BAT Malaysia Pins Hopes on Dunhill to Reverse Sales Decline in SA Countries
British American Tobacco Malaysia is hopeful that its brand "Dunhill" cigarettes will help reverse the decline in sales in Southeast Asian countries.
Nedal Louay Salem, the General Manager of British American Tobacco (Malaysia) Company, has stated that a rule reform introduced last year has enabled the company to start selling the Vuse brand of e-cigarettes in Malaysia. This has doubled the potential market size for the tobacco company locally, leading to significant confidence in the Vuse brand.
During an interview with Dow Jones Newswires, Salim expressed his ambition, stating, "Our objective is to establish Vuse as the e-cigarette equivalent of Dunhill in the cigarette industry. Our aim is to become Malaysia's leading vape brand.
He stated that these efforts have laid the foundation for an increase in sales. "In 2024, our sales will definitely be better than in the past.
As the manufacturer of one of Malaysia's most popular cigarette brands, Dunhill, British American Tobacco is facing formidable challenges in the country. The increasingly intense competition from unregulated vape products and illicit tobacco products has significantly eroded the market share of traditional cigarettes.
For most of the past decade, the company has experienced a continuous decline in profits, with its stock price falling by approximately 76% over the past five years. This year, the company's stock price has further dropped by 2.1%, leading BAT Malaysia's market value to fall below $550 million.
Analysts predict that during BAT Malaysia's financial report release on Tuesday evening, its sales for 2023 are expected to reach MYR 2.36 billion (approximately USD 496.8 million), which is lower than MYR 2.6 billion in 2022 and MYR 2.64 billion in 2021.
Salim highlighted that in the short term, the company's bottom line may continue to face pressure due to its investment in the "right mix of channels" to gain market share in the smoking accessories industry, following the launch of Vuse in Malaysia last August.
It is crucial for BAT to increase the sales of Vuse to the level of its competitor Dunhill cigarettes. According to their 2022 annual report, British American Tobacco's Malaysian branch, Dunhill, holds a 32% market share in the Malaysian tobacco market, dominating 62% of the country's high-end market.
Simultaneously, the company plans to continue improving its traditional products. Salim mentioned that consumption of the affordable Luckies cigarettes, introduced by BAT last year, has experienced rapid growth, while inflation risks are high at this time, particularly with impending subsidy cuts and tax increases.
Salim stated that BAT has a series of new product plans to be launched in the next nine months. He further added that the expansion into the e-cigarette sector supports the company's intent to not delist or go private, which was previously speculated by market analysts in the case of prolonged decline in the company's stock price.
"We are facing tremendous opportunities," he stated. "This is where the company's focus should lie, rather than privatization."
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