. By 2035, its main business will completely shift towards smoke-free products. According to BAT's latest financial report, by the first half of 2024, the revenue from BAT's smokeless products has accounted for 18% of the group's total revenue. If traditional combustion tobacco products from the United States are excluded, this proportion reaches 27%. In the development of new product categories, BAT will focus on improving the market performance of atomized electronic cigarette products and heated tobacco products.

 

On October 16th UK time, Tadeu Marroco, CEO of British American Tobacco (BAT), delivered a speech titled "Building a Smoke Free World" during a live stream on Capital Markets Day 2024.

 

In his speech, Maroko stated that traditional tobacco businesses are facing significant challenges as global consumers increasingly prioritize health. To cope with this transformation, BAT has formulated a strategic vision to fully transition to smoke-free products by 2035. The company's vision is to completely shift its main business towards smoke-free products by 2035.

 

 

The revenue from smoke-free products has accounted for 18% of the group's total revenue

 

Maroko stated that there are currently approximately 1 billion smokers worldwide, and BAT's smoke-free new product categories, such as vaping products, heated tobacco, and modern oral cigarettes, provide healthy alternatives for these consumers.

Distribution of smoke-free products | Image source: BAT

Maroko introduced the types of smoke-free products under the company and their market performance:

 

• Atomization products: BAT's atomization product Vuse occupies important market shares in multiple global markets, especially in the high-end markets of France and the UK, with Vuse market shares reaching 67.9% and 41.3% respectively.

Distribution of Atomized Products | Image Source: BAT

 

Heating tobacco products: Glo heating tobacco equipment has shown impressive performance, especially in European countries such as Italy, Poland, Germany, and the Czech Republic, where Glo's market share continues to grow.

Distribution of heated tobacco products | Image source: BAT

Modern Smoking: Velo maintains a leading position in major European markets, particularly in Switzerland, Poland, and Italy, with market shares of 95%, 94%, and 93.3%, respectively.

Distribution of Oral Smoking Products | Image Source: BAT

 

Maroko stated that through continuous research and market expansion, smoke-free products will become the core business of the company in the next decade and contribute to the structural transformation of the global tobacco industry. According to BAT's latest financial report data, by the first half of 2024, the revenue from BAT's smokeless products has accounted for 18% of the group's total revenue. If traditional combustion tobacco products from the United States are excluded, this proportion reaches 27%.

Distribution of smoke-free products | Image source: BAT

 

Will improve the market performance of heated tobacco products and electronic cigarettes

 

Maroko stated that in recent years, BAT has not only driven performance growth but also significantly improved operational efficiency through patent innovation and continuous upgrading of new products.

 

Especially in the development of new categories of products, BAT focuses on improving the market performance of atomized electronic cigarette products and heated tobacco products, and its transformation strategy is established on the following four levels.

 

Quality Growth: Through innovation and brand enhancement, BAT will further drive high-quality growth in new product categories. The company emphasizes patent protection and continues to launch innovative products such as Vuse Alto to maintain its market leading position.

Sustainable Future: BAT promises to enhance sustainable development by reducing tobacco harm and accelerating the development of smoke-free products. Reducing the health burden caused by smoking will be the core content of promoting this goal.

Excellent Operations: BAT ensures stable growth during the transformation process by optimizing capital efficiency and enhancing operational capabilities. For example, the company continuously optimizes equipment and technology in the supply chain to improve the market performance of heated tobacco products.

Leading integrity and sustainability: BAT not only hopes to achieve success in business, but is also committed to becoming a global leader in reducing tobacco harm. Through responsible market behavior, the company is actively shaping the future of the industry.

 

The annual growth rate of global smoke-free products will reach 4.6%

 

Maroko stated that BAT's new product categories, such as Glo heated tobacco and Velo modern oral tobacco, have performed well in multiple key markets, particularly in Europe and the United States.

 

According to data provided by British American Tobacco, by 2024, approximately 36% of nicotine consumers in Europe will have used smoke-free products, an increase of 14 percentage points compared to 2020. The new category of products is particularly popular among consumers under the age of 30, which means there is huge market potential in the future.

 

The company expects the annual growth rate of global smoke-free products to reach 4.6% by 2035, significantly exceeding the previous growth level of 3.8%.

Annual growth rate of smoke-free products | Source: BAT

 

Oral products are expected to reach £ 5 billion, continuing to deepen our presence in the US market and expand globally

 

The US market is currently the largest nicotine market in the world. By 2024, the total revenue of nicotine products in the US is expected to reach £ 41 billion, of which £ 27 billion comes from combustibles (traditional smoking products), £ 9 billion from vaping products, and £ 5 billion from oral products.

 

BAT's early investments in this market have achieved significant results. Maroko stated that nicotine products have grown by 40% since the acquisition of Renault Tobacco in 2017. Smoke free products (including nebulized and oral products) have surged by 280%. It is worth noting that Maroco claims that Vuse products have a market share of 50.8% in the US market and maintain a leading position in 40 states.

Highlights of US Business | Source: BAT

 

The scale of illegal electronic cigarettes has reached 6 billion pounds, calling on the government to strengthen regulatory measures

 

At the same time, BAT is actively supporting the United States' crackdown on the illegal aerosol product market.

 

According to data presented by BAT, the current market size of illegal vaping products in the United States is as high as £ 6 billion, with over 11500 electronic cigarette products sold in US stores, which weakens the competitiveness of compliant enterprises. BAT calls for strengthened regulation and more efficient enforcement measures. For example, electronic cigarette companies are required to submit a tracking number (STN), and a federal multi agency working group has been established to curb illegal products, increase FDA warning letters, confiscation, and civil penalties.

 

It is worth noting that the presentation files are accompanied by images of GEEKBAR and RAZ products.

Illegal Electronic Cigarettes in the United States | Image Source: BAT

 

Finally, Maroko stated that BAT not only promotes the development of smoke-free products through innovation, but also strives to shape a healthy and responsible industry regulatory landscape. The company is collaborating with governments and industry regulatory agencies in multiple countries to promote a more robust regulatory framework to ensure the legality of smoke-free products and consumer safety.