Well, it’s happening. British American Tobacco (BAT), the second-largest tobacco company in the world, has announced that by 2035 they’ll become a predominantly smokeless business.
In light of these changes, let’s look at who will be the winners and losers from this transformation.
Public health
Less combustible smoking is an obvious benefit for public health. The more people that move away from lethal cigarettes, the fewer cases of cancer and other smoking-related deaths and illnesses. In a British context, BAT going smokeless is exactly the sort of preventative action that Wes Streeting wants to implement to save the NHS.
To reasonable observers, it’s just another example of citizens and private businesses resolving problems without the need for the government. Even though it’s unlikely that governments will just get out of the way, the public will come out ahead here.
Winner
Consumers
While BAT vaping products might have a distribution and marketing advantage, the devices can’t compete with the best that Shenzhen has to offer. However, if the writing is on the wall, hopefully, BAT will pump more money into R&D and make products that can stand on their own without being propped up by exclusive distribution agreements.
On the other hand, BAT has good nicotine pouch brands in their portfolio, like VELO and Lyft, which can compete with rival products.
Overall, vapes and pouches are affordable, convenient, and healthy. The only real barriers between smokers adopting these products is misinformation and zealous regulations. As long as consumers have good choices in front of them, I’m confident they’ll make the right decisions.
Winners
Shareholders
A hostile regulatory environment and decline of tobacco sales have made BAT a mixed performer in recent years. Until 2017, the stock more or less outperformed the major indices, but recent years have been lean, with prices trading at around half its peak.
Pivoting towards pouches and vapes is the only way for BAT to stay relevant into the next decade. While a lot will depend on how governments deal with vapes and pouches, if BAT embraces a smokeless future, there could be sunny days ahead for consumers.
Winners
Tobacco control
As Big Tobacco evolves towards smokeless products, the relevance of tobacco control diminishes. Well, that’s how it should work, anyway. Yet, as we’ve seen in the last decade, the goal posts have moved and a smokefree world is not enough for the intricate network of foundations, trusts, and NGOs.
We can expect more lies, activists posing as journalists, and fear mongering from tobacco control as they fight to stay relevant. They’re perennial losers, and a smokeless BAT won’t change that.
Losers
Governments
For all their big talk, governments are addicted to cigarette taxes. As big companies move towards smokeless products, expect to see more excise duties on harm reduction products to make up the deficit.
The problem here is that affordability is a big part of vapes and pouches’ appeal. If governments push things too far, they will drive people toward the blackmarket, boosting criminality while reducing overall tax incomes.
Losers
Final thoughts
Moving to a predominantly smokeless product range is the best we could hope for tobacco firms like BAT. Continuing to kill and maim people in the name of profit couldn’t continue. However, thanks to the invention of vapes and pouches, these businesses can continue to provide employment, taxes, and products that the public want.
