Will the tobacco industry continue to change due to vaping?

UBS analysts have addressed whether vaping will continue to have an influence on the global tobacco market while providing an update on tobacco and vapour companies.

The corporation's unique Tobacco Transformation model predicts that in 2023, vapour sales will increase by 53% to $35 billion, while nicotine volume will increase by 32% to 5.7%. The 15% market share held by tobacco businesses is expected to continue to fall as non-tobacco competitors cut prices by as much as 50% per milliliter/user.

According to UBS, vapour volume will grow at a compound annual growth rate (CAGR) of 10.2% from 2023 to 2028. This suggests that during the following three years, there will be a 1ppt substitution impact on tobacco volumes.

Vapour quantities increased by 23% in April 24 compared to 28% and 33% in March and February, according to data from China Customs. "We think that the shift towards disposables with larger liquid capacities (e.g., Geek Bar 18ml vs. original 2ml) is understating the growth in consumption," the analysts said.

Rising regulatory limits won't have as much of an impact as UBS predicts because Chinese firms are "adept at navigating regulation," prohibitions are frequently ineffective and create a grey market, and enforcement is difficult.

"There may be a $3–4 billion revenue opportunity if US enforcement is successful and assumes that 30% of grey/illegal volumes shift to legal vapes," UBS continued.

With a 50% market share in the legal US vape industry, experts believe British American Tobacco (BAT) is in the best position in this situation.

(Sources: investing.com, reuters.com)