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Vapes and other smoke-free products on the rise as race for market share hots up

Last updated: 14:45 28 Jul 2022 BST, First published: 12:45 28 Jul 2022 BST

British American Tobacco PLC -

As British American Tobacco PLC (LSE:BATS) unveiled its half-year results, volumes of 'vape' and other forms of so-called 'smoke-free' products continue to rise.

More than 20mln people now use those products across the sector, and, the FTSE 100 blue-chip continues exploring its product diversification beyond cigarettes and tobacco.

Some 2.1mln BATs customers have used products in the company's “non-combustible” range - which comprise tobacco heating products, vapes and snuff.

The company said its vaping revenues soared 48% to £590mln, driven largely by Vuse, its flagship e-cigarette brand while overall group sales jumped slightly to £12.9bn.

Net revenues from smoke-free products accounted for 4.5% of BAT’s total turnover in the first half.

How does this figure compare with rivals?

Philip Morris International Inc (NYSE:PM) revealed in its latest trading update that its net sales from smoke-free products made up 30.5% of total net revenues.

BATs has some catching up to do. It is nevertheless, not at the bottom of the pile.

Imperial Brands PLC (LSE:IMB)’s last trading update unveiled its net sales were £15.4bn, while next-generation products grew to £101mln.

This means non-smoke products accounted for a mere 0.66% of total net revenues.

Whilst the top brands will continue to tussle for their share of the burgeoning smoke-free market, the overall size of the sector is growing and is expected this will continue in the coming years.

Is 'smoke-free' in rude health?

Legal and regulatory issues remain, however. 

Juul Labs Inc has taken a high profile hammering in recent months, as revenues in the quarter ended 31 March sunk 23% to US$259mln due to a crackdown on teenage vaping and e-cigarette use.

As a result, the company reported a US$28mln loss for the quarter.

Industry pundits, meanwhile, expect regulatory scrutiny will continue to tighten in certain jurisdictions.

In the meantime, the popularity of vaping and the resulting expansion of sales is expected to remain a key focus for investors.

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