The future is Cannabis, Say’s Tobacco Giant

Cannabis Vaping

British American Tobacco look to Cannabis for the future

The UK’s largest tobacco firm (British American Tobacco) is looking to expand its operations into the cannabis industry. Philip Morris, which sells Marlboro cigarettes in over 180 countries across the globe, sees a “new opportunity” for growth with recreational marijuana and has invested $2 million dollars of research on how it affects human health.

The United Kingdom’s (UK) leading cigarette company thinks that there will be major changes soon from just selling traditional smokes as they are coming out ahead in sales when compared to other companies like Altria Group Inc., British American Tobacco plc, Imperial Brands Plc or Japan Tobacco International by making acquisitions such as buying e-cigarette maker Nicoventures Holdings Ltd last year and owning 11% stake in Juul Labs since November 2018.

British American Tobacco has been busy in the cannabis space. In March, it took a stake in Canadian medical cannabis maker Organigram and signed a deal to research new adult products that are initially focused on CBD. “As we think about our portfolio for the future,” BAT boss Jack Bowles told Radio 4’s Today Programme, “certainly beyond nicotine products.”

Mr Bowles said it saw cannabis-related products as part of its future growth. The firm is currently trialling a CBD vape product in Manchester.

“I think [CBD vaping] is going to be an important element of tobacco’s evolution, but the present challenge for us will continue to be reducing harm through our range of nicotine and other alternative solutions,” he commented during the group’s half-year earnings call with investors on Thursday morning (1 July).

As a result of its focus on non-combustible tobacco products, the company saw an increase in new customers. This was largely driven by vaping brands like Vuse and Velo with 2.6 million users combined jumping to 16.1 million within 12 months alone!

The Balance of Cannabis has massively shifted

Big tobacco companies are struggling to find their footing in a changing world. They have tried riding two horses over the past decade: drawing attention to efforts getting away from cigarettes while also pointing out big dividend payments that come with cigarette sales.

However, this balance has now shifted decisively – at least as far as company communications go; Philip Morris International and BAT both recently going all-out on emphasising newer types of less harmful products like vaping or heated cannabis rather than combusted tobacco in order for them to survive into the future.

BAT’s results for the six months to the end of June show that sales of “new category” products grew by half, reaching £942 million.

That is still a fraction in comparison to its total revenue at just over £12 billion. Cigarette volumes – BAT sold 316 billion cigarettes in this period – actually increased slightly thanks to increasing demand from emerging markets like Brazil and India where smoking rates are high but populations aren’t as health-conscious as those found elsewhere around the world.

Even though traditional tobacco remains their biggest business, they say ESG (environmental, social and governance) issues will be at the core of future strategy with commitment towards change promising more investment into research instead of focusing on marketing campaigns promoting new product lines or trying tempting smokers back.

BAT wants to use the ESG flag as a way of being seen in a good light by shareholders. A recent study conducted by PWC noted that there’s been an influx of money into those types of funds, with their combined value expected to surpass other fund options within three years.

This means BAT will need these types of investors if they want any chance at restoring its stock price from £55 per share four years ago down to £27 currently.

Tobacco sales have certainly recovered

Despite its commitment to healthier choices, BAT said sales of cigarettes recovered in some developing nations following the end of coronavirus lockdowns when sales were banned in some countries.

Sales of brands like Dunhill, Kent, Lucky Strike and Rothmans rose dramatically during this time period; even though overall revenue from their combustibles division – cigarettes and heated tobacco products – fell 3% to £10.5bn due to stricter regulations across various markets including India where they lost a whopping $400 million (£309m).

There is still some way to go if the tobacco giant wants to meet its target by 2025. William Ryder, an equity analyst at Hargreaves Lansdown said that while traditional products pay dividends for now and will do so even more in years to come, BAT’s nicotine alternative revenues need time before they can contribute substantially towards meeting this ambitious goal.

Is the correlation between CBD and Vaping more prevalent?

Both CBD and Vaping are becoming more popular. Cannabis is a plant that many people use to get over pain, but it’s also used to help with mental disorders. Many studies have been done on Cannabis, and some of the results show that Cannabis may be able to diminish or relieve symptoms of depression, anxiety, and chronic pain. Cannabis can be delivered by vaping, which is a vapour device that heats Cannabis at a lower temperature than smoking. This makes it possible for Cannabis to reach an individual’s lungs without combusting because it doesn’t heat up enough to actually burn anything.

A study from John Hopkins University found that vaping Cannabis was about 95% better for respiratory health as compared with inhaling tobacco smoke. A lot of Cannabis smokers prefer vaping because there are fewer smoke by-products in Cannabis vapours, and they usually feel the effects faster and more intensely.

Vaping Cannabis also allows for a higher bioavailability of the Cannabinoids since it doesn’t have to fight its way through respiratory toxins as smoke would. Combined with CBD oil or e-liquids, Cannabis is potent medicine for helping with many health issues.

The purity and dosing of Cannabis have been found to be one of the biggest challenges when it comes to Cannabis edibles, Cannabis drinks, as well as Cannabis vapes. Since most Cannabis products are unlicensed by the government, purity is not guaranteed.

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