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I searched & couldn’t find an Altria thread.

 

If someone else finds one & links it here or bumps it up, I’ll delete this & repost in the existing thread.

 

Meanwhile, a lot of users have discussed Altria (peripherally) and it appears that a few have taken positions so here goes.

 

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Altria doubles down in their latest response to the FDA.

 

“We welcome FDA’s efforts to address the underage use of e-vapor products. That is why we believe Congress should raise the legal age of purchase for all tobacco products to 21.”

 

https://www.apnews.com/d8e46bd9698349178c075411ed09977b

 

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I like this move but can’t exactly explain why  ???

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Well for one getting rid or eliminating e vapor products kills Juul and others that have invested much more time effort to extract that market segment. MO breaks even or loses money on e vapor/MarkTen products not to mention the contribution to revenue and eps is a rounding error.

 

Moving purchase age up has already been instituted in a couple states and has not affected volumes. Many people under the age of 18 smoke now same will happen if age is 21.

 

Menthol regulation is not unilateral on the FDAs part and could/will likely take years to institute. Lawsuits will come undoubtedly and those take a long long time. Secondly FDAs stance is to move away from combustible products in general so long term transition to nicotine delivery devices that are not combustible is what is going to happen and MO is ok with it. FDA says menthol e cigs still ok but combustible not. Secondly no mention of chew, move those people over to chew then also and infact MO has submitted MRP application for chew.

 

In mean time Altria kills competitors (who do you think lobbied FDA on Juul and teenage usage?)and moves nicotine lovers to a noncombustible option.  Its quite clear to alerted FDA to teen usage/flavors, etc. Altria is in FDAs back pocket.

 

Its my 3rd largest position, one Im most knowledgeable on and will add at 6% div yield.

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  • 2 weeks later...

More Institutional Investors Say No to Tobacco, Weapons

 

U.S. institutional investors are increasingly screening out securities tied to tobacco and weapons production, cordoning off $4 trillion of investment assets from the two industries, according to a new study.

 

https://www.wsj.com/articles/more-institutional-investors-say-no-to-tobacco-weapons-1542978000 [pay wall]

 

See chart from article.

unnamed.png.ceef631f251d1090dbb4f0a5cfc79e84.png

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It's unfortunate that they spend so much more on dividends than on buybacks.

Imagine what this would look like if the reverse were true.

 

As long as the unit volume declines in combustible products continue at a measured pace, the cash flows in and the buybacks continue.

And if cigarettes DO fall off a cliff?

 

---

 

Lots of people are rebellious & self destructive & the government will continue to battle the cost to Medicare, Medicaid & private insurers.

 

Regulation favors the incumbents?

 

---

 

Moist smokeless is roughly 14% of revenues.

 

Expected new 2018 diagnoses of oral cancer 51,540 = https://seer.cancer.gov/statfacts/html/oralcav.html

Expected new 2018 diagnoses of stomach cancer 26,240 = https://seer.cancer.gov/statfacts/html/stomach.html

Expected new 2018 diagnoses of lung cancer 234,030 = https://seer.cancer.gov/statfacts/html/lungb.html

 

---

 

They own slightly north of 10% of BUD (divs are 15%'ish of revs.)

 

Marijuana COULD be removed from schedule 1 status & the rollups would begin (pun fully intended.)

 

That's my thesis & I know the dangers (of investing in bad behavior.)

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Well for one getting rid or eliminating e vapor products kills Juul and others that have invested much more time effort to extract that market segment. MO breaks even or loses money on e vapor/MarkTen products not to mention the contribution to revenue and eps is a rounding error.

 

Moving purchase age up has already been instituted in a couple states and has not affected volumes. Many people under the age of 18 smoke now same will happen if age is 21.

 

Menthol regulation is not unilateral on the FDAs part and could/will likely take years to institute. Lawsuits will come undoubtedly and those take a long long time. Secondly FDAs stance is to move away from combustible products in general so long term transition to nicotine delivery devices that are not combustible is what is going to happen and MO is ok with it. FDA says menthol e cigs still ok but combustible not. Secondly no mention of chew, move those people over to chew then also and infact MO has submitted MRP application for chew.

 

In mean time Altria kills competitors (who do you think lobbied FDA on Juul and teenage usage?)and moves nicotine lovers to a noncombustible option.  Its quite clear to alerted FDA to teen usage/flavors, etc. Altria is in FDAs back pocket.

 

Its my 3rd largest position, one Im most knowledgeable on and will add at 6% div yield.

 

Does today's WSJ article about Altria negotiating to buy a stake in Juul Labs make you question this thesis? It seems like a "if you can't kill em, join em" type scenario.

 

Personally, I think the Juul device is the genie that has come out of the vaping industry bottle. It's going to be an uphill battle for anyone to turn back the tide. Keep in mind that, as consumer tech, vaping device improvements will continue at a rapid pace. The vaping industry in the US is only ~10 years old!

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Well for one getting rid or eliminating e vapor products kills Juul and others that have invested much more time effort to extract that market segment. MO breaks even or loses money on e vapor/MarkTen products not to mention the contribution to revenue and eps is a rounding error.

 

Moving purchase age up has already been instituted in a couple states and has not affected volumes. Many people under the age of 18 smoke now same will happen if age is 21.

 

Menthol regulation is not unilateral on the FDAs part and could/will likely take years to institute. Lawsuits will come undoubtedly and those take a long long time. Secondly FDAs stance is to move away from combustible products in general so long term transition to nicotine delivery devices that are not combustible is what is going to happen and MO is ok with it. FDA says menthol e cigs still ok but combustible not. Secondly no mention of chew, move those people over to chew then also and infact MO has submitted MRP application for chew.

 

In mean time Altria kills competitors (who do you think lobbied FDA on Juul and teenage usage?)and moves nicotine lovers to a noncombustible option.  Its quite clear to alerted FDA to teen usage/flavors, etc. Altria is in FDAs back pocket.

 

Its my 3rd largest position, one Im most knowledgeable on and will add at 6% div yield.

 

Does today's WSJ article about Altria negotiating to buy a stake in Juul Labs make you question this thesis? It seems like a "if you can't kill em, join em" type scenario.

 

Personally, I think the Juul device is the genie that has come out of the vaping industry bottle. It's going to be an uphill battle for anyone to turn back the tide. Keep in mind that, as consumer tech, vaping device improvements will continue at a rapid pace. The vaping industry in the US is only ~10 years old!

 

Anecdotally,

most of the kids I know at school use these things and

you can't drive down the road without seeing clouds billowing out of car windows.

 

I'm thinking there's more than a few puffs left here and also the optionality of a marijuana roll up scenario.

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Does today's WSJ article about Altria negotiating to buy a stake in Juul Labs make you question this thesis? It seems like a "if you can't kill em, join em" type scenario.

 

Personally, I think the Juul device is the genie that has come out of the vaping industry bottle. It's going to be an uphill battle for anyone to turn back the tide. Keep in mind that, as consumer tech, vaping device improvements will continue at a rapid pace. The vaping industry in the US is only ~10 years old!

 

I believe this too, mostly because JUUL is the much better nicotine delivery system thet separetess the nicotine from the harmful ingredients of cigarette smoke. The FDA doesn’t like that this has increased the TAM, hence their will be regulation, but I think the product will be here to stay and crowd out the cigarette market.

 

It will be interesting to see how much MO has to pay of the minority share. I don’t think they do this to kill JUUL either, because if they did, a competing product would just grow the untapped market.

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Well for one getting rid or eliminating e vapor products kills Juul and others that have invested much more time effort to extract that market segment. MO breaks even or loses money on e vapor/MarkTen products not to mention the contribution to revenue and eps is a rounding error.

 

Moving purchase age up has already been instituted in a couple states and has not affected volumes. Many people under the age of 18 smoke now same will happen if age is 21.

 

Menthol regulation is not unilateral on the FDAs part and could/will likely take years to institute. Lawsuits will come undoubtedly and those take a long long time. Secondly FDAs stance is to move away from combustible products in general so long term transition to nicotine delivery devices that are not combustible is what is going to happen and MO is ok with it. FDA says menthol e cigs still ok but combustible not. Secondly no mention of chew, move those people over to chew then also and infact MO has submitted MRP application for chew.

 

In mean time Altria kills competitors (who do you think lobbied FDA on Juul and teenage usage?)and moves nicotine lovers to a noncombustible option.  Its quite clear to alerted FDA to teen usage/flavors, etc. Altria is in FDAs back pocket.

 

Its my 3rd largest position, one Im most knowledgeable on and will add at 6% div yield.

 

Does today's WSJ article about Altria negotiating to buy a stake in Juul Labs make you question this thesis? It seems like a "if you can't kill em, join em" type scenario.

 

Personally, I think the Juul device is the genie that has come out of the vaping industry bottle. It's going to be an uphill battle for anyone to turn back the tide. Keep in mind that, as consumer tech, vaping device improvements will continue at a rapid pace. The vaping industry in the US is only ~10 years old!

 

I think it certainly is if you cant killem join em. For a couple reasons this would work out great for both companies.

1. With recent FDA regulations and Juul having to pull products and multiple flavors off the shelves valuation will certainly be lower. Recent funding valued it at ~12B last summer with sales thought to be 1.8-2B.  A couple billion being knocked off valuation not out of question now. The majority of Juul's volume was C store and going to be heavily curbed if FDA goes forward with strict flavor and point of sale restrictions. Juul advertised most on FB and instagram etc. Thats gone now.

2. Altria has the premium shelf space and tends to give the best margins to retailers so that gives Juul and instant in and with Marlboro name more incremental margin and introduces the product to the millions of 30+ year old smokers who are loyal to Marlboro.

3. MO has massive regulatory clout with FDA. With recent moves we see how much Juul has as recent FDA actions handcuffed them the most.

 

In the long run MO buys up new threat, Juul investors/owners get buyout and team up with most powerful player in industry. Ecigs/pods are MOs weakest segment.

 

Long run I bet we see MO go "smoke free" like PM has and will eventually sell "nicotine delivery devices". If this goes through this is a huge step towards it. If Juul backs down from deal then they essentially will have to fight the FDA and Altria side by side.  Not to mention PMTA applications are expensive like upwards of 100 million dollars expensive and no now one is better versed on regulation/lawsuits etc then Altria.  If you go back and look Altria voluntarily took all of their pod devices and flavors off of the  market before FDA statement. Saves face, makes them look like the good guy and more then willing as their volume is nil  while 100% of Juuls.

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Does anyone know what is the free cash flow estimate of the company . I see around 7.8 to 8 bn.

 

There has been some tax related benefit recognition and gain related to Ab Inbev  Sab miller transaction clouding numbers for the last 2 years.

 

If it’s 8bn and they can increase FCF , it’s reasonably cheap compared to other alternatives

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Here is an interesting recent article about Altria. Mentions speculation they they may take a stake in Aphria or merge again with PM. (What's next, buying back Kraft?)

 

If Altria and Philip Morris want to quit smoking, then deals — with e-cig makers, pot producers or one another — are one way to do it

 

https://www.bloomberg.com/opinion/articles/2018-11-29/altria-juul-cannabis-and-an-even-bigger-deal-may-be-in-big-tobac

 

 

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I think this transaction is a potential gamechanger for Altria. Warnings of the cigarette companies deaths have of course been greatly exaggerated, but it seems reasonable to assume a continued slow decline in volumes over time. Owning part or all of Juul would add growth to this American stalwart and give it a very strong position in the emerging e-cig market. Marijuana is another wildcard, one its seems Altria and PM are keen on taking a wait-and-see approach towards. We shall see..

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Well for one getting rid or eliminating e vapor products kills Juul and others that have invested much more time effort to extract that market segment. MO breaks even or loses money on e vapor/MarkTen products not to mention the contribution to revenue and eps is a rounding error.

 

Moving purchase age up has already been instituted in a couple states and has not affected volumes. Many people under the age of 18 smoke now same will happen if age is 21.

 

Menthol regulation is not unilateral on the FDAs part and could/will likely take years to institute. Lawsuits will come undoubtedly and those take a long long time. Secondly FDAs stance is to move away from combustible products in general so long term transition to nicotine delivery devices that are not combustible is what is going to happen and MO is ok with it. FDA says menthol e cigs still ok but combustible not. Secondly no mention of chew, move those people over to chew then also and infact MO has submitted MRP application for chew.

 

In mean time Altria kills competitors (who do you think lobbied FDA on Juul and teenage usage?)and moves nicotine lovers to a noncombustible option.  Its quite clear to alerted FDA to teen usage/flavors, etc. Altria is in FDAs back pocket.

 

Its my 3rd largest position, one Im most knowledgeable on and will add at 6% div yield.

 

Does today's WSJ article about Altria negotiating to buy a stake in Juul Labs make you question this thesis? It seems like a "if you can't kill em, join em" type scenario.

 

Personally, I think the Juul device is the genie that has come out of the vaping industry bottle. It's going to be an uphill battle for anyone to turn back the tide. Keep in mind that, as consumer tech, vaping device improvements will continue at a rapid pace. The vaping industry in the US is only ~10 years old!

 

I think it certainly is if you cant killem join em. For a couple reasons this would work out great for both companies.

1. With recent FDA regulations and Juul having to pull products and multiple flavors off the shelves valuation will certainly be lower. Recent funding valued it at ~12B last summer with sales thought to be 1.8-2B.  A couple billion being knocked off valuation not out of question now. The majority of Juul's volume was C store and going to be heavily curbed if FDA goes forward with strict flavor and point of sale restrictions. Juul advertised most on FB and instagram etc. Thats gone now.

2. Altria has the premium shelf space and tends to give the best margins to retailers so that gives Juul and instant in and with Marlboro name more incremental margin and introduces the product to the millions of 30+ year old smokers who are loyal to Marlboro.

3. MO has massive regulatory clout with FDA. With recent moves we see how much Juul has as recent FDA actions handcuffed them the most.

 

In the long run MO buys up new threat, Juul investors/owners get buyout and team up with most powerful player in industry. Ecigs/pods are MOs weakest segment.

 

Long run I bet we see MO go "smoke free" like PM has and will eventually sell "nicotine delivery devices". If this goes through this is a huge step towards it. If Juul backs down from deal then they essentially will have to fight the FDA and Altria side by side.  Not to mention PMTA applications are expensive like upwards of 100 million dollars expensive and no now one is better versed on regulation/lawsuits etc then Altria.  If you go back and look Altria voluntarily took all of their pod devices and flavors off of the  market before FDA statement. Saves face, makes them look like the good guy and more then willing as their volume is nil  while 100% of Juuls.

 

If $MO had "massive regulatory clout" with the FDA, Gottlieb wouldn't be pushing to ban menthol cigarettes. $MO has been clear that it does not want menthol cigs banned.

 

$PM hasn't gone "smoke free." While it has been the most proactive of the big tobacco companies in the next gen products space, the vast majority of its cash flow still comes from traditional combustible cigarettes. Whether $PM's IQOS will be a success outside of the Japanese and Korean markets is still a very open question.

 

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Well for one getting rid or eliminating e vapor products kills Juul and others that have invested much more time effort to extract that market segment. MO breaks even or loses money on e vapor/MarkTen products not to mention the contribution to revenue and eps is a rounding error.

 

Moving purchase age up has already been instituted in a couple states and has not affected volumes. Many people under the age of 18 smoke now same will happen if age is 21.

 

Menthol regulation is not unilateral on the FDAs part and could/will likely take years to institute. Lawsuits will come undoubtedly and those take a long long time. Secondly FDAs stance is to move away from combustible products in general so long term transition to nicotine delivery devices that are not combustible is what is going to happen and MO is ok with it. FDA says menthol e cigs still ok but combustible not. Secondly no mention of chew, move those people over to chew then also and infact MO has submitted MRP application for chew.

 

In mean time Altria kills competitors (who do you think lobbied FDA on Juul and teenage usage?)and moves nicotine lovers to a noncombustible option.  Its quite clear to alerted FDA to teen usage/flavors, etc. Altria is in FDAs back pocket.

 

Its my 3rd largest position, one Im most knowledgeable on and will add at 6% div yield.

 

Does today's WSJ article about Altria negotiating to buy a stake in Juul Labs make you question this thesis? It seems like a "if you can't kill em, join em" type scenario.

 

Personally, I think the Juul device is the genie that has come out of the vaping industry bottle. It's going to be an uphill battle for anyone to turn back the tide. Keep in mind that, as consumer tech, vaping device improvements will continue at a rapid pace. The vaping industry in the US is only ~10 years old!

 

I think it certainly is if you cant killem join em. For a couple reasons this would work out great for both companies.

1. With recent FDA regulations and Juul having to pull products and multiple flavors off the shelves valuation will certainly be lower. Recent funding valued it at ~12B last summer with sales thought to be 1.8-2B.  A couple billion being knocked off valuation not out of question now. The majority of Juul's volume was C store and going to be heavily curbed if FDA goes forward with strict flavor and point of sale restrictions. Juul advertised most on FB and instagram etc. Thats gone now.

2. Altria has the premium shelf space and tends to give the best margins to retailers so that gives Juul and instant in and with Marlboro name more incremental margin and introduces the product to the millions of 30+ year old smokers who are loyal to Marlboro.

3. MO has massive regulatory clout with FDA. With recent moves we see how much Juul has as recent FDA actions handcuffed them the most.

 

In the long run MO buys up new threat, Juul investors/owners get buyout and team up with most powerful player in industry. Ecigs/pods are MOs weakest segment.

 

Long run I bet we see MO go "smoke free" like PM has and will eventually sell "nicotine delivery devices". If this goes through this is a huge step towards it. If Juul backs down from deal then they essentially will have to fight the FDA and Altria side by side.  Not to mention PMTA applications are expensive like upwards of 100 million dollars expensive and no now one is better versed on regulation/lawsuits etc then Altria.  If you go back and look Altria voluntarily took all of their pod devices and flavors off of the  market before FDA statement. Saves face, makes them look like the good guy and more then willing as their volume is nil  while 100% of Juuls.

 

If $MO had "massive regulatory clout" with the FDA, Gottlieb wouldn't be pushing to ban menthol cigarettes. $MO has been clear that it does not want menthol cigs banned.

 

$PM hasn't gone "smoke free." While it has been the most proactive of the big tobacco companies in the next gen products space, the vast majority of its cash flow still comes from traditional combustible cigarettes. Whether $PM's IQOS will be a success outside of the Japanese and Korean markets is still a very open question.

 

Not sure I see the logic of MO not having regulatory clout and Gottlieb wanting to ban menthol. The FDA can want to do whatever it wants. The FDA has threatened to ban menthol every couple of years for the last 20 years. Whether or not it gets done is the issue.  I think the best example of regulatory clout is that fact that the US has no plain packaging and warnings that are minimal compared to other countries.

 

Secondly of course MO doesnt want menthol banned. Why would a company want 25% of their volume banned? Doesn't mean its going to happen or not happen over many years.  Key though will be whether non combustible menthol is banned in the final language of law. I assume you read the FDA treatment of menthol e cigs in the last FDA statement?  If final regulation spares non combustible nicotine then new objective over time lawsuit takes to run through is to switch consumers to menthol e cigs  ie Juul, green smoke and Mark Ten.

 

...And in to regards to PM..yes PM is going or at least trying to go smoke free. Their home page has the headline "Designing a smoke free future" for christ sakes.  My hope is at a minimum if one was going to discuss MO/PM they would at least have a basic understanding of what PM current sells in regards to combustible/IQOS/etc, ie im sure most are aware that the majority of PMs cash flow comes from combustible nicotine. I dont see where anyone says it didnt? ???

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Well for one getting rid or eliminating e vapor products kills Juul and others that have invested much more time effort to extract that market segment. MO breaks even or loses money on e vapor/MarkTen products not to mention the contribution to revenue and eps is a rounding error.

 

Moving purchase age up has already been instituted in a couple states and has not affected volumes. Many people under the age of 18 smoke now same will happen if age is 21.

 

Menthol regulation is not unilateral on the FDAs part and could/will likely take years to institute. Lawsuits will come undoubtedly and those take a long long time. Secondly FDAs stance is to move away from combustible products in general so long term transition to nicotine delivery devices that are not combustible is what is going to happen and MO is ok with it. FDA says menthol e cigs still ok but combustible not. Secondly no mention of chew, move those people over to chew then also and infact MO has submitted MRP application for chew.

 

In mean time Altria kills competitors (who do you think lobbied FDA on Juul and teenage usage?)and moves nicotine lovers to a noncombustible option.  Its quite clear to alerted FDA to teen usage/flavors, etc. Altria is in FDAs back pocket.

 

Its my 3rd largest position, one Im most knowledgeable on and will add at 6% div yield.

 

Does today's WSJ article about Altria negotiating to buy a stake in Juul Labs make you question this thesis? It seems like a "if you can't kill em, join em" type scenario.

 

Personally, I think the Juul device is the genie that has come out of the vaping industry bottle. It's going to be an uphill battle for anyone to turn back the tide. Keep in mind that, as consumer tech, vaping device improvements will continue at a rapid pace. The vaping industry in the US is only ~10 years old!

 

I think it certainly is if you cant killem join em. For a couple reasons this would work out great for both companies.

1. With recent FDA regulations and Juul having to pull products and multiple flavors off the shelves valuation will certainly be lower. Recent funding valued it at ~12B last summer with sales thought to be 1.8-2B.  A couple billion being knocked off valuation not out of question now. The majority of Juul's volume was C store and going to be heavily curbed if FDA goes forward with strict flavor and point of sale restrictions. Juul advertised most on FB and instagram etc. Thats gone now.

2. Altria has the premium shelf space and tends to give the best margins to retailers so that gives Juul and instant in and with Marlboro name more incremental margin and introduces the product to the millions of 30+ year old smokers who are loyal to Marlboro.

3. MO has massive regulatory clout with FDA. With recent moves we see how much Juul has as recent FDA actions handcuffed them the most.

 

In the long run MO buys up new threat, Juul investors/owners get buyout and team up with most powerful player in industry. Ecigs/pods are MOs weakest segment.

 

Long run I bet we see MO go "smoke free" like PM has and will eventually sell "nicotine delivery devices". If this goes through this is a huge step towards it. If Juul backs down from deal then they essentially will have to fight the FDA and Altria side by side.  Not to mention PMTA applications are expensive like upwards of 100 million dollars expensive and no now one is better versed on regulation/lawsuits etc then Altria.  If you go back and look Altria voluntarily took all of their pod devices and flavors off of the  market before FDA statement. Saves face, makes them look like the good guy and more then willing as their volume is nil  while 100% of Juuls.

 

If $MO had "massive regulatory clout" with the FDA, Gottlieb wouldn't be pushing to ban menthol cigarettes. $MO has been clear that it does not want menthol cigs banned.

 

$PM hasn't gone "smoke free." While it has been the most proactive of the big tobacco companies in the next gen products space, the vast majority of its cash flow still comes from traditional combustible cigarettes. Whether $PM's IQOS will be a success outside of the Japanese and Korean markets is still a very open question.

 

Not sure I see the logic of MO not having regulatory clout and Gottlieb wanting to ban menthol. The FDA can want to do whatever it wants. The FDA has threatened to ban menthol every couple of years for the last 20 years. Whether or not it gets done is the issue.  I think the best example of regulatory clout is that fact that the US has no plain packaging and warnings that are minimal compared to other countries.

 

Secondly of course MO doesnt want menthol banned. Why would a company want 25% of their volume banned? Doesn't mean its going to happen or not happen over many years.  Key though will be whether non combustible menthol is banned in the final language of law. I assume you read the FDA treatment of menthol e cigs in the last FDA statement?  If final regulation spares non combustible nicotine then new objective over time lawsuit takes to run through is to switch consumers to menthol e cigs  ie Juul, green smoke and Mark Ten.

 

...And in to regards to PM..yes PM is going or at least trying to go smoke free. Their home page has the headline "Designing a smoke free future" for christ sakes.  My hope is at a minimum if one was going to discuss MO/PM they would at least have a basic understanding of what PM current sells in regards to combustible/IQOS/etc, ie im sure most are aware that the majority of PMs cash flow comes from combustible nicotine. I dont see where anyone says it didnt? ???

 

Oh lawd, here we go again.....

 

The whole point of having regulatory clout is that the regulator does (or doesn't do) what you want it to. In other words, the regulator serves to advance industry interests instead of the public interest. This is commonly known as "regulatory capture" in the economics literature. My point about menthol is that Big Tobacco has been very clear that it doesn't want menthol banned, and yet Scott Gottlieb is making a big push to do exactly that. I don't know how much more clear this can be.

 

Also, you seem to be unaware that the FDA gained much broader powers to regulate the tobacco industry when the 2009 Family Smoking Prevention and Tobacco Control Act was signed into law. Talking about what the FDA was or wasn't doing 20 years ago isn't as relevant as you seem to think it is.

 

https://en.wikipedia.org/wiki/Family_Smoking_Prevention_and_Tobacco_Control_Act

 

I'm not trying to be pedantic with all of this. My overall point is that the structure of the US cigarette industry is changing surprisingly quickly from a two company oligopoly to a vaping free-for-all. The profit pool for the latter is likely to be much smaller than the profit pool for the former.

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I'm not trying to be pedantic with all of this. My overall point is that the structure of the US cigarette industry is changing surprisingly quickly from a two company oligopoly to a vaping free-for-all. The profit pool for the latter is likely to be much smaller than the profit pool for the former.

 

Thats the consensus view right now, the problem is it is wrong and that are the situations where you can make a lot of money. Look at the data, smoking decline rates have not changed the past years. Vaping is a new market and it doesn`t subtract from the cigarette market, it attracts more non-smokers than smokers. iQoS might attract more "normal" smokers, because it is more tobacco like. At least thats my view right now and i think i read that MO and BTI management is saying something similar. And it looks like margins for ecigs are even higher than for cigarettes, because it costs the same, but there are no taxes on it in a lot of countries (HEETS for example in germany are 6€ per pack, i bet that PM makes much more on them than on a regular pack of cigarettes).

And people just don`t change their ecig habits that easily, when you buy a device you stay with it (1% of iQoS users have switched to other ecigs when i recall that correctly). The companies make the money with the refills, like Nestle makes money with capsules and not with the nespresso machine (Or the printer manufacturers make their money with the cartridges.). Thats still a great business.

 

This quote is from a Seeking Alpha article: (https://seekingalpha.com/article/4222462-concerned-proposed-menthol-ban)

Therefore, the logical outcome is that the vast majority of menthol smokers will simply switch to non-menthol cigarettes, a view confirmed by people I know who have smoked menthol cigarettes in the past.

 

But i may be wrong on all of this, so take it with a grain of salt.

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I'm not trying to be pedantic with all of this. My overall point is that the structure of the US cigarette industry is changing surprisingly quickly from a two company oligopoly to a vaping free-for-all. The profit pool for the latter is likely to be much smaller than the profit pool for the former.

 

Thats the consensus view right now, the problem is it is wrong and that are the situations where you can make a lot of money. Look at the data, smoking decline rates have not changed the past years. Vaping is a new market and it doesn`t subtract from the cigarette market, it attracts more non-smokers than smokers. iQoS might attract more "normal" smokers, because it is more tobacco like. At least thats my view right now and i think i read that MO and BTI management is saying something similar. And it looks like margins for ecigs are even higher than for cigarettes, because it costs the same, but there are no taxes on it in a lot of countries (HEETS for example in germany are 5€ per pack, i bet that PM makes much more on them than on a regular pack of cigarettes).

And people just don`t change their ecig habits that easily, when you buy a device you stay with it (1% of iQoS users have switched to other ecigs when i recall that correctly). The companies make the money with the refills, like Nestle makes money with capsules and not with the nespresso machine (Or the printer manufacturers make their money with the cartridges.). Thats still a great business.

 

This quote is from a Seeking Alpha article: (https://seekingalpha.com/article/4222462-concerned-proposed-menthol-ban)

Therefore, the logical outcome is that the vast majority of menthol smokers will simply switch to non-menthol cigarettes, a view confirmed by people I know who have smoked menthol cigarettes in the past.

 

But i may be wrong on all of this, so take it with a grain of salt.

 

Analyst report quote: "[North American] cigarette vols contracted at a 2.9% annual rate over the 2012-17 period, including a -3.3% dip in Canadian vols and a -2.9% drop in US volumes."

 

Pretty clear MO's cig volumes are going to be down by more than -2.9% this year. Looking at the historical data can be misleading, since Juul (and vaping as a whole) is so new + growing rapidly.

 

I am probably going to take a break from posting in this thread for awhile. Carry on!

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