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New Tobacco Industry Special Report: The Rise of New tobacco from the strategic transformation of Tobacco Giants

2022/08/05|Industry news

Under the Global Framework Convention on Tobacco Control, the traditional cigarette market tends to be stable and shows a gradual downward trend. According to Euromonitor data, the compound growth rate of traditional cigarettes in the past five years is about 1%; Other combustible categories, such as cigars, also fell.

New types of tobacco represented by atomization and HNB have accelerated significantly: according to Euromonitor data, the market size has increased by more than 21% in the past five years; The proportion of new tobacco in global tobacco increased from 2.42% in 2007 to 7.25% in 2021, with a significant increase. Among them, nebulized tobacco accounts for about 33% of new tobacco, HNB accounts for 44%, and new products such as oral nicotine are also growing rapidly.

The four major tobacco companies dominate the overseas market. International tobacco giants represented by Philip Morris International and British American Tobacco have clear transition strategies to new tobacco, leading the development direction of the tobacco market.

Philip Morris International has made a firm transition to new tobacco with clear goals, and clearly proposed the strategic goal of completely replacing traditional cigarettes with new tobacco. HNB products represented by IQOS are leading in the world. Since 2011, Philip Morris International has strategically placed new tobacco products, and launched the first IQOS products in Japan and Italy in 2014, showing obvious first-mover advantages.

Against the traditional cigarette, Feimo International is committed to building a multi-series product matrix system, relying on the five R&D platforms, in HNB, aerosol, nicotine bag and other new tobacco products layout; At the same time, through continuous product iteration and innovation, the company has launched diversified product series such as IQOS DUO and IQOS ILUMA to meet multi-level consumer needs.

Since 2008, the total investment in new tobacco has exceeded 9 billion US dollars. In recent years, new tobacco accounts for more than 99% of the R&D investment. New tobacco is a clear strategic direction of the company.

Multi-dimensional transformation, such as supply chain, operation and commercialization, to cooperate with the market expansion of new tobacco, from supplier selection, factory construction, to market expansion, the company's all-round reform to support the transformation of new tobacco.

The goal of the new tobacco transformation is firm. The industry is the first to propose that the new tobacco completely replace the traditional cigarette. Fomo plans to take the lead in realizing the "smoke-free society" in Japan within 10 years, while other countries and regions will withdraw from the field of combustible tobacco within 10-15 years. In 2021, Vape also proposed a 'Beyond Nicotine' strategy to explicitly expand into health and medicine.

Bat Atomization and HNB have two-way power, independent research and development, extension and merger, and the strategic transformation process is leading the industry of the four major tobacco giants, BAT atomization and HNB are the most balanced in the two directions, and both are in a relatively leading position. In 2021, BAT aerosolized and heated tobacco revenues were £927 million and £853 million, respectively, accounting for 3.6% and 3.3% of the company's revenues, respectively.

Active extension of merger and acquisition, rapid expansion of the new tobacco market: in 2011, the strategy of new tobacco, has acquired CN Creative, CHIC, Renault America and other new tobacco companies, especially the acquisition of Renault laid its global leadership in the field of atomization; At the same time, with the help of the existing channel network of traditional tobacco, the rapid completion of market expansion and layout.

The direction of BAT's transition is also clear, with a gradual transition while maintaining the stability of traditional tobacco: BAT proposes that the sales revenue of non-combustible new products will reach 5 billion pounds by 2025, and the number of consumers of non-combustible tobacco products will reach 50 million by 2030; Products, marketing, channels and other multi-dimensional efforts to drive the new tobacco market expansion.

Risk warning: industry policy supervision exceeded expectations; New product research and development progress is lower than expected; Other alternative products on the market; Tax risk; Exchange rate volatility risk.

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