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Continuing to be clear that combustible cigarettes pose serious health risks, and the only way
to avoid these risks is not to start or to quit
We are accelerating our transformation journey to create A Better Tomorrow™ for all our
stakeholders, building a long-term sustainable business in the process.
Today, we see opportunities to capture consumer moments which have, over time, become
limited by societal and regulatory shifts, and to satisfy evolving consumer needs and
preferences.
Our mission is to anticipate and satisfy this ever-evolving consumer: provide pleasure, reduce
risk, increase choice and stimulate the senses of adult consumers worldwide.
Driven by our unique and data-driven consumer insight platform (PRISM), we will focus on
product categories and consumer segments across our global business that have the best
potential for long-term sustainable growth.
Priority Markets
By relying on a rigorous market prioritisation system (MAPS), we will focus the strengths of
our unparalleled retail and marketing reach, as well as our regulatory and scientific expertise,
on those markets and marketplaces with the greatest opportunities for growth.
Remarkable innovation
As consumer preferences and technology evolve rapidly, we rely on our growing global
network of digital hubs, innovation super centres, world-class R&D laboratories, external
partnerships and our corporate venturing initiative to stay ahead of the curve.
With strong New Category momentum and a clear pathway to their 2025 profitability,
Bowles called 2021 a ‘pivotal year’ for BAT, announcing an ambitious programme called
QUEST to accelerate the company’s transformation to create the “Enterprise of the Future”.
Technological Advances
The two industries have shared the benefits of certain technological advances. Whenever a
breakthrough is made in facilitating the consumption of combusted organic material in a
more safe and efficient way – as is the case for vaporising and e-liquids – both industries
stand to gain.
Diverse Products
Big Tobacco’s interest may also go well beyond smokables. Investments are still at an early
stage but, from our vantage point, we’re noticing interest in products from the entire cannabis
range. Tobacco is looking to offer consumers an alternative to smoking; the cannabis
industry’s evolution, which has brought a huge variety of products to the market – like
edibles, oils and topicals – can serve as a reference point. At Prohibition Partners, we’re
noticing increasing interest in these alternatives. This is quite remarkable for an industry that,
for so many decades, thrived on a relatively limited range of products.
Production Processes
Cannabis and tobacco rely on similar production processes, i.e. cultivation of a warm-climate
crop and subsequent processing. This explains the interest in cannabis of countries such as
Andorra or Malawi, who have in the past relied heavily on tobacco cultivation as their prime
farming product.
Both industries share similar distribution channels as products are usually sold in brick and
mortar shops, which sell regulated products, such as tobacconists, off licences and
dispensaries. In all of these points of sale, retailers need specific permits and are bound to
strict codes of conduct.
Likewise, the marketing for both cannabis and tobacco products is highly restricted as
countries and states have specific rules on where (i.e. print, radio, digital communications,
television) and how (i.e. health claims, free sample restrictions, sponsorships) companies can
advertise. Thus, by having previous experience with heavily regulated products it would be
fairly easy for Big Tobacco to transition into the cannabis retail market.
Marketing Opportunities
Investing in cannabis could also be a huge marketing opportunity for tobacco brands. After
all, fundamental product differentiation in the tobacco industry is slight, so fortunes have
been built primarily on iconic advertising. However, in recent years, regulatory crack-downs
and changes in consumer perception have made it more and more difficult to promote
tobacco brands. Investing in cannabis would not only be a way to spend some marketing
budget in a less regulated environment, but the mere association to cannabis could help the
industry improve its reputation in some key strategic segments of its target audience,
particularly among younger people.
Highly-Regulated Markets
The tobacco industry knows how to operate in a complex and heavily regulated environment.
Because of that, it has been forced to develop strong public relations and lobbying
capabilities – by applying that influence to cannabis, tobacco could have a significant impact
in shaping a regulatory framework that is still nascent. Altria activism in the US is a clear
example of that.
Finally, a transition into the cannabis market has its advantages for publicly traded tobacco
companies as it would enable them to improve their environmental, social and corporate
governance (ESG) ratings. ESG ratings have become increasingly important for publicly
traded companies, as investors and analysts factor in these ratings when they are determining
the long-term risk of a company’s stock. Adding products such as CBD from outdoors-grown
hemp (a carbon negative crop) to their range could improve Big Tobacco’s ESG ratings, and
enable them to take part in shaping the progress of the emerging industry towards more
positive environmental and social outcomes.
When you consider all these factors together, the relationship between tobacco and cannabis
could become more than just a marriage of convenience. Tobacco corporations have many of
the requisite skills and resources needed to succeed in the world of cannabis, while cannabis
manufacturers have overseen a process of transformative innovation that tobacco giants
would do well to learn from – the relationship could be symbiotic.
Cannabis cannot and will not be a substitute for tobacco. This is not, however, what the
tobacco industry needs. It critically needs new products to diversify its business, so the
incorporation of legal cannabis seems like a logical step for tobacco corporations to consider.
Tobacco has a long enough shelf life to remain hugely profitable for some time. Cannabis is
not a quick fix for declining revenues over the short term; rather, it’s an opportunity for the
long term. It could be a critical forward-looking investment for an industry that wants to
remain the lifestyle staple that – for better or worse – it has been over the past 100 years or
more, and not become the next great empire to go up in smoke.
BAT has 13.5 million consumers of its non-combustible products, a growth of 3m in 2020.
As BAT works towards its aim of achieving 50 million consumers of non-combustible
products by 2030, the company will continue to target its offering in high growth future
areas, including the beyond nicotine ‘on-the-go wellbeing and stimulation’ space.
strategy, growth and investment priorities are building BAT into a sustainable, leading
consumer-centric multi-category consumer products company of the future. Our
transformation is moving us from a company that is known for tobacco, to one that is focused
on technology and innovation.
Building A Better Tomorrow by reducing the health impact of our business through a greater
choice of enjoyable and less risky products
£1bn efficiencies to fuel New Category investment and delivery against our financial
guidance
Stretching new ESG ambitions including 50 million non-combustible product consumers and
carbon neutrality by 2030
An ambition to satisfy evolving consumer preferences and recapture moments through a
focused portfolio of products that offer sensorial enjoyment for a variety of moods and
moments, leveraging our unique multi-category consumer insights platform (PRISM)
£1bn of efficiencies over the next three years from an extended project Quantum, our
simplification program that will fuel New Category investment and delivery against our
financial guidance
The creation of open innovation and corporate venture teams to assess, test and ultimately
accelerate the development of products, including beyond nicotine, that leverage our proven
delivery technologies.
Our growing range of reduced-risk*† products includes our vapour, tobacco heating products,
and modern and traditional oral products, which include oral tobacco and nicotine products.
That is why we are dedicated to the development and commercialisation of alternative
tobacco and nicotine products that don’t burn tobacco to deliver nicotine to the user and offer
smokers an enjoyable, reduced risk alternative. portfolio of non-combustible, reduced-risk
products (RRPs) currently comprises three categories of products*†:
Vapour products
Like its competitors, British American Tobacco (BAT) has been investing in tobacco and
nicotine products that, unlike cigarettes, have potential for growth in developed markets.
BAT has promoted its NGP investment under the phrase “transforming tobacco” and the
slogan “creating a better tomorrow”, stating that these investments are a testimony to the
company’s commitment to offer “…an unrivalled suite of potentially reduced-risk products
that address the varied preferences of today’s consumers” These new products offer us
another opportunity to further grow our business, while also having the potential to reduce
smoking-related disease because they are considered to be less risky than normal cigarettes”
Irrespective of the product or claims of harm reduction motives, BAT’s primary goal remains
the same: growing its market share and revenue in order to deliver profits and returns to
shareholders. In March, 2020 BAT rebranded its website, with a new logo and the prominent
strapline ‘A Better Tomorrow’.78 This phrase had originally been trademarked by
subsidiary Nicoventures in July 2019 and had been used to promote its NGPs, notably
in motorsports. It was also registered to cover tobacco products.
BAT’s 2020 Annual Report continued the theme, with reference to “the evolving and varied
needs of today’s consumer who seeks sensorial enjoyment for different moods and
moments”.6 In 2021 BAT also referred to “On The Go Wellbeing & Stimulation” in a
presentation to investors, while predicting further growth in the nicotine consumer pool
In 2021, BAT claimed “15 million users of our non-combustible products” (which would
include snus and heated tobacco) and that it aimed to reach 50 million by 2030.777 It did not
specify how many of those consumers are in LMICs, but BAT noted that its target markets
vary according to consumer preference and regulatory restrictions:
In late November 2019, BAT announced that it was “simplifying” its NGP portfolio to focus
on three flagship brands only: e-cigarettes would be branded as Vuse, “modern oral” products
as Velo, and HTPs as glo.75 As of 2021, this rebranding was ongoing
To improve the tobacco industry’s financial sustainability, tobacco companies are investing
in tobacco and nicotine products that, unlike cigarettes, could have growth potential in
developed markets. These products are often referred to as next generation products (NGPs),
and are often linked to tobacco companies’ harm reduction strategies. They include e-
cigarettes, heated tobacco products (HTPs) and snus. BAT also has an interest in
new cannabis products.
In March 2020, BAT rebranded its corporate website with the tagline “A Better Tomorrow”,
which was originally registered by Nicoventures and used to promote BAT’s
NGPs. However, in 2020, over 90% of BAT’s revenue still came from cigarettes and other
combustible tobacco products, with only 10% coming from non-combustibles.7 It also stated
that its revenue growth since 2019 “was driven by combustibles”.7
Btomorrow Ventures
In 2020, BAT set up a new investment unit called Btomorrow Ventures.95 As part of a
“transformation”, BAT announced plans to go “beyond nicotine”.96 The new division invited
investment in areas ranging from “BioTech & Science, Technology, Wellbeing &
Stimulation to Environmental Social Governance”.2897 BAT launched a dedicated website
in July 2021 and invited companies to pitch for investment to help “accelerate this
transformation”, specifically those relating to “digital transformation” and the “sustainability
agenda