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UK’s Leading Cigarette Manufacturer Sees Future in Cannabis

29 July 2021
As more tobacco companies eye their future beyond nicotine, British American Tobacco considers investing in cannabis
29 July 2021
1 min read
UK’s Leading Cigarette Manufacturer Sees Future in Cannabis

The company’s CEO, Jack Bowles, told BBC Radio that investing in cannabis product development is interesting for them ‘as another wave of future growth.’ Recently, the UK's largest tobacco manufacturer has launched VUSE CBD Zone, its first CBD e-liquid. For now, this new product is pilot-tested in Manchester with plans of further rollout.

Reasons for Going ‘Beyond Nicotine’

As nicotine and cigarettes in general are increasingly viewed as health hazards, BAT is struggling in its search for a sustainable growth model. The company’s share price has dropped from £55 ($76.8) to £27 ($37.7) in the last four years which prompted BAT to adopt a new policy centering on environmental, social and governance issues, or ESG. For a cigarette manufacturer, this means reducing harm to public health by making smokers switch to less hazardous products.

Currently, the share of non-cigarette products in BAT’s revenue has grown to £942 million ($1.3 billion) a year but is still only a fraction of £12 ($16.75) billion the company makes annually.

Trend Reversal Won’t Come Easy

The company expects to sell an estimated £5 ($7) billion worth of nicotine alternatives by 2025. BAT’s robust supply chain and world-class expertise of their R&D team may guarantee the success of these new products, including cannabis-based e-liquids. However, nicotine is likely to remain their main source of revenue in the years ahead.

William Ryder from Hargreaves Lansdown, a British investment company that sells financial products to retail investors, told the BBC that traditional tobacco still paid the dividend and would do so for some time.

Meanwhile, BAT sold 316 billion cigarettes in a 6-month period, a significant increase over the previous six months. This number probably reflects the recent easing of Covid-19 restrictions but can also be seen as a sign that tobacco won’t be leaving the stage just yet.