Tobacco Companies Facing Reputation Challenges in Alternative Market

As tobacco companies aggressively expand into the alternative products market, their main challenge remains earning credibility. "We know that cigarettes are dangerous and addictive," said William F. "Billy" Gifford, CEO of Altria, in a recent speech to the Richmond Chamber of Commerce. "And we know that society's first expectation of us is to reduce the harm associated with cigarettes.

After serving as Vice Chairman and Chief Financial Officer in various leadership positions at the company, Billy Gifford became CEO of Altria in April 2020. He noted that focusing on safer alternatives is logical. "Therefore, it makes sense for us to focus resources on alternatives to quitting smoking for adult smokers who cannot or do not want to quit smoking.

Switching from cigarettes to safer alternatives.

In recent years, Altria has made various investments to shift its focus from cigarettes to safer alternatives. In 2021, the company spent $372 million to acquire a Swiss-based manufacturer of smokeless, oral nicotine products that are currently sold in the United States under the On! brand.

Meanwhile, competitor British American Tobacco (BATS.L) recently announced a 7% increase in adjusted revenue for the year, with dividend growth of 1.0% to 217.8p, and the implementation of a £2 billion share buyback plan in 2022.

The tobacco company also reported a 51% increase in sales for its "next generation" product line, reaching £2.05 billion, which includes e-cigarettes, heated tobacco, and oral nicotine products. Despite the division not yet generating any profits, BAT said it aims to report revenue and profitability of £5 billion by 2025.

The continued growth of the new category is the cornerstone of BAT's long-term success plan," said analyst Ross Hindle of Third Bridge. "With over 1.1 billion smokers still using combustible products, the opportunity to convert consumers to the new category is highly attractive.

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