British American Tobacco’s new CEO will be tasked with navigating the highly competitive vaping market.
BAT is currently amid a transformation and the sudden departure of Jack Bowles to be replaced by former finance direct Tadeu Marroco suggests a stepping up in the pace and direction of the new strategy.
Bowles himself noted in today’s RNS release that “it is now the time for a change of leadership to take the business to the next level.”
That next level involves rolling out the group’s range of vape and heated tobacco products.
It’s potentially a highly lucrative market, which is growing among the younger population, particularly disposable vapes, which are cheaper and come in an array of flavours.
The long-term effects of vapes on health are clouded in a mist of fruit-flavoured smoke and that brings alongside it challenges that BAT and Marroco will have to navigate.
At the top of the list of challenges are governments that are paying far greater attention to health and the environment, meaning tobacco manufacturers need to evolve to keep up.
Earlier this year it was rumoured that the UK’s minister for public health, Neil O’Brien, was planning to gather evidence to justify the clampdown on vapes such as Elf Bars, which are flavoured like sweets and fruits.
Similarly, Australia introduced a ban on imports of non-prescription vapes, wiping out the entire continent of potential business.
Investors are also increasingly turning their back on British American Tobacco and other ‘bad’ stocks due to ESG concerns, which may go some way in explaining their relative cheapness and high dividend yields.
“While these businesses remain highly cash-generative, they are having to find new ways to attract investors and win over sceptics,” said Russ Mould, investment director at AJ Bell.