Recently, Imperial Brands, one of the international tobacco giants, announced its performance report for the last fiscal year ended September 30, 2023. In fiscal year 2023, it achieved net income of 8.012 billion pounds, a year-on-year increase of 0.7%. In the traditional cigarette market, the market share of the five major markets (the United States, Australia, Spain, Germany and the United Kingdom) has maintained steady growth. Amid the global decline in the traditional cigarette market, Imperial Tobacco has taken advantage of rising prices to expand market share in the business over the past six months, with cigarette revenue gaining an additional 20 basis points in five major markets.
Among the major international tobacco giants, Imperial Brand has the lowest sense of existence and the smallest enterprise scale. It is the "little transparent" among the four major tobacco giants. However, the development momentum of Imperial Brand in recent years cannot be underestimated. In the last fiscal year, against the backdrop of the global traditional cigarette market declining at an average annual rate of 3% as required by the Global Framework Convention on Tobacco Control, Imperial Brand's traditional tobacco still maintained steady growth. Among other companies led by Philip Morris International Giant companies have invested heavily in the research and development of new tobacco and market expansion. The traditional tobacco sector has barely remained stable or even declined, but Imperial Tobacco has achieved steady growth. So what is the current situation of Imperial Tobacco in terms of new tobacco in the past year?
The new tobacco sector achieved significant growth overall
According to the company's annual report, the new tobacco business segment achieved net income of 265 million pounds, a year-on-year increase of 26.4%, mainly driven by the growth of the European market. The impact of the decline in the US market was offset, and the company's operating profit growth rate was in line with the five-year financial plan. In 2023, the company will continue to accelerate the launch of new products in Europe. In terms of product type classification: heated tobacco products Pulze2.0 and iD are on sale in 7 European countries; atomized e-cigarette equipment blu2.0 has been fully launched in 9 countries. The sex cartridge product Blubar has been sold in 11 markets, and ZoneX continues to launch new flavors in Europe.
In the past year, in terms of atomized e-cigarettes, blu2.0 products have been launched in the UK, Spain, France, Czech Republic and Portugal. Imperial Brands has launched its heated tobacco product Pulze in the Czech and Greek markets. Currently, heated cigarettes account for about 10% of the Czech tobacco market share and more than 10% of the Greek tobacco market share, and the market share of heated cigarettes in these two countries is expected to grow further.
Generally speaking, in terms of new tobacco market expansion, the European market is developing better than the United States, and European revenue growth is as high as 40%. Revenue next year is expected to exceed the same period last year, driven by strong growth in Europe, which will more than offset the decline caused by uncertainty caused by the US FDA (U.S. Food and Drug Administration) marketing denial order. However, compared with other major tobacco companies, new tobacco has developed slowly and its overall size is still small.
New tobacco business encounters huge resistance in the United States
The United States is the largest and most valued market for the new tobacco sector of all giant companies, but the development of Imperial brand new tobacco has encountered huge resistance in the United States, and development has been stagnant. PMTA, the full name is Premarket Tobacco Application, which is the application before tobacco products are put on the market. The U.S. FDA has promulgated regulations to include e-cigarette products in the scope of tobacco products and accept FDA supervision. Products that have not passed PMTA certification are not allowed to be marketed in the United States. The US FDA requires that all e-cigarette products sold in the US market need to submit an application for review materials before September 9, 2020.
Imperial Brand has submitted PMTA applications for multiple products, including atomized e-cigarettes and heat-not-burn products, but no products have passed the review yet. Several products have received marketing rejection orders from the FDA and have been rejected from the U.S. market. outside. Some media commented that new tobacco products must pass the PMTA review of the US FDA, which is determined by the capital strength of the applicant company. Currently, the most approved products are the Vuse series products of British American Tobacco and Njoy of Altria, while the Imperial brand Its capital strength is naturally inferior to that of British American Tobacco and Altria.
Judging from the current situation, it is still difficult to pass the PMTA review of the US FDA and legally enter the US market. Considering the uncertain impact of the US FDA market sales ban, the company still chooses to focus on existing key markets with greater potential and relatively loose regulations, such as Europe. However, Imperial Brand still has great potential in new tobacco. It adopts a consumer-centered business model while selectively expanding the new tobacco product market. It has achieved positive operating and financial results in recent years. Since September 2020 Since then, the net revenue of new tobacco products has increased by 41%.
Implement new strategies and firmly transition to next-generation products
The overall scale of Imperial Brand including traditional combustible tobacco is lower than that of several other giant companies. Compared with other giants, the development of new tobacco is also relatively slow. At present, Philip Morris International's new tobacco products contribute more than 35% of total revenue, which is far ahead. British American Tobacco also accounts for about 11%. Imperial Tobacco's new product revenue only accounts for 3% of total revenue, which is far lower than Other companies, other companies are a little lower, but they are all higher than Imperial Brand.
Philip Morris International proposed the slogan "Smoke-free Future", British American Tobacco proposed the "Better Tomorrow" strategy, and Imperial Brand did not have its own official "replacement" slogan in the development strategy of new tobacco, but Imperial Brand proposed a five-year The "Focus on New Tobacco" strategy will firmly promote the transformation to next-generation products (new tobacco). Imperial Brand's current overall development strategy is to take into account two markets: on the one hand, it focuses on the combustible tobacco product market to further enhance the market value of its product portfolio; on the other hand, it continues to explore the new tobacco product market. Imperial Brand currently focuses on the European market for heated cigarettes and the US market for e-cigarettes.
Overall, the global economy will continue to decline in 2023. Under the Framework Convention on Global Tobacco Control, the global traditional cigarette market will decline at an average annual rate of 3%. New tobacco products have become the key development direction of international tobacco companies. This trend will also continue in the future. will not change. Philip Morris International, Altria, British American Tobacco and Japan Tobacco are all making frequent moves in the field of new tobacco, either increasing R&D investment, expanding geographical coverage, or establishing cooperation with other giant companies. The major companies have clear strategies for transforming into new tobacco. , leading the development direction of the global tobacco market.
Competition in the new tobacco field is fierce, but the potential is also huge. If Imperial Tobacco wants to continue to capture more territories, it must continue to increase investment in research and development in the future, and it must also undergo all-round transformation and reform in the supply chain, operations, commercialization and other dimensions. , to cooperate with the expansion of new tobacco market.
Although Imperial Tobacco is slow in developing new cigarettes, it is also continuing to make efforts. Under the influence of the Russo-Ukrainian War, Imperial Brand withdrew from the Russian market, which dealt a huge blow to the company's development. However, in the past year or so, the considerable growth in several major markets such as Europe has almost offset the impact of the withdrawal from the Russian market. , it seems that the development potential of Imperial Brand Company is still unlimited.