I b
elieve that British American Tobacco (LSE: BATS) (NYSE: BTI.US) is poised to enjoy terrific sales expansion.
In this article I look at two keys numbers that make think so.
39.2
The hot growth prospects of the e-cigarette sector have not been lost on the likes of British American Tobacco. With evolving social attitudes towards smoking, tough regulatory changes and a thriving black market all denting demand for traditional products, producers are now looking towards this new technology to drive revenues in coming years.
Chinese vapouriser manufacturer Kimree highlighted the tremendous potential of this sub-sector when — citing a report from industry researcher Frost & Sullivan — it noted that worldwide e-cig demand will hit $39.2bn by 2018. This marks a huge departure from sales of $4.8bn clocked up last year.
Kimree makes products for a variety of North American tobacco firms, and saw revenues leap 57% during the first half of 2014, to $51m, further underlining surging off-take for the new technology. The business is now looking to raise $125m through an initial public offering on the NASDAQ index.
British American Tobacco threw its hat into the ring by acquiring CN Creative two years ago, a move which culminated in the launch of its Vype vapouriser last summer. And the company is dedicating vast sums to developing its product range as well as improving its retail distribution network to bolster its position in the marketplace.
5.7
Undoubtedly British American Tobacco is under pressure as the pool for traditional cigarette and tobacco products continues to shrink. Fortunately for the company, however, its suite of Global Drive Brands — comprising the likes of Pall Mall, Dunhill and Lucky Strike — continue to grab market share from its industry rivals.
These products enjoyed a 5.7% sales bump during January-June, a result which kept group volumes broadly unchanged at 331 billion sticks.
And the company is betting heavily on these blue-ribbon products to drive sales higher in emerging markets. Indeed, the company has spent almost half of a planned $200m in boosting its distribution network in the Philippines, and is circling the country for potential partners in order to boost sales still further.
British American Tobacco saw adjusted profit from Asia Pacific edge 6% at constant currencies despite the effect of current macroeconomic issues on consumer spending power. And I fully expect revenues from these critical regions to power higher, as the long-term implications of rising population growth and income levels remain positive.