Volume declines in Europe / Americas (ex US) were under 3% (ex the Russia, Belarus Exit).
Velo is the number one oral brand in most of Europe.
US Citizens have often a very limited worldview. Not meant negative, result of the big land territory.
What i don t understand why BAT can not bring the same quality of pouches to the USA? It can't be rocket science to produce a nicotine pouch.
I travelled to Italy through Austria this summer. Smoking cigarettes is still so common that i think for the cigarette companies (ex US) its a "so what". They will earn there marketcaps by cigarettes alone in the coming years. The USA has extreme low cigarette smoking rates compared to all other developed countries (maybe ex UK and Australia, New Zealand).
"They will earn there marketcaps by cigarettes alone in the coming years."
I agree -- the long-term cashflows of cigarettes are woefully underappreciated.
Velo 2.0 has a PMTA pending but can not be brought onto the market. Previous pouches were allowed to stay on the market if they had been marketed prior to the earlier PMTA deadlines for the category set forth by the FDA -- this explains the relatively stale US market, which is far less impressive and less diverse than Scandinavia.
Hi Devin, thanks for the great writing as usual. As a long-term shareholder of BTI for one agree with the conclusion, BTI is cash cow and will likely remain one but on the other hand the equity holders will not shrug off a continued weakness in new catagories as well as decline in combustibles at these price levels. If BTI has an inferior product in each new catagory and PMI & MO are breathing down their neck how would you sustain it going forward?
I would argue that the Scandinavian version of Velo is better than PM's MONP offerings. At the same time, I actually don't view either to be the 'highest' quality product -- there are several smaller brands that are terribly impressive, yet lack the distribution to become respectably sized. While BAT's THP and vapor products are lagging, MONP growth in the aggregate (even discounting US performance, as highlighted) can produce a significant return if you believe the category is nascent and is far from reaching its max potential. Data showing MONP growth in countries that historically have low oral usage is all the more flattering. Mind you, the model isn't necessarily what I think will play out nor what I think is most likely -- I just normally attach an illustration showing one of many potential futures.
I look at all these issues and think "so what", as the company remains woefully discounted to peers. My nicotine barbell is Haypp and British American Tobacco. 😅
I respect barbell approaches - I tell people I have a barbell diet: McDoubles and Ribeyes. As for nicotine, I take a basket approach. I think there is far more value in legacy than people see, and each name offers unique characteristics that aid in certain potential futures.
I also find it a bit intriguing as to why BAT decided to rejuvenate the Velo brand in the U.S. with an inferior product towards the end of last year. When they eventually launch Velo 2.0, they will likely need to clear the channel inventory and repurchase Velo 1.0 from retailers. Whereas for PMI, they just do pilot of IQOS 3 blade in limited scale instead of national rollout, as they patiently wait for PMTA approval of IQOS Iluma. BAT also disclosed that they are launching nicotine pouch product under the Grizzly brand name. I suppose it is the same product inside Velo 1.0? They could have played this card after PMTA approval of Velo 2.0 though.
You hit the nail on the head. The approaches taken by both contrast starkly. Not only is PM more guarded in their rollouts, but the company is also looking to build new brand equity within new categories. BAT on the other hand is willing to use the legacy Grizzly name for a new NP product; having the potential to risk the brand name on an untested product as well as confuse consumers who associate the brand with legacy oral tobacco.
Good article as always.
Volume declines in Europe / Americas (ex US) were under 3% (ex the Russia, Belarus Exit).
Velo is the number one oral brand in most of Europe.
US Citizens have often a very limited worldview. Not meant negative, result of the big land territory.
What i don t understand why BAT can not bring the same quality of pouches to the USA? It can't be rocket science to produce a nicotine pouch.
I travelled to Italy through Austria this summer. Smoking cigarettes is still so common that i think for the cigarette companies (ex US) its a "so what". They will earn there marketcaps by cigarettes alone in the coming years. The USA has extreme low cigarette smoking rates compared to all other developed countries (maybe ex UK and Australia, New Zealand).
Greetings Ulrich
"They will earn there marketcaps by cigarettes alone in the coming years."
I agree -- the long-term cashflows of cigarettes are woefully underappreciated.
Velo 2.0 has a PMTA pending but can not be brought onto the market. Previous pouches were allowed to stay on the market if they had been marketed prior to the earlier PMTA deadlines for the category set forth by the FDA -- this explains the relatively stale US market, which is far less impressive and less diverse than Scandinavia.
Hi Devin, thanks for the great writing as usual. As a long-term shareholder of BTI for one agree with the conclusion, BTI is cash cow and will likely remain one but on the other hand the equity holders will not shrug off a continued weakness in new catagories as well as decline in combustibles at these price levels. If BTI has an inferior product in each new catagory and PMI & MO are breathing down their neck how would you sustain it going forward?
I would argue that the Scandinavian version of Velo is better than PM's MONP offerings. At the same time, I actually don't view either to be the 'highest' quality product -- there are several smaller brands that are terribly impressive, yet lack the distribution to become respectably sized. While BAT's THP and vapor products are lagging, MONP growth in the aggregate (even discounting US performance, as highlighted) can produce a significant return if you believe the category is nascent and is far from reaching its max potential. Data showing MONP growth in countries that historically have low oral usage is all the more flattering. Mind you, the model isn't necessarily what I think will play out nor what I think is most likely -- I just normally attach an illustration showing one of many potential futures.
I look at all these issues and think "so what", as the company remains woefully discounted to peers. My nicotine barbell is Haypp and British American Tobacco. 😅
I respect barbell approaches - I tell people I have a barbell diet: McDoubles and Ribeyes. As for nicotine, I take a basket approach. I think there is far more value in legacy than people see, and each name offers unique characteristics that aid in certain potential futures.
I also find it a bit intriguing as to why BAT decided to rejuvenate the Velo brand in the U.S. with an inferior product towards the end of last year. When they eventually launch Velo 2.0, they will likely need to clear the channel inventory and repurchase Velo 1.0 from retailers. Whereas for PMI, they just do pilot of IQOS 3 blade in limited scale instead of national rollout, as they patiently wait for PMTA approval of IQOS Iluma. BAT also disclosed that they are launching nicotine pouch product under the Grizzly brand name. I suppose it is the same product inside Velo 1.0? They could have played this card after PMTA approval of Velo 2.0 though.
You hit the nail on the head. The approaches taken by both contrast starkly. Not only is PM more guarded in their rollouts, but the company is also looking to build new brand equity within new categories. BAT on the other hand is willing to use the legacy Grizzly name for a new NP product; having the potential to risk the brand name on an untested product as well as confuse consumers who associate the brand with legacy oral tobacco.
Great writing! You are an honest analyst with a clear understanding of the Nicotine space.
Thank you, James. Never hesitate to reach out via DM if you have any questions.