British American Tobacco, the maker of Lucky Strike cigarettes, lowered its growth outlook for full-year sales growth in smoking alternatives as health concerns and a US regulatory crackdown on vaping weigh on e-cigarette revenue.
Sales growth from the new product categories, which also included heated tobacco, will be in the lower end of BAT’s forecast range of 30% to 50%, the company said. In August BAT was guiding to the midpoint.
A price war has been breaking out in the e-cigarette market as makers of vaping devices try to gain clients after the recent health scare in the US. BAT and rival Imperial Brands have run promotions for vaping starter kits for as little as $1 in recent months.
The new forecast means that while sales growth of smoking alternatives is accelerating in the second half, it’s not recovering as fast as BAT had hoped. Still, investors may be calmed by the fact that the company maintained its earnings forecasts.
The 3.5% drop expected in cigarette volumes underlines the importance of the new category. While considered the main driver of future growth, next-generation products like e-cigarettes are coming under scrutiny from the US Food and Drug Administration.
The shares have gained 19% this year.
© 2019 Bloomberg L.P.