British American Tobacco (BAT), the maker of Lucky Strike and Dunhill cigarettes, has issued a warning that dwindling cigarette sales in the US and the surge of illegal disposable vapes could impact its financial performance this year.
Despite signs of economic recovery, American consumers are still feeling the pinch, contributing to a 9% drop in cigarette sales across the US industry so far this year, according to BAT. The company anticipates its revenues and adjusted profit from operations for the first half of the year to be around 1% to 5% lower compared to 2023.
However, it expects an improvement in performance during the second half of the financial year, resulting in a slight increase in sales and adjusted profits throughout 2024. "Our guidance also reflects ongoing macro-economic pressures, particularly in the US market and continued lack of effective enforcement against the growing illicit vapour segment," said BAT's chief executive Tadeu Marroco.
BAT highlighted that the rise in consumers opting for illegal disposable vapes is negatively affecting sales of its own vape product, Vuse, and called on the Government to clamp down on the market. The company also announced the launch of its new single-use vape product, Vuse Go 2.0, this month, which it believes will help boost sales in the latter half of the year.
BAT produces "reduced-risk" products such as Vuse, its Glo e-cigarette, and Velo oral nicotine pouch. This is part of its strategy to move away from traditional cigarettes and venture into newer products, with the goal of these items contributing half of its total revenues by 2035.
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"While there is still more to do, I am confident that our actions are working," said Mr Marroco, drawing attention to its ongoing success within the US cigarette industry and the escalating momentum of its alternative smoking products.
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