Key Points
- Traditional tobacco remains Imperial’s cash engine.
Tobacco net revenue rose 1.5% in HY26, supported by pricing and mix, despite continued volume declines.
- Imperial is exiting myblu from the U.S. market.
The company said its legacy U.S. vape business is loss-making, contributes little to net revenue and faces a prolonged regulatory process for new innovations.
- Zone is becoming the center of Imperial’s U.S. NGP strategy.
Zone has expanded to 109,000 stores, delivered volume growth of more than 40%, and reached a 2.8% national share in the U.S.
- Europe is emerging as Imperial’s multi-category NGP growth market.
European NGP net revenue grew 15.3%, supported by blu reusable vaping products, Pulze heated tobacco and Zone/Skruf modern oral products.
- Australia highlights the pressure from illicit markets.
Imperial said new regulation and illicit product growth accelerated legal market volume declines in Australia, weighing on AAACE regional performance.
- The 2030 Strategy shows Imperial’s transformation is also operational.
The company is targeting £320 million in annualized cost savings by 2030 through manufacturing rationalization, data platforms, AI-supported tools and its Capgemini partnership.
2Firsts
May 12, 2026
Imperial Brands’ fiscal 2026 first-half results, released on May 12 and covering the six months ended March 31, show the British tobacco group pursuing a more focused and pragmatic transition in next-generation products: using traditional tobacco cash flow to fund selective investment in modern oral nicotine, heated tobacco and reusable vaping systems.
For the six months ended March 31, 2026, the British tobacco group reported a 1.8% increase in Tobacco & NGP net revenue, a 7.5% rise in NGP net revenue and a 5.3% increase in adjusted earnings per share. At the same time, Imperial confirmed it will transition its legacy myblu vaping business out of the U.S. market, while continuing to expand Zone, its modern oral nicotine brand. In Europe, growth was supported by blu reusable vaping products, Pulze heated tobacco and Zone/Skruf modern oral products.
The results suggest more than a stable half-year performance. They point to a reallocation of NGP resources: in the United States, Imperial is shifting its focus from vaping to nicotine pouches; in Europe, it is building a broader multi-category NGP platform. Traditional tobacco remains the financial base supporting that transition.
Traditional tobacco remains the cash engine
Imperial’s transformation is still anchored in combustible tobacco. In the first half, tobacco net revenue rose 1.5%, supported by price and mix, which offset a 1.5% decline in tobacco volumes. The company reported a 3.0% contribution from tobacco price/mix.
That pricing power remains central to Imperial’s model. In mature markets such as Europe and the United States, cigarette volumes continue to decline, but higher prices and portfolio management have allowed the company to sustain revenue.
Imperial’s presentation also made clear that the company is not chasing market share at any cost. It said “not all points of market share are equal,” noting large differences in gross margin between the top and bottom of the pricing ladder: about seven times in the U.S., three times in Germany and 2.5 times in Spain.
That framing helps explain Imperial’s current tobacco strategy. Rather than prioritizing aggregate market share, the company is focusing on higher-value segments, brand equity and margin quality.
Compared with the more aggressive “smoke-free” narrative of Philip Morris International, Imperial’s approach is more conservative and capital-disciplined. Traditional tobacco is still providing the funds for NGP investment, restructuring costs, dividends and share buybacks.
U.S.: myblu exits as Zone becomes the priority
The U.S. market provided one of the most significant signals in Imperial’s half-year report.
Imperial confirmed that it has decided to transition its legacy myblu vaping business out of the U.S. market. The company cited its strategic focus on modern oral, the prolonged regulatory process for new innovations, and the fact that myblu is a loss-making legacy vape business with a small and declining contribution to net revenue.
The decision is more than a brand-level adjustment. It reflects a reassessment of the returns available in the regulated U.S. vaping market.
In recent years, U.S. vaping has been shaped by slow PMTA reviews, limited room for product innovation and continued competition from unauthorized products. For Imperial, continued investment in a legacy vape platform appears to offer diminishing strategic value.
But Imperial is not retreating from U.S. NGP. It is redirecting resources toward Zone.
According to the company’s investor presentation, Zone has expanded to 109,000 stores since its February 2024 launch. The brand delivered volume growth of more than 40% and reached a 2.8% national share. Imperial said it will focus on volume share, consumer activation, velocity and long-term brand building.
The shift suggests Imperial’s U.S. NGP strategy is moving from “vape-led” to “modern oral-led.”
That transition, however, still carries regulatory uncertainty. Imperial said one set of Zone PMTAs remains under FDA review, while another set received a refuse-to-file letter. Its U.S. business, ITG Brands, has filed a lawsuit in the U.S. District Court for the District of Columbia challenging the FDA decision. Under an agreement with the FDA, the affected products may remain on the market while the case continues, with advance notice required before any potential enforcement action.
For Imperial, modern oral nicotine may offer a more attractive path than legacy vaping, but Zone’s long-term trajectory will still depend on the FDA review process and the boundaries of future enforcement.
Europe becomes the multi-category growth market
If the U.S. shows Imperial reallocating NGP resources, Europe shows the company’s multi-category strategy gaining traction.
In Europe, Tobacco & NGP net revenue rose 3.3% and adjusted operating profit grew 8.1% in the first half. NGP net revenue in the region increased 15.3%, making Europe a key contributor to Imperial’s reduced-risk product growth.
The growth came across three product lines: blu vaping products, Pulze heated tobacco and Zone/Skruf modern oral nicotine.
In vaping, Imperial said consumer preferences in Europe are moving from disposables toward pod-based and rechargeable products, supporting growth in blu kits. The company reported more than 10% market share for blu in markets including the United Kingdom, France, Spain, Greece and Portugal.
In heated tobacco, Pulze 3.0 continued to gain traction, particularly in Italy and Greece. The device is supported by iD tobacco sticks and iSenzia non-tobacco heated sticks, both of which can be used with Pulze 3.0.
In modern oral, Zone and Skruf benefited from new flavors and formats in Nordic markets, while Zone made early progress in the UK independent channel.
Europe is therefore not a single-category growth story for Imperial. It is the clearest market for the company’s multi-category NGP approach: reusable vaping systems are benefiting from regulatory pressure on disposables, heated tobacco is advancing in selected markets, and modern oral continues to expand in the Nordics and the UK.
For suppliers, this points to continued structural opportunities in compliant reusable vaping systems, pod platforms, heated tobacco consumables and nicotine pouches. But those opportunities are increasingly tied to regulatory readiness, brand strength and local channel execution.
Australia highlights the pressure from illicit markets
Beyond the U.S. and Europe, Australia stood out as a regulatory warning signal.
Australia is one of Imperial’s five global priority markets, but the company said the market has been affected by new regulation and the growth of illicit products. Legal market volumes declined sharply, weighing on performance in the AAACE region. In the first half, AAACE Tobacco & NGP net revenue rose 1.1%, but adjusted operating profit fell 3.0%. Excluding Australia, AAACE adjusted operating profit grew 12.8%.
Imperial said enforcement actions against illicit trade in places such as Queensland had led to localized improvements in market dynamics, but those improvements had not been widespread.
Australia has become a test case for the interaction between high taxation, strict regulation and illicit market expansion. For regulators, the challenge is no longer only how to reduce tobacco and nicotine use, but how to balance public-health objectives with tax policy, legal market order and enforcement against illicit products.
For companies, Australia shows the limits of pricing and portfolio management when the legal market faces structural pressure from illegal supply.
2030 Strategy: transformation beyond products
Imperial’s transition is not only about product mix. It is also about reshaping the company’s cost base, operating model and data capabilities.
Under its 2030 Strategy, Imperial is targeting £320 million in annualized cost savings by 2030. The programme includes manufacturing footprint rationalization, enterprise platform rollout, AI-supported sales tools and a long-term strategic partnership with Capgemini.
The company said it has completed the transfer of 386 roles to Capgemini across finance, procurement and global supply-chain hubs in Poland. Imperial said the partnership will support consumer and sales capabilities, provide data-led insights and agentic AI tools, and help deliver efficiencies.
Imperial is also adjusting its manufacturing network. It has concluded consultations over the closure of its Langenhagen factory in Germany, where production is expected to cease in July 2027, and it has announced the sale of a cigarette manufacturing facility in Taiwan. The company said the two actions together are expected to save about £100 million per year once fully implemented.
That makes Imperial’s “focused challenger” positioning more than a product strategy. It is also an operating model: a leaner, more data-led company that is choosing where to compete rather than trying to match larger rivals across every NGP category and market.
A more focused, more realistic transition
Imperial Brands’ half-year results show that global tobacco companies are entering a more selective phase of NGP competition. Companies are no longer simply placing bets across every emerging category. They are ranking markets and products by regulatory certainty, margin potential, channel efficiency and consumer adoption.
For Imperial, the simultaneous U.S. exit of myblu and expansion of Zone point to a clear shift from vaping to modern oral nicotine in the American market. In Europe, NGP growth shows that a multi-category model still has room to develop, but only where local execution and regulation allow.
This is a more cautious transition than the one being pursued by some larger rivals. But it may also be a more realistic one: using tobacco cash flow to fund selective NGP investment, rather than trying to replace the core business through rapid expansion.
Imperial is not positioning itself as the most aggressive player in NGP. It is doing something narrower: cutting low-return exposure, concentrating resources on more promising categories and markets, and rebuilding its operating model to support that focus.
For the NGP industry, that strategic shift may matter more than the headline growth number.
(Cover image: Imperial Brands Half-Year Results for Fiscal 2026. | Image source: Imperial Brands)
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