The biggest tobacco company in The UK has said cannabis is part of its future, as it attempts to distance itself from traditional cigarettes.
British American Tobacco, or BAT, has started to reduce the health impacts of their products in order to “accelerate” its transformation.
BAT has signed a contract to study a new range of adult cannabis products. The initial focus was on cannabidiol, (CBD), a none psychoactive chemical harvested from cannabis plants. It purchased a share in Organigram, a Canadian manufacturer of medical cannabis.
Kingsley Wheaton, an executive at BAT, has stated that the future of our portfolio is “beyond nicotine products” as they look towards them as a “wave of future growth”.
Chief marketing officer at BAT, Mr Wheaton, stated that the company sees cannabis-related products as part its future growth. In Manchester, England the firm is testing a new CBD vape product. He believes that CBD vaping will be a part of the future. He talked about challenge of encouraging people switch from more harmful tobacco and nicotine to healthier alternatives.
More than a third now comes from vaping brands like Velo, Vuse and Glo. The company released its half-year results for June and reported a 8.1% increase in revenues to 12.18 billion Pounds.
The fastest growth in new customers for the tobacco giant was also seen, with non-combustible product users, like vapes, jumping from 2.6 million to 16.1million.
A decisive change to the balance
Over the past decade, big tobacco companies have attempted to ride two horses when communicating with investors. They have called attention to their efforts to eliminate harmful cigarettes while simultaneously pointing out the large dividend payments that are supported by the sale of these cigarettes.
This balance has now shifted decisively to the former, at least in companies’ communications. First Philip Morris International, now BAT, have done everything to emphasize their shift into safer products, vaping, heated tobacco rather than combusted tobacco and, in BAT’s case, cannabis.
BAT’s share prices have roughly fallen by half in the last four years, from 55 to 27 billion.
There is certianly progress. BAT sold 316 billion cigarettes over the six-month period. The number of cigarettes sold has increased due to a higher demand from emerging markets. BAT’s six-month results show that sales of products in this “new category” grew by half to reach 942 million. This is relatively small percentage of the total revenue of 12 billion.
Although traditional tobacco is still the largest business of the company, the company claims it is determined to make a change and pledges that ESG (environmental, socio-economic, and governance) will be at the heart of its strategy.
Tobacco sales recover
BAT stated that sales of its cigarettes have recovered in certain developing countries following the lifting of coronavirus lockdowns, during which some countries had banned them.
During the first half of the year.n countries like Brazil, Turkey, and Pakistan, sales of brands such as Lucky Strike, Kent, Dunhill, Kent and Rothmans rose
The company reported that overall revenue from its combustibles business division, which includes cigarettes and heated tobacco products, fell by 3% to 10.5 billion.
“For now… “For now…,” BAT still depends on cigarettes. He said that traditional tobacco products still pay the dividend and will continue to do so for some time.
There are still many steps to be taken if the tobacco company is to reach its goal of 5 billion in revenue from nicotine alternatives by 2025, says Hargreaves Lansdown equity analyst William Ryder.