Recently, the four major international tobacco giants Philip Morris International, British American Tobacco, Imperial Tobacco, and Japan Tobacco have successively released their 2020 annual reports.
Judging from the financial report data, the four tobacco companies present a situation of "two happy and two sad": Philip Morris International and British American Tobacco, which have deployed new tobacco businesses early, have stable growth, but are hesitant about transformation. Imperial Tobacco and Japan Tobacco, which have made erroneous decisions and strategies, are beginning to show signs of decline.
1. "Happy" Philip Morris International and British American Tobacco: early deployment of new tobacco and strong growth
Philip Morris International and British American Tobacco, which have focused on new tobacco technology and product innovation for many years , ushering in further recognition by the market in 2020.
Philip Morris International’s full-year operating income increased by 15.3%. Behind the growth momentum, the company is increasingly relying on the market performance of new tobacco. The financial report shows that Philip Morris International’s cigarette shipments fell by 11.1% in 2020. However, shipments of new tobacco products increased by 27.6%.
Among them, the main product IQOS contributed 23.8% to the company’s revenue. In the global market (excluding China and the United States), IQOS market share increased by 1.7 to 6.1%. Philip Morris International estimates that by the end of 2020, the total number of global IQOS users will be approximately 17.6 million, of which 12.7 million users have completely switched to IQOS and successfully Quit smoking. The company also predicts that by 2025, the contribution of new tobacco products to the company's total revenue will increase to more than 50%.
British American Tobacco’s new tobacco business also contributed to the company’s profit growth for the first time. According to the 2020 report, although British American Tobacco's annual operating income fell by 0.4% year-on-year, its net profit increased by 4.8%.
According to the 2020 annual report, the revenue of the new tobacco business, including the atomized e-cigarette products Vuse and Velo and the heat-not-burn product Glo, increased by 1.5 to 1.5 billion pounds year-on-year. Among them, the atomized e-cigarette business was more It is an increase of 52.3. Currently, the number of users of the company's new tobacco products has reached 13.5 million, a year-on-year increase of 30. British American Tobacco expects this number to grow further to 50 million by 2030.
Both companies with good growth momentum have already resolutely laid out new tobacco businesses and continued to invest heavily. Since 2016, Philip Morris International has defined the company's vision as "creating a smoke-free future", and investors have even recently predicted that many countries will completely stop cigarette sales within 10 to 15 years. Similarly, British American Tobacco invested nearly 1 billion pounds in this field last year and expects new tobacco to contribute 5 billion pounds in sales to the company by 2025.
When looking forward to 2021, the two tobacco giants invariably mentioned the product concept of "beyond nicotine" and emphasized the need to "further shift to better and more sustainable businesses." ”, “Transforming into a technology and innovation company”. This seems to mean that tobacco giants have begun to continue to expand the market imagination of the new tobacco industry itself, such as nicotine-free products, atomized medicine and other fields, which are also very likely to become the next stop of transformation.
2. "Sad" Imperial Tobacco and Japan Tobacco: Can layoffs and replacement of senior executives reverse the decline?
In contrast, Japan Tobacco and Imperial Tobacco are clearly lagging behind.
According to Japan Tobacco's 2020 financial report and 2021 performance outlook, the company's profit dropped by 6.6% in 2020, and it is expected that profits will continue to drop by 22.6% in 2021.
At the same time, Japan Tobacco also announced a layoff plan. The company said that due to the decline in sales of traditional cigarettes, it plans to merge its international tobacco business with its domestic tobacco business and lay off 1,000 people. On the other hand, it will strengthen its investment in risk-reducing products, such as heat-not-burn products, and plans to launch new products in 2021 to improve its competitiveness in Japan.
Japan is the world’s largest market for heat-not-burn products.
Since the launch of IQOS by Philip Morris International in 2014, it has quickly become popular in the Japanese market and has taken the lead. It was not until 2017 that Japan Tobacco launched the heated tobacco product Ploom to compete with it, but it has been unable to completely reverse the situation.
Providing consumers with more competitive products has become the company's top priority. Recently, Japan Tobacco CEO Masamichi Terabatake said that considering the decline in traditional cigarette sales in recent years and the highly uncertain operating environment, the company had to make some "difficult and necessary decisions."
2020 will also be a difficult year for Imperial Tobacco. The annual report shows that the company's operating income in 2020 was 7.99 billion pounds, a decrease of 0.1% from 2019. Net profit was 3.53 billion pounds, down from 3.74 billion pounds the previous year. Although Imperial Tobacco has been trying its best to keep pace with its competitors and actively launch new tobacco products (Blu), the company has encountered problems with unsatisfactory product and market mix in 2020, and the stock has fallen 18% in the past year.
The company’s former CEO resigned under pressure from investors in 2019 because the company’s products suffered a heavy setback in the U.S. e-cigarette market. When the new CEO Stefan Bomhard recently announced his plan for the next five years, he said that he would implement a more "disciplined" new tobacco layout strategy and carefully adjust his sales of heated tobacco in Europe and atomization in the United States based on market research. E-cigarette strategy.
In February, Stefan Bonhard also appointed a new CFO and expressed confidence in the measures taken to improve next-generation product operations. However, market analysts believe that compared with Philip Morris International and British American Tobacco, Imperial Tobacco's new strategy is more conservative, and speculated that it may be because the new CEO hopes to stabilize the transition and stabilize the decline.
3. On the eve of changes in the international tobacco landscape, opportunities for Chinese companies have emerged.
It is not difficult to see that the transition period from the traditional tobacco industry to new tobacco has arrived. British American Tobacco CEO Jack Bowles said in an interview with the Financial Times that "the cigarette market is currently declining at an average annual rate of 3%." As harm reduction has gradually become an important development direction and R&D hotspot in the tobacco industry , the demand and market potential for new tobacco is huge.
The global tobacco market (excluding the Chinese market), which has long been occupied by the four major tobacco giants, has therefore entered a period of change. Whether it can turn the ship around in time and resolutely and transform into a new tobacco business will undoubtedly become a watershed in changing the international competition landscape.
In this great transformation of epochal significance, opportunities have also been handed over to Chinese companies. China is the world's largest e-cigarette production base and takes an absolute leading position in the middle and upper reaches of the industrial chain. In 2019, the export value reached 76.585 billion yuan. The global e-cigarette market has always shown a pattern of "produced in China and consumed in Europe and the United States".
In recent years, this pattern has been gradually broken. Some Chinese companies, such as China Tobacco, Wuxin Technology (the parent company of RELX), and Smore International, are strongly entering the international market with their technological accumulation and influential domestic brands. Chinese companies are relying on the innovation of new tobacco to open the door to the long-closed global tobacco market and gradually become more competitive.
In the latest market value rankings of the world's publicly listed leading companies in the tobacco and new tobacco industries, Philip Morris International ranks first with a market value of US$126 billion, while Chinese companies Smol International and Wuxin Technology respectively rely on US$58 billion and US$38 billion ranked fourth and fifth.
However, to further compete for the right to speak in this global competition, solid technological accumulation is needed. The latest report released by the US Patent Office shows that in the field of innovation, the number of patent applications for new tobacco technologies has ranked second. Companies such as Philip Morris International have also accumulated hundreds of thousands of pages of documents to study the health effects of their products from toxicological, clinical, in vitro, epidemiological and other aspects.
At present, domestic systematic scientific research on aerosol inhalation is still in its infancy. According to the prospectus of Wuxin Technology, the company has also established physical and chemical laboratories and life science laboratories, strengthened investment in scientific research through measures such as establishing a global scientific research platform, and led the industry to expand the radius of knowledge.
It is undeniable that traditional cigarettes are still the mainstream of the global tobacco market, and their position in the Chinese market will be unshakable for a long time. However, whether they can establish a firm layout and expand their advantages in the new tobacco field will directly determine the position of Chinese companies in the future international tobacco industry. Undoubtedly, China must work hard to seize this opportunity, promote and support more and more new innovative tobacco companies to participate in the competition in the global market from the policy level, and then further master this field based on the existing advantages of the global industrial chain. global value chain.