Tobacco giants favor electronic cigarettes
cigarette manufacturer Altria Group in the United States has repeatedly exposed the big move: not only to acquire two Canadian star-rated cannabis producers, but also to become the largest electronic cigarette company in the US market. The media said that while the consumption of paper cigarettes is declining year by year, this marks Altia's commitment to a new field of competition.
As one of the world's largest and most profitable tobacco companies, the cigarette manufacturer Altria Group has always adhered to the principle of high-profile products and the company's slaps, but recently Breaking many years of low-key, boarded the major financial media.
In addition to the high cost, Altria's three capital transactions will drag themselves from one dilemma to another: under the pressure of the anti-smoking wave, Altria has to put on the recommended consumption of all cigarettes. It is best not to smoke cigarettes. Now, they are busy relocating the tobacco market and entering new fields. In the process, new challenges will be encountered, especially the cannabis industry.
Paper cigarettes have the longest history, smokers are the most used, and most countries are legally allowed. According to data provided by the World Health Organization, the number of paper cigarettes sold worldwide is as high as 6.5 trillion, with an average of 18 billion cigarettes per day. The number of smokers has reached 1.1 billion. The huge consumer base has made the tobacco industry one of the most profitable businesses for many years.
China's tobacco consumption is quite prominent in the world. According to the Tobacco Atlas published by the American Cancer Society and the World Lung Foundation, as early as 2016, Chinese smokers accounted for more than 40% of the world's total consumption.
However, as people's health awareness increases, the opposition to paper smoke in the society is getting higher and higher, and the ban on smoking is on the rise.
At the same time, vapes are swallowing more and more traditional paper cigarettes. In the past few years, the consumption of paper cigarettes has been declining year by year. According to the US Centers for Disease Control and Prevention, smoking rates in the United States fell to a record low last year.
The main reason for the decline in paper cigarette consumption is electronic cigarettes, which are consuming the former's market share. At present, the United States, Japan and the United Kingdom are the world's largest vape market, and consumers in these three countries purchased a total of $16.3 billion worth of vapes and related products in 2016. Wells Fargo analyst Bonnie Herzog believes that the US vape market is expected to reach $6.6 billion this year.
The above three acquisitions of Altria show that the tobacco giant is eager to transform in the context of the shrinking traditional paper cigarette market. They may think that vapes and marijuana may be a good way to deal with them.
Altria's Philip Morris also pioneered the business of vapes, which produce IQOS-branded vapes. Once approved by the FDA, Altria will begin marketing and sales of this product.
In addition, Altria also quickly expanded its business by purchasing Juul Labs, the most popular vape company in the US, while achieving some form of risk hedging for the IQOS brand vape.
Since the glory of paper smoke has gradually dimmed, Altria's share price has fallen sharply this year and has fallen to nearly 30% so far, although the decline is slightly lower than the entire tobacco sector. In FY2017, the net profit attributable to the parent company of the company fell nearly 30% year-on-year.
In the United States, the number of young people who smoke vapes is growing rapidly, with about one-fifth of high school students using vapes. To this end, the FDA took an action in September this year to prevent children from using vapes. Currently, US federal law prohibits the sale of electronic cigarettes to people under the age of 18.
For Philip Morris' IQOS vape, the FDA said earlier this year that there is no evidence that this product is a safe alternative to cigarettes.
Rating agency Moody's announced that Altria's debt outlook will be reduced from stable to negative after the announcement of Altria's acquisition of Juul, on the grounds that the company will face dual regulatory risks in the vape and cannabis fields, which may be involved in the future. litigation.
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