British American Tobacco (LON:BATS)

QUOTE AND NEWS
newratings.com  Nov 20  Comment 
LONDON (dpa-AFX) - British American Tobacco Plc. (BATS.L, BTI) on Thursday announced certain management changes, under which the company said Des Naughton, Managing Director of Nicoventures would leave the BAT Group on February 28, 2015, for...
Wall Street Journal  Nov 13  Comment 
British American Tobacco has been fined by the U.K. government for oversupplying cigarettes into the low-tax Belgium market that can be smuggled back into the U.K.
The Hindu Business Line  Nov 4  Comment 
The ATM was installed in Adavuladeevi, a Tier-5 town in Guntur, Andhra Pradesh
News.com.au  Oct 22  Comment 
BRITISH American Tobacco says sales sank in the first nine months of 2014 and blames adverse currency moves and Western Europe’s slow recovery.
guardian.co.uk  Oct 22  Comment 
Cigarette maker falls 4% as revenues miss forecasts on weak European markets Leading UK shares are on the slide again as concerns about global growth continue. In particular British American Tobacco has unsettled investors after warning of a...
newratings.com  Oct 22  Comment 
LONDON (dpa-AFX) - British American Tobacco Plc. (BATS.L, BTI) Wednesday said it performed well during the first nine months of the year, but trading environment remains challenging. The company's revenue grew on a currency-neutral basis...
Wall Street Journal  Oct 22  Comment 
British American Tobacco reported a big fall in nine-month revenue, blaming a slow recovery in Western Europe and pressure on the disposable incomes of consumers in all its big markets.
SeekingAlpha  Oct 16  Comment 
By Timberwolf Equity Research: This article is the second in a series on international tobacco companies. The first one about international market share leader Philip Morris (NYSE:PM) was published a few days ago and seemed to be well received....
JCN Network  Sep 1  Comment 
Scientists from A*STAR's Bioprocessing Technology Institute (BTI) have uncovered the crucial role of two signalling molecules, DOK3 and SHP1, in the development and production of plasma cells.




 

British American Tobacco (LSE: BATS, AMEX:BTI) is the second largest quoted global tobacco company by market share, and with operations in over 180 markets, it is the "most international" tobacco company in the world.[1] The Company's brand portfolio consists of over 300 brands, namely, Dunhill, Kent, Lucky Strike and Pall Mall, and includes ready-made cigarettes, cigar, roll-your-own, pipe, and smokeless tobacco products [2]. British American Tobacco was founded in 1902 through a joint venture between the Imperial Tobacco Group (IMT-LN) and the American Tobacco Company (USA) [3]. The company earned £14.2 billion in revenue and £4.5 billion in net income in 2009.[4]

Despite the company's international presence, it does not currently directly sell cigarettes or other tobacco products in the United States. Instead, British American Tobacco indirectly sells Pall Mall and other brands through Reynolds American (RAI) in the United States, a company of which British American Tobacco has 42% ownership following a deal with R.J. Reynolds Tobacco Holdings, Inc. in July 2004. [5] However, British American Tobacco does have the largest market share in over fifty geographic markets and has the most significant sales in Europe, which make up about 40% of the company's revenue. [6]

As British American Tobacco sells tobacco products it is affected to a large degree by exogenous factors, notably tobacco litigation and smoking bans. The prevalence of public smoking bans in the United States only affects the company through its ownership of Reynolds American; however, many European countries, including France, Germany, Italy, Spain, and the United Kingdom, have enacted laws that prohibit smoking in various public places.[7] Given that about 40% of sales are in Europe, this trend threatens the sale of tobacco products.

Company Overview

British American Tobacco is one of the five largest tobacco companies in the world. Although it manages and sells over 300 brands, the Company considers Dunhill, Kent, Lucky Strike, and Pall Mall to be its four Global Drive Brands.

Major Brands[8]

  • Dunhill - 41 billion cigarettes sold
  • Kent - 61 billion cigarettes sold
  • Lucky Strike - 26 billion cigarettes sold
  • Pall Mall - 68 billion cigarettes sold

Geographic Regions[9]

  • Asia-Pacific - 23% of net sales
  • Americas - 22% of net sales
  • Western Europe - 27% of net sales
  • Eastern Europe - 11% of net sales
  • Africa and Middle East - 16% of net sales

Business Growth

FY 2009 (ended December 31, 2009)[4]

  • Net revenue increased 17% to £14.2 billion. The company attributes the growth to increases in sales volume in all four of its major brands.
  • Net income increased 12% to £4.5 billion.

Trends and Forces

Ongoing tobacco litigation and smoking bans in countries throughout the world threaten British American Tobacco

Although there are 30 states, in addition to Puerto Rico and Washington D.C., which have state laws that require smoke-free workplaces, restaurants, or bars, British American Tobacco currently has no direct sales in the United States, so the Company is not directly affected by American smoking laws [10]. However, British American Tobacco has a 42% ownership stake in Reynolds American[5], and many countries throughout the world in which BATS does conduct operations have enacted laws that limit smoking in public places. In Europe, France, Germany, Italy, the United Kingdom, and others have all passed laws which ban smoking in bars, restaurants, and other public places [11].

Related to smoking bans is the general rate of tobacco consumption in countries throughout the world, which is influenced to a large extent by factors exogenous to BATS' marketing. Anti-smoking groups, government officials, health agencies and other non-governmental organizations all attempt to discourage smoking by advertising the health risks of cigarettes and other tobacco products. These groups have been successful in the United States, as smoking rates among adults have decreased by more than 50% since the 1960s; however, British American Tobacco does not currently sell products in the U.S. market. Moreover, smoking rates in the developing world, which is the source of more than 50% of BATS' revenue, have been increasing by 3.4% per year [12].

Exchange rate movements have a significant impact on British American Tobacco

Given the international nature of British American Tobacco and its presence in over 180 markets, the company is forced to conduct its operations in many different currencies. British American Tobacco benefited from these movements over the past two fiscal years; however, exchange rate movements are exogenous to the Company's performance. Moreover, the Company's operations in emerging economies makes it is susceptible to sudden stops that lead to rapid devaluation of a country's currency and reduces demand.

Competition

British American Tobacco has five major competitors in the tobacco industry, they are:

  • China National Tobacco Company: The largest cigarette company in the world, China National Tobacco Company is owned and managed by the Chinese government, and sells 1.5 trillion cigarettes annually, all in China.
  • Philip Morris International (PM): Philip Morris is best known for its Marlboro brand and is the best selling cigarette brand in the world.
  • Japan Tobacco International (JAPAF): This company owns and manages three of the top five intentional cigarette brands, Winston, Camel, and Mild Seven, as well as other cigarette brands and tobacco products.[13]
  • Altria Group (MO): Altria sells brands such as Marlboro, Copenhagen, Skoal and Black & Mild, through its four operating companies, Philip Morris USA, U.S. Smokeless Tobacco Company, and John Middleton. In addition to cigarettes and tobacco products, Altria sells premium wines through Ste. Michelle Wine Estates and has a 25.8% ownership stake in SABMiller.[14]
  • Imperial Tobacco Group (IMT-LN): The company has sales in over 160 countries and a portfolio of brands, led by Davidoff.[15]

References

  1. British American Tobacco
  2. British American Tobacco, "Our Brands"
  3. British American Tobacco, "Our History"
  4. 4.0 4.1 BATS 2009 Annual Report pg. 109
  5. 5.0 5.1 Reynolds American Inc.
  6. British American Tobacco. Who We Are.
  7. BBC News. Smoking Curbs: The Global Pictures
  8. BATS 2009 Annual Report pg. 15-16
  9. BATS 2009 Annual Report pg. 4
  10. American Nonsmokers' Rights Foundation. How Many Smokefree Laws?
  11. BBC News. Smoking Curbs: The Global Pictures
  12. World Health Organization. Smoking Statistics
  13. Japan Tobacco International. Our Brands.
  14. Altria. Our Companies and their Brands
  15. Imperial Tobacco. Group at a Glance.
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