End Of The Road For HNB?

Posted 18th October 2018 by Dave Cross
Market analysts are focussing on the poor sales figures and declining stock value, but it is British American Tobacco’s (BAT) action and comments that should elicit the most interest. BAT has declared that HNB is not a complete solution for smokers.

BAT announced poor performance from its electronic and HNB products, knocking a full 10% off its annual revenue target for next generation products. This had the immediate effect of sending stock values to their lowest level for four years, with market analysts predicting that the decline will continue to 2008 levels.

The company said that demand for HNB has flatlined in Japanese markets. 

BAT’s Ben Stevens said: “Glo is not a complete substitute for smoking. It’s not going to sweep the world as some of our competitors say it will.”

This lies at odds with the (underhand) efforts being expended by Philip Morris International (PMI). Having been castigated for placing illegal posters in shops, this week we report on a rep offering potentially illegal incentives for IQOS to undercover reporters. The desperation in such moves illustrate a company that it fighting tooth and nail to get a product established in a resistant market.

An analyst at RBC Europe believes the future is problematic for the tobacco industry. With leading companies unable to publicly agree on how the market for alternative products will develop, their role in it, and the threat of having to face strict opposition in many countries, the argument for continuing to invest in Big Tobacco is looking “opaque”. Morgan Stanley is “concerned” about tobacco company performance in the future.

BAT were one of the twenty-one companies to receive a letter from the FDA last week, demanding action on preventing illegal sales to teens.

With little competition from vaping, Japan is considered to be the key market for HNB products. Following a flush of initial success, tobacco companies have found it almost impossible to convince current smokers to make a switch to their lower risk brands.

This situation is complicated by the fact that no other HNB market has followed Japan’s initial enthusiasm. South Korea was seen as the next biggest potential market, but HNB met with stiff opposition – leading to PMI currently going through the motions of taking Seoul’s Ministry of Food and Drug Safety to court.

 Dave Cross
Article by Dave Cross
Freelance writer, physicist, karateka, dog walker