Dec 6, 2023Liked by Devin LaSarre

9 months later BATS CEO said illegal disposables are estimated to have 6 out of 10 billion market share.

Cigarettes are declining at almost 10%, and VUSE is unable to compete.

Do you still feel the FDA will enforce anything? I can't imagine police raiding vape shops and small online retailers...

I'm not from the US and don't understand the regulatory environment (tools at FDA disposal - is there anything more than writing angry letters?). Are you still confident the market will be cleared out of illegal stuff?

Assuming nothing changes, how woude that reflect on BATs valuation?

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"Are you still confident the market will be cleared out of illegal stuff?"

I've never been confident of that. Since earlier this year, we've seen hundreds of warning letters and a growing list of maximum Civil Money Penalties. These are a drop in the bucket compared to what could be done. Too boot, there are import orders and other legal actions taking place. As I've noted, the complexities, need for collaboration across government bodies, and the often slow nature of legal proceedings means that nothing material is set to change quickly. In the grand scheme of things, little has changed in how I view the industry.

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Dec 7, 2023Liked by Devin LaSarre

I did some reading, and while I still don't understand well how the US regulatory framework works I came to few conclusions.

1. First the obvious. Vapes are superior to cigarettes in almost every way (price, smell, health) and consumers will adopt them quickly. Now I assume 10%+ decline in smoking volumes.

2. I find it hard to believe that during strategic competition with China the US government and ruling elites will allow Zhang Shengwei to amass his billions riding FDA regulatory failure.

So long term more strict enforcement is probable.

Problem here is the timeline, when can we expect an effective import ban or court ruling?


ITC website shows no progress since october 13.


3. "grand scheme of things" is changing, the ultimate balancing act will be far more difficult now with accelerating smoking decline.

BAT may become 50%+ smoke free sooner than it anticipates.

4. I have no doubt BAT and PM can compete in the new generation nicotine products space on a level playing field. In Poland (where I live) THP, vapes and pouches from both companies are very successful, despite fierce competition and black market. Smoking is on sharp decline (you will not see this in PM and BAT combustible sales numbers because of significant immigration from Ukraine)

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Thanks for your perspective. I think it's important to note that while vapes are superior on paper, there is truly nothing that competes with the consistency and ritual of cigarette usage for those accustomed to it. Vaping is alluring to many, but there are also a long list of anecdotes of people preferring cigarettes. As for your expected volume declines, I would venture you are speaking exclusively to the U.S. market? Would be an elevation from current levels, and certainly well above the rest of the world. As always, volumes are one variable in the larger formula for value creation. My views on the value of these companies has not changed.

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Dec 8, 2023Liked by Devin LaSarre

"there is truly nothing that competes with the consistency and ritual of cigarette usage for those accustomed to it."

I agree, it's just going to be difficult to keep rising prices and competing with vapes. So in the future I assume volume declines closer to 10%. (I'm talking about the US here).

I still believe nicotine is lindy, "The New Era of Nicotine" is clearly coming,

but my view changed a bit. Owning big tobacco It's going to be a bumpy ride. (I'm a long BAT and PM).

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I very much agree. But, in truth, it's been a bumpy ride for half a century. Perhaps the most dependable aspect!

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