Recent Movements of the Big Four

Ellesmere Zhu

In the third quarter of 2022, Tobacco Big 4, i.e. PMI, BAT, JTG, and Imperial Brands, were all moving to develop more sustainably.

PMI announced its ambition to go carbon neutral around 2025. As part of the effort, it built eight new carbon neutral production centers, and constructed a green energy base in Indonesia this year to supply energy sustainably and make production carbon neutral. Meanwhile, PMI is promoting Heat Non-Burn (HNB) products all over the world. According to a report of Bisnis Indonesia, PMI's subsidiary HM Sampoerna will shell out $166 million for a cutting-edge HEETS production factory for PMI's IQOS system in Karawang, Jawa Barat, Indonesia in the fourth quarter of 2022. Moreover, PMI unveiled Bonds, a new product under its IQOS system using state-of-the-art bladeless-heating technology and designed to be used only with Blends tobacco sticks, on November 22. Also this November, PMI finally acquired Swedish Match—the world's largest tobacco company that doesn't sell cigarettes—after six months. Swedish Match's flagship products, for example, snus and nicotine pouches, will put PMI in great stead for its smoke-free strategy and tobacco harm reduction.

BAT has released a transition plan detailing actions to achieve its climate goals. One of them is bringing absolute emissions in its value chain from the 2020 baseline by half by 2030 and down to net zero by 2050 at the latest. BAT is also working to diversify its product lines. On November 16, BAT announced an investment of £48.2 million ($57.4 million) in Charlotte's Web Holdings, a producer of CBD lifestyle products. BAT's Chief Growth Officer Mr. Kingsley Wheaton said in a statement, "Investing in Charlotte’s Web means another step to branch out from tobacco and nicotine product lines into other fields."

Like PMI and BAT, JTG and Imperial Brands are also making a big push to wean off their dependence on traditional tobacco products.

JTG's third-quarter financial results released on October 31 showed that JTG's HNB product PloomX performed encouragingly well in both sales and stocks in Japan, which inspired JTG to unveil PloomX in the United Kingdom on November 3. Next year, JTG will roll out PloomX across the world faster. Besides, JTG's and PMI's subsidiaries JTI and Altria established a joint venture to promote HTS products in the United States by relying on PM USA which uses Ploom tobacco heating devices and Marlboro tobacco consumables. Marlboro is a brand of PMI.

Imperial Brands now focus on two markets. It continues to bet on combustible tobacco products to keep its product portfolio appreciating. At the same time, it constantly develops new-type tobacco products or, as the tobacco maker itself puts it, Next Generation Products (NGPs). Imperial Brands mainly sells Pulze Heated Tobacco Products (HTPs) in Europe and Blu e-cigarettes in the United States. In addition, Europe will continue to be the main market for its nicotine-containing business.

Let's go into more detail through figures. BAT had invested over £1 billion in diversifying its product categories and sold HNB products to over 20 million people all over the world by this June, showed its 2022 half-yearly report. Notably, the sales revenue of its HNB products accounted for 14.6% of the total, up 2% from the last half year. By 2025, New Category products are expected to rake in a profit of £5 billion for BAT.

PMI announced its 2022 third-quarter results on October 20. In the quarter, net revenues from smoke-free products accounted for 30.1% of PMI's total; market share for heated tobacco units (HTUs) in IQOS markets went up by 1.3 points to 7.7%; IQOS users worldwide at quarter-end totaled 16.4 million.

According to JTG's third-quarter financial results, JTG's revenue for the first nine months of 2022 rose by 13.7% year on year; adjusted operating profit grew by 17.5% to JPY 637.8 billion; net profit went up by 19.2% to JPY 403.8 billion.

As shown in Imperial Brands' FY2022 report released on November 15, its market share in the United States cigarette market grew by 90 base points to 10.1%, representing a four-year increase; it revitalized five of the largest HTP markets with their combined market share up 35 base points; its oral nicotine products grew robustly in Sweden, Norway, and Austria; NGPs net revenue enjoyed an impressive growth rate of 34.2% in Europe in constant currency; African market maintained strong with market share and revenue up 3%.

Due to the war, all four groups performed miserably in Russia. JTG described the market environment in Russia as "highly challenging" in its third-quarter financial results.

•  BAT estimated that pulling out of Russia would cost £957 million (about $1.2 billion).
•  PMI plans to establish a self-sufficient independent organization in Russia and delay its withdrawal from the market.
•  Imperial Brands' FY2022 report showed that as of this September, pulling out of Russia cost the group nearly £400 million and resulted in its total tobacco sales in the second half of 2022 down 8.4% compared with the same period of 2021 and that in the whole year of 2022 down 4.7% compared with 2021.
• Because of a business structure different from that of the other three in Russia, JTG took only a mild hit from withdrawing from the market.

Stay tuned for the latest updates on Tobacco Big 4.

Related News:

Tobacco Giant Stocks Keep Surging in December