The Lemon Fool

"The US Food and Drug Administration has withdrawn its plan for a new tighter nicotine standard rule"

"British American Tobacco PLC (LON:BATS) and Imperial Brands PLC (LON:IMB) shares both lit up on Thursday as it appeared the industry would be given some headroom on tighter nicotine rules by the US regulator."

https://www.proactiveinvestors.co.uk/co ... ews/907535

monabri wrote:"The US Food and Drug Administration has withdrawn its plan for a new tighter nicotine standard rule"

"British American Tobacco PLC (LON:BATS) and Imperial Brands PLC (LON:IMB) shares both lit up on Thursday as it appeared the industry would be given some headroom on tighter nicotine rules by the US regulator."

https://www.proactiveinvestors.co.uk/co ... ews/907535

Anyone know what the "e-cigarette crisis" is? And will that be just as bad for BAT/IMB in the future?

Arborbridge wrote:Anyone know what the "e-cigarette crisis" is? And will that be just as bad for BAT/IMB in the future?

AFAIK it follows some adverse reactions (lung damage) reported in the US which so far seems to be due to the addition of cannabis oil and Vitamin E acetate which is added as a 'thickening' agent. Consequently there have been calls for their banning in parts of the US.

https://www.cdc.gov/tobacco/basic_infor ... sease.html

IMHO 'Big Tobacco' is unlikely to make much profit from e-cigarettes anyway, there's no moat. The initial cost of producing vaping devices must be fairly insignificant and nicotine fluid is cheap and widely available. Consequently products like Juul are relatively expensive compared with the high street alternatives of which there are many.

RC

Looks like BAT/IMB holders are doomed eventually, either way

The FDA failure to prevent take up of ecigs in young adults.

https://www.statnews.com/2019/11/21/e-c ... ands-tied/

Both BATS and IMPS were playing catch up with JUUL in terms of their next generation products. The recent deaths (associated with vaping, possibly through the use of unregulated preservative in the liquid/ unforeseen adverse effects of said preservative in the lungs) has made the " vape industry" pause ( and for Altria to write down a big chunk of change recently as a result of their holding in JUUL).

(Selfishly, for an investor in bats/imps it might have opened a window for them to play catch up and an angle for big Tobacco to take when it comes to regulation of vape liquids...ie. only available from reputable outlets, controlled and not via Ebay).

ReformedCharacter wrote:IMHO 'Big Tobacco' is unlikely to make much profit from e-cigarettes anyway, there's no moat. The initial cost of producing vaping devices must be fairly insignificant and nicotine fluid is cheap and widely available. Consequently products like Juul are relatively expensive compared with the high street alternatives of which there are many.
RC

Thought provoking comment.
What do you think the moat is on normal cigarettes? Not the production or cost base of making the things.
Big Tobacco's cigarette moat comes from branding (particularly as current advertising rules don't allow new entrants to get established), mass distribution, and dealing with government regulation.
Question is whether the same competitive advantages will operate in the vaping business as it matures.

TUK020 wrote:Thought provoking comment.
What do you think the moat is on normal cigarettes? Not the production or cost base of making the things.
Big Tobacco's cigarette moat comes from branding (particularly as current advertising rules don't allow new entrants to get established), mass distribution, and dealing with government regulation.
Question is whether the same competitive advantages will operate in the vaping business as it matures.

I agree with your point about branding, etc being the main moat, but regarding production, have you ever seen the machines produced by Focke or Hauni? I was told it takes 6 months to install and get a single production line running. Might not be a moat, but it's a pretty big ditch.

torata

Actually it might be better for the tobacco companies to abandon NGP altogether and simply concentrate on making and selling traditional tobacco products. Their shares should then be priced as a bond with a very good coupon attached. That would probably at least stabilise the price and there would be no more bad news to worry about.

Dod

The risk then would be that someone (perhap Altria -JUUL) come along and are successful in delivering a much lower risk product. I believe that there would be an almost immediate ban on "conventional" smoking.

BATS & IMPS simply cannot afford to take this risk - they would go out of business - they have to be in the NGP arena and to control it.

monabri wrote:The risk then would be that someone (perhap Altria -JUUL) come along and are successful in delivering a much lower risk product. I believe that there would be an almost immediate ban on "conventional" smoking.

BATS & IMPS simply cannot afford to take this risk - they would go out of business - they have to be in the NGP arena and to control it.

A worldwide ban on smoking? I don't think so.

Dod

Dod101 wrote:

monabri wrote:The risk then would be that someone (perhap Altria -JUUL) come along and are successful in delivering a much lower risk product. I believe that there would be an almost immediate ban on "conventional" smoking.

BATS & IMPS simply cannot afford to take this risk - they would go out of business - they have to be in the NGP arena and to control it.

A worldwide ban on smoking? I don't think so.

Dod

I was thinking that any such ban would start in the US, followed by Europe and then trickling down to other countries.