Tag: British American Tobacco

Motley Fool: Juul Removal Would Crown BAT King

Photo: BAT
The removal of Juul products would hand the U.S. market to BAT (formerly British American Tobacco), according to Motley Fool.
Juul, which is partly owned by Altria Group, had been the undisputed e-cigarette leader, with a near-80 percent share of the market at the height of its success. The latest Nielsen data puts Vuse’s share at 35.1 percent compared to 33.1 percent for Juul. Third-place NJOY has a 3.1 percent share.
Last year, the U.S. International Trade Commission ruled that Philip Morris International’s IQOS heated tobacco device infringed on BAT’s patents, and that device was prohibited from being imported and sold in the U.S. Altria had partnered with PMI to market and distribute IQOS in the U.S., but the ITC ruling disrupted those plans.
Because Altria shelved its MarkTen e-cigarette brand in favor of partnering with PMI, the ITC ruling leaves it without a vapor product. The FDA has all but wiped out the rest of its investment in Juul. In 2018, Altria paid $12.8 billion for a 35 percent in the vapor company. As of the end of the first quarter of 2022, Altria had reduced the fair value of its Juul position to just $1.6 billion.
If the FDA is successful in eliminating Juul, BAT will essentially have no roadblocks in its way to market dominance.
Vuse turned profitable in the U.S. for BAT in the second half of last year, and it’s been able to grow its share because it discounted the device and the consumables to attract users. Earlier this month, BAT said it was now ready to raise prices on both. With a major competitor removed from the market, this should provide the company with a big boost in profits.
BAT’s vapor revenue grew 59 percent last year to £927 million ($1.14 billion), while its own heated tobacco products, marketed under the Glo brand, saw a 46 percent rise in sales to £853 million.
June 27, 2022
‘BAT key beneficiary of Juul MDO’

Photo: BAT
The removal of Juul products from the U.S. market would boost the prospects of British American Tobacco, create opportunities for Philip Morris International but represent a problem for Altria Group, according to Morgan Stanley.
In a letter to investors, the financial institution evaluated the impact of the U.S. Food and Drug Administration’s leaked plans to deny Juul Labs’ premarket tobacco product application (PMTA). While the FDA has not issued a formal statement yet, shares in Altria Group were down more than 9 percent in the immediate wake of the news. Altria owns about a third of Juul Labs.
According to Morgan Stanley, Juul is Altria’s only exposure to the growing vapor category. While a Juul marketing denial order (MDO) would give Altria an opportunity to terminate its noncompete agreement with Philip Morris International, allowing it to step-up its vapor product research and development or acquire vapor technology, the company would not be coming from a position of negotiating leverage, according to the investment bank.
“In addition, there are few larger scale independent e-vapor assets on the market,” wrote Morgan Stanley.
The investment bank believes that removing market leader Juul from U.S. store shelves would create opportunities for other products, such as PMI’s IQOS heat-not-burn device, which has already received PMTA approval.
The key beneficiary of a Juul MDO, however, would be British American Tobacco, according to Morgan Stanley.
Several of the company’s products have already received PMTA authorizations, the investment bank points out. Though its Vuse brands, BAT recently overtook Juul as the leading U.S. e-cigarette player with a market share of more than 33 percent. The company has gained significant momentum in the category over the past 24 months and a Juul MDO could lead to further BAT market share gains, according to Morgan Stanley.
June 23, 2022
Altria Banned From Importing IQOS Into U.S.

Photo: Kuznietsov Dmitriy
The U.S. Trade Representative has upheld the International Trade Commission’s (ITC) finding that Philip Morris International’s IQOS tobacco heating device infringes on patents held by British American Tobacco, reports The Winston-Salem Journal.
As a result of the ITC ruling, Philip Morris USA is barred from importing PMI’s IQOS 2.4, IQOS 3, IQOS 3 Duo heat-not-burn traditional cigarette products. It also was ordered to halt future sales of those products—marketed as Marlboro HeatSticks—already in the U.S.
Some retailers of the Marlboro HeatSticks, including convenience stores, already had displayed notifications to customers that those products could no longer be sold as of Monday.
“Today’s announcement provides a measure of success for our enforcement of intellectual property rights to ensure we can continue to innovate, as is common practice among innovation-based industries,” Gareth Cooper, BAT’s assistant general counsel, said in a statement. “As we have strenuously noted, there was no reason to overturn the policy.”
Altria said expressed disappointment with the decision. “We continue to believe that the plaintiff’s patents are invalid and that IQOS does not infringe on those patents,” the company said in a statement.
“The ITC’s importation ban makes the product unavailable for all consumers who have switched to IQOS, reduces the options for the over 20 million smokers looking for alternatives to cigarettes, and ultimately is detrimental to the public health.”
This sentiment was echoed by Gregory Conley, president of American Vaping Association, at the time of the ITC’s Sept. 30 decision.
“By potentially denying them the opportunity to switch to a harm reduction production IQOS, the real losers of this protracted court battle could end up being American adult smokers,” Conley said.
“While some may use vaping, snus, or pouches in the absence of IQOS, far too many American adults will choose to just smoke cigarettes instead.”
The U.S. Food and Drug Administration authorized IQOS for sale in April 2019. The products debuted in test markets in Atlanta in October 2019 and Richmond, Virginia, in November 2019. During the second quarter, PM USA expanded retail distribution of Marlboro HeatSticks into the Triad and other metro areas of North Carolina, as well as northern Virginia and Georgia.
Altria will likely appeal to the U.S. Court of Appeals for the Federal Circuit, which handles patent lawsuits. That process could take up to a year to reach a decision, with the likelihood of a successful appeal not favorable, according to industry analysts.
In the worst-case scenario for Altria and Philip Morris, the two companies would have to go back to the drawing board, moving production to the U.S. or changing up the design enough to avoid patent infringement claims.
PMI has successfully defended similar cases in the U.K. and elsewhere. BAT has already pursued litigation over IQOS in Poland, the Czech Republic, Bulgaria, Romania and Greece and through the European Patent Office.
November 30, 2021
BAT Calls for Higher Cigarette Taxes in Japan

Photo: Colleen Williams
British American Tobacco has surprised some observers by calling for higher cigarette taxes in Japan, reports the Japan Times.
The company has submitted the request in writing to a group of lawmakers ahead of a tax system reform scheduled for 2022.
The unusual move by a tobacco-maker comes as Japan is slated to raise its tobacco tax only for heat-not-burn (HnB) tobacco products in October 2022, which is expected to make some of such products more expensive than cigarettes.
BAT is concerned that this will discourage smokers from switching to HnB products, which the company believes are less harmful to health than combustible cigarettes.
The company is also requesting that the tax on heat-not-burn tobacco be increased at a slower pace than that for cigarettes in the medium to long run.
In 2018, the government decided to increase the cigarette tax by ¥1 per cigarette each in 2018, 2020 and 2021 and the tax on heat-not-burn products in five stages from 2018 to 2022.
According to the Tobacco Institute of Japan (TIOJ), sales of cigarettes in fiscal 2020, which ended last March, dropped 11.8 percent from the previous year to ¥2.47 trillion, due in part to a fall in opportunities to smoke outside home as people stayed at home amid the coronavirus pandemic.
Tobacco harm reduction activists attribute the sharp drop in smoking to the rising popularity of HnB products.
The TIOJ’s first survey of HnB products showed sales of ¥1.06 trillion, or more than 40 percent of the country’s cigarette sales.
November 5, 2021
ITC: IQOS Infringes on BAT Patents, U.S. Sales to End

Photo: theaphotography
The International Trade Commission (ITC) has upheld an initial determination from May 2021 that Philip Morris International’s IQOS device infringes on two patents owned by BAT subsidiary Reynolds American Inc. (RAI).
The agency has instituted an import ban and a cease-and-desist order preventing IQOS consumables and devices from being sold in the U.S. in 60 days. PMI’s U.S. partner, Altria Group, plans to continue to sell IQOS through the 60-day period in its existing markets.
BAT welcomed the ruling. “Infringement of our intellectual property undermines our ability to invest and innovate and thereby reduce the health impact of our business,” the company wrote in a statement. “We will therefore defend our IP robustly across the globe.”
The patents relate to an electronically powered device with a heater to generate an aerosol and expire in October 2026 and November 2031. BAT has filed similar cases globally, including in Germany, the U.K., Japan and Italy.
Morgan Stanley said the ruling would have limited financial impact on PMI and Altria, as IQOS in the U.S. is not a meaningful contributor to the companies’ earnings. The outcome of similar cases brought by BAT against PMI internationally, however, could have a greater impact. But so far, PMI has been successful defending cases in the U.K. and Greece.
The investment bank also noted that the IQOS ban applies to imported product, suggesting it may be overcome by shifting production to the U.S.
The ITC decision will now be reviewed by the U.S. Trade Representative. If the decision is not vetoed within 60 days (only a handful have ever been vetoed), it can be appealed to the U.S. Court of Appeals, but the import ban would still be in effect throughout an appeals process.
September 30, 2021
Vuse Becomes No. 1 Global Vaping Brand

Photo: BAT
Vuse is now the No. 1 global vaping brand by value share, according to its manufacturer, BAT.
Vuse is the category value share leader in four of the top five vapor markets (Canada, France, Germany and the U.K.), and BAT’s U.S. momentum in vapor means Vuse is now leader by value share in 22 states, up from 20 in July, BAT announced on its website.
In May this year, BAT also announced that Vuse became the world’s first global carbon neutral vape brand.
“We are delighted that Vuse has become the number one global vaping brand,” said Jack Bowles, CEO of BAT. “It is proof that we are building brands of the future, underpinned by strong innovation, as part of our vision for ‘A Better Tomorrow.’
“In the first half, we delivered 50 percent New Category revenue growth and added 2.6 million consumers of our noncombustible products, our highest ever increase, to reach 16.1 million consumers. This momentum is powered by our strong global brands Vuse, Glo and Velo. Each New Category brand grew its category share by more than 280 base share points [bsp] across key markets and recorded volume growth of 70 percent or more.”
At its half-year results, BAT reported that its vapor business performed strongly, with revenue up 59 percent, volume grew by 70 percent and consumer numbers were up by 0.9 million to reach 7.5 million. Since December 2020, Vuse’s value share is up 340 bps, reaching 34 percent in July 2021.

September 8, 2021
IQOS Pauses Expansion After Patent Ruling

Photo: Kuznietsov Dmitriy
Philip Morris USA has paused U.S. expansion of its IQOS heat-not-burn (HnB) cigarettes following an unfavorable U.S. International Trade Commission (ITC) ruling, reports The Winston-Salem Journal, citing the company’s second-quarter report.
In April 2020, British American Tobacco subsidiaries R.J. Reynolds Tobacco Co., RAI Strategic Holdings and R.J. Reynolds Vapor Co. filed a patent infringement lawsuit against Philip Morris USA.
The complaint focuses on three HnB technology patents held by the company. An additional two patents are involved in a separate legal proceeding before the patent and trademark office.
In May, an ITC administrative law judge found that the IQOS system infringes two of the plaintiff’s patents and recommended imposition of a ban on the importation of the IQOS system.
On July 27, the ITC accepted review of the administrative law judge’s findings and recommendations on certain issues, including issues relating to the patent infringement claims and potential remedies, including a ban on the importation of the IQOS electronic device, Marlboro HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States.
The ITC’s ultimate order is subject to review by the U.S. Trade Representative and federal court. Due to this uncertainty, PM USA has delayed further expansion of IQOS and Marlboro HeatSticks.
IQOS is the only HnB product authorized for sale in the U.S., where it is sold by Altria. Last year, the U.S. Food and Drug Administration allowed the company to market IQOS as reducing consumers’ exposure to harmful chemicals found in cigarettes.
The IQOS products debuted in test markets in Atlanta, Georgia, in October 2019 and Richmond, Virginia, in November 2019.
During the second quarter, PM USA expanded retail distribution of Marlboro HeatSticks into the Triad and other metro areas of North Carolina as well as northern Virginia and Georgia.
The expansion contributed to Marlboro HeatSticks’ retail sales volume jumping by nearly 40 percent, including reaching a 0.8 percent market share for overall cigarettes in Atlanta as well as 0.5 percent in Charlotte.
July 30, 2021
Significant Growth in New Category Sales for BAT

Photo: BAT
BAT reported revenue of £12.18 billion ($16.89 billion) for the six months that ended June 30, down 0.8 percent (up 8.1 percent on an adjusted basis) from the comparable 2020 period. Revenue from new categories increased by more than 50 percent to £883 million. Profit from operations totaled £4.91 billion, down 3.7 percent (up 5.4 percent on an adjusted basis) from the comparable six months a year earlier.
“This has been an exciting period of growth in New Categories, with New Category constant currency revenue up by 50 percent in the first half,” said BAT CEO Jack Bowles in a statement. “We added 2.6 million consumers—our highest ever increase—to our noncombustible product consumer base, to reach 16.1 million. This demonstrates our accelerating transformation driven by our multi-category portfolio, with continued key market share gains in all three New Categories.
“We are building strong, global brands of the future with Vuse, Velo and Glo. These are underpinned by industry leading multi-category consumer insights and science, with increasing digitalization. We have invested a further incremental £346 million in the first half, funded by continued value growth from combustibles and expect to reach our £1 billion Quantum savings target 12 months early. We have now increased our savings target to £1.5 billion by 2022.
“Our rapid growth in New Categories is driving significant scale benefits and 2021 is shaping up to be a pivotal year in our journey towards ‘A Better Tomorrow.’”
July 28, 2021
BAT Highlights Vuse’s Carbon Neutral Status
Photo: BAT
BAT’s Vuse e-cigarette celebrated its position as the first global carbon neutral vape brand with a carbon neutral voyage down the Thames in London, home of BAT’s global headquarters.
The event was organized to underscore Vuse’s commitment to carbon neutrality and its various supporting initiatives. For instance, in utilizing substantial sea freight as part of its global supply chain, BAT aims to move the majority of Vuse’s global shipments by sea freight by the end of next year.
“I am proud of the way that Vuse is playing its part in delivering A Better Tomorrow by reducing its impact on the environment,” said Kingsley Wheaton, chief marketing officer at BAT, in a statement.
“Vuse is a leading global brand with ever-increasing scale, which allows us to drive global supply chain efficiencies and effectiveness. I am delighted that, in Vuse, we are demonstrating the kind of purposeful behavior expected from leading brands of the world. This commitment will play a part in our vision of A Better Tomorrow becoming a reality.”
Research conducted on behalf of BAT’s R.J. Reynolds Vapor Co. subsidiary found that nearly half (46 percent) of consumers said they would prefer using a vapor product from a company that was successful in becoming carbon neutral. A brand’s environmental priorities and impact are increasingly important to consumers in considering their purchasing choices, with nearly a third of consumers broadly viewing a brand more favorably based on their environmental initiatives, according to Reynolds.
Vuse’s carbon neutrality status and ambition to increase sea freight is part of BAT’s bigger ambition to become an environmentally sustainable vape brand with initiatives including:

An ambition to transport the majority of international shipments by sea by the end of 2022 and 100 percent of its consumable pods by end of 2023.

A global device and pod collection scheme; through the “Drop the Pod” campaign, approximately 200,000 pods were collected since the start of the pilot in 2020

Cutting single use plastics from packaging. The “Cut the Wrap” campaign has saved 100 tons of plastic or the equivalent of four million plastic bottles in 20202
BAT’s sustainability efforts and commitment have received notable independent recognition. These include inclusion in the Dow Jones Sustainability Indices for 19 consecutive years (the only tobacco company to be listed in the prestigious World Index in 2020), a MSCI rating of BBB and CDP A List status for climate change.
July 23, 2021
BAT Study Confirms Harm Reduction Potential of HTPs
Photo: BAT
New research published today in Internal and Emergency Medicine, provides the first real-world evidence that people switching from cigarettes to exclusive use of glo, BAT’s flagship tobacco heating product (THP), can significantly reduce their exposure to certain toxicants and indicators of potential harm related to several smoking-related diseases compared with continuing to smoke.
The results, recorded at six months of a 12-month study, showed that switching completely to glo resulted in statistically significant changes across a range of “biomarkers of exposure” (BoE), and indicators of potential harm, known as “biomarkers of potential harm” (BoPH), compared with continuing to smoke.
For most biomarkers measured, the reductions seen in people using glo were similar to those in participants who stopped smoking completely.
Based on the toxicants measured, glo users showed a:
Significant reduction in a biomarker for lung cancer risk
Significant reduction in white blood cell count, an inflammatory marker indicative of cardiovascular disease risk (CVD) and other smoking-related diseases
Improvement in HDL cholesterol associated with reduced risk of CVD
Improvements in two key indicators of lung health
Improvement in a key indicator of oxidative stress, a process implicated in several smoking-related diseases, such as CVD and hypertension
“These are exciting results as they allow us to understand the potential for reduction of risk that switching completely to glo can deliver,” said David O’Reilly, director of scientific research at BAT, in a statement. “The study shows that smokers switching to glo can reduce their exposure to certain toxicants, which reduces their risk of developing certain smoking related diseases.
“To have shown a significant reduction in measures of BOPH, some comparable to quitting completely, is very encouraging and provides further scientific substantiation of the harm reduction potential of glo and how it supports our ambition to build A Better Tomorrow by reducing the health impact of our business.”
July 1, 2021