PM - Zacks Industry Outlook Philip Morris Altria and British American Tobacco | Benzinga
For Immediate Release
Chicago, IL – May 20, 2024 – Today, Zacks Equity Research Philip Morris International Inc., Altria Group, Inc. and British American Tobacco p.l.c.
The Zacks Tobacco industry players have been witnessing soft cigarette sales volumes due to inflation, changing consumer habits, and stringent regulations. Increased costs of essential materials further raise concerns for profit margins.
While investments in smoke-free products come at the cost of margins, they have been driving revenues of tobacco companies, given consumers' growing health consciousness. Pricing power has also been working well. These upsides keep Philip Morris International Inc. (NYSE: PM), Altria Group, Inc. (NYSE: MO) and British American Tobacco p.l.c. (NYSE: BTI) well positioned despite the industry challenges.
About the Industry
The Zacks Tobacco industry includes companies that manufacture and sell cigarettes as well as tobacco and nicotine-based products, such as cigars, snuffs and oral tobacco. Some companies also offer RRPs, such as e-cigarettes, vaping and heat-not-burn variants. A few of the firms are engaged in making devices and attachments needed in vaping and heat-not-burn products.
Most products manufactured by the tobacco industry participants fall under the strict vigilance of the U.S. Food and Drug Administration ("FDA") and are required to follow the permissible levels of nicotine in manufacturing. Players in this space sell products mostly through large retailers, distributors, convenience stores, drugstores, wholesalers and grocery chains. Additionally, some international tobacco firms operate in the country through subsidiaries.
4 Trends Shaping the Future of the Tobacco Industry
Cigarette Volumes Under Pressure: The tobacco industry is grappling with challenges related to the inflationary environment, which has significantly influenced consumer spending habits. Economic factors such as inflation, increased interest rates, and Adult Tobacco Consumers' dynamics, including changing purchasing patterns, the adoption of smoke-free products, and shifts in disposable income, have affected cigarette sales volumes.
Additionally, stringent government regulations on sales, marketing, and manufacturing, prompted by the health hazards of nicotine consumption, have further impacted volumes. Some guidelines issued by the FDA include the mandatory use of precautionary labels on cigarette packets and self-critical advertisements. As cigarette sales constitute a significant portion of revenues for tobacco industry companies, the decrease in sales volumes within this category raises concerns.
Escalated Costs: Numerous industry participants have been affected by cost inflation. Global inflationary challenges linked to essential materials such as tobacco leaf, energy and labor costs have been concerns. Elevated expenses related to the research, development and marketplace activities of smoke-free products further present risks to profit margins.
Growing Popularity of Smoke-Free Alternatives: Increasing awareness of health risks and stringent government regulations intended to curtail cigarette smoking have encouraged many consumers to switch to ...