RE: FT comment24 Aug 2018 22:56
Cheers ....explains it
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https://www.ft.com/content/629ca79a-a7af-11e8-926a-7342fe5e173f
Tobacco giants, Philip Morris and Altria Group were trading lower after Jefferies downgraded the stocks and predicted slower adoption of “reduced risk” tobacco products than previously forecasted. The move also weighed on their rivals.
Jefferies analyst Owen Bennett, revised down projections for so-called reduced risk tobacco products, to 41 per cent of market share globally, compared with previous predictions of 61 per cent in the US and 51 per cent overseas.
Mr Bennet also downgraded Philip Morris and Altria to “hold”, while reaffirming British American Tobacco and Imperial Brands as a “buy”, as the tobacco industry contends with a shift in consumer preferences away from traditional cigarettes in favour of “vaping”.
Philip Morris shares were down 3 per cent, just after noon in New York on Friday, while Altria was down 1.5 per cent. UK-listed Imperial Brands was down 1.5 per cent and British American Tobacco was down 3.4 per cent after the close of markets in London.
Mr Bennett said he previously believed that “heated” products would appeal to the majority of smokers, but now sees a slower adoption of heated products, pointing to consumer preference for vapour.
BAT has the first-mover advantage in the US vapour market, Mr Bennet wrote in the report, and noted that Imperial Brands is also well positioned for vapour share.
Philip Morris, on the other hand, faces longer term pressure on total tobacco volume due to consumer preferences for vapour, Mr Bennett said, adding the company has seen significant share loss in the Japanese market.
Altria Group also faces share pressures, and is at a disadvantage in the vapour market, due to available formats and concerns around a delay on approval of IQOS, a tobacco heating system, Mr Bennet wrote.
Jefferies predicts vapour making up 54 per cent of initial launch markets in the US by 2026, and 62 per cent outside of the US by that date. That’s up from Jefferies previous predictions of 40 per cent and 36 per cent. That prediction is supportive of British American Tobacco and Imperial Brands, but bad news for Philip Morris, Mr Bennet wrote.
All of these companies compete with Juul, the San Francisco-based vaping start-up, which has grown in popularity, but is currently under scrutiny by regulators.
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