The group has benefited from strong growth in new product categories. More new customers adopted British American Tobacco’s heated tobacco, vaping and oral products during the first nine months of this year, than all of 2020.
Full-year global tobacco industry volume is now anticipated to be broadly flat, an improvement on the prior outlook for a decline of 1.5%.
This improvement has been driven by particularly strong demand in Indonesia, specifically in Bangladesh and Pakistan. Revenue grew by 5% at constant currency. US industry volume expectations was maintained at around -5.5%
Given the strong position of its global brands the group has been able to continually improve the price mix. Management suggests ‘the elasticity of cigarettes across the world is still very benign at 0.4 to 0.6’. Or in other words a 10% increase in price would lead to a 4% to 6% drop off in consumption.
The strength of the cigarette business is built on the group having strong global brands at every price point. Around 70% of the group’s combustibles portfolio are what it calls global drive brands. These include Lucky Strike, Dunhill, Pall Mall and Kent. In America the premium American Spirits and Newport brands have been particularly successful.
With the group rapidly reducing net debt, there is increasing scope for a share buyback. In today’s announcement the company maintained that at current valuations it acknowledged the ‘clear value’ of a buyback.