London-listed British American Tobacco (BAT), renowned for brands such as Lucky Strike and Dunhill, delivered a significant blow to the industry with its announcement of a massive $32 billion write-down of its cigarette brands. As a result, BAT’s American depositary receipts plummeted by 8%.
In a domino effect, Altria Group, responsible for the Marlboro brand, and Philip Morris International also experienced a decline in their stock prices. In premarket trading, both companies saw a roughly 1% drop. It is worth noting that Philip Morris International was spun off by Altria in 2008, although Altria still holds control over Philip Morris brands in the United States.
This development highlights the great uncertainty that tobacco firms face, even as they strive to diversify beyond traditional smoking and explore alternatives like vaping. In fact, some countries are taking steps to completely eradicate smoking. For instance, New Zealand recently contemplated a law that would have eventually prohibited the sale of cigarettes within the country.
Despite these challenges, British American Tobacco remains resilient amidst turbulent times. Derren Nathan, the head of equity research at Hargreaves Lansdown, commented: “While it is encouraging to witness a decline in global tobacco consumption from a public health standpoint, doubts still remain regarding the safety of these newer alternatives.”