Tobacco Investment Consultant Foresees Bright Future for Harm Reduction Products
At the GTNF forum in Seoul, Erik Bloomquist (CFA), a global nicotine and tobacco investment consultant with over 15 years of experience in the sector, was interviewed exclusively by 2FIRSTS. Bloomquist expressed a bullish stance on the investment prospects for harm reduction products in the tobacco industry.
Globally, reduced risk nicotine product sales (RRP) retail sales were approximately $56 billion in 2022, with about 100 million consumers. However, Bloomquist highlighted, "the total nicotine & tobacco category, excluding China, stands closer to $700 billion in retail sales and about 1.1 billion consumers."
When questioned about which tobacco companies might be deemed the most investment-worthy and his assessment criteria, Bloomquist stated, "It really depends on what an investing firm is looking for." Many investors lean towards growth rather than mere dividend returns.
"This positive outlook is attributed to its significant shift over the past decade, especially towards heated tobacco products and nicotine pouches, which constituted about 35% of its revenue in the first half of 2023. The company aims for 50% of revenue from RRPs by 2025."
"For those seeking higher dividend yields in the quest for stability, Imperial Tobacco's 8% to 9% dividend rate might be enticing," Bloomquist opined. However, for investors interested in companies with a focus on reducing risk, options might include firms like SMOORE or RELX. "But, the near-term outlook for these firms might be challenging," he added, highlighting how market restrictions in China, as seen in the case of RELX Technology, might not be overcome in the short term, potentially stymieing growth.
Sharing his perspectives on the e-cigarette industry's future and noteworthy companies, Bloomquist emphasized the tremendous potential of harm reduction products. "The technological evolution in this domain over the past decade, since 2013, has been exhilarating," he shared. Such advancements make the products more user-friendly, effective, and popular among consumers. With an increasing number of people transitioning from combustible tobacco to these lower-risk products, Bloomquist believes the industry holds much promise.
The Interviewee's Profile:
Erik Bloomquist (CFA) has analysed the global tobacco and nicotine industry for nearly 20 years and covered the global consumer sector for nearly 25 years, working for a variety of investment banks including J.P. Morgan and as an independent consultant to alternative nicotine companies. He formerly chaired the Tobacco Transformation Index Technical Committee and holds the Chartered Financial Analyst designation. He can be reached at granstubbeadvisors@gmail.com.
