Imperial Brands: A Sharper Downtrading Bet Than Peers

2025-04-06 08:07:50 ET

Summary

• Imperial Brands is a downtrading angle, assuming the economic fears around tariffs come to pass.
• We think the tobacco industry is not too exposed to these tariffs, since there is a lot of production in the Southeastern US and the main import source is Brazil.
• We also look back at the statistical analysis we did in 2021, and see evidence now for the conclusion that laggards could follow the trailblazers nicely.
• Other than that, product savvy in NGP, still limited as a portion of revenue, has helped notably improve Imperial Brands' revenue development.
• It's maybe not the cheapest pick, but we see developments as a net tailwind.

Imperial Brands ( OTCQX:IMBBF )( OTCQX:IMBBY ) was among one of the few picks that was able to pick up some allocations post "Liberation Day", among grocers and other more defensive, non-discretionary and low-ticket non-cyclicals. Where Imperial Brands has an additional advantage is that it is generally seen as the downtrading pick among peers, with rolling tobacco and other cheaper brands, particularly in the US market. The other thing we note is that the category creation by the first-movers of Glo and IQOS, as well as the introduction of other products to international markets like snus to international markets from the Nordics, has actually followed out predictive model that we blogged about four years ago - that the first movers would actually amp sales of latecomers to the market by doing the heavy lifting of category creation....

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