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British tobacco group says US vaping crackdown is hurting its business

Imperial Brands warned that sales growth will be lower than expected in the year ending September 30, following a regulatory crackdown on vaping products in the United States. The company also forecast zero profit growth this year.

Smoke from the US vaping crisis has blown across the Atlantic.

Imperial Brands warned Thursday that sales growth will be lower than expected in the year ending September 30, following a regulatory crackdown on vaping products in the United States. The company also forecast zero profit growth this year.

The British group, which was formerly called Imperial Tobacco, said the US market for vaping products and e-cigarettes had “deteriorated considerably” because of increased uncertainty over how regulators would respond to a spate of deaths linked to their use.

“This has prompted a marked slowdown in the growth of the vapor category in recent weeks, with an increasing number of wholesalers and retailers not ordering or not allowing promotion of vaping products,” said the company, which sells vaping gear in the United States and Europe under the brand name Blu.

“We continue to refine our investment behind building a strong and profitable next generation products business in a rapidly evolving market,” it added.

According to the company’s most recent annual report, sales of vaping products “grew substantially” to reach £200 million ($250 million) in 2018. Yet that translated to just 2.6% of its total revenue of £7.7 billion ($9.5 billion) from vaping products and traditional tobacco brands such as Salem and Kool.

Imperial Brands’ stock plummeted over 9% in London on Thursday, while shares in rival British American Tobacco shed more than 3%.

US regulators are considering whether to ban all flavored e-cigarettes, which some consider particularly attractive to young users, after nine deaths and 530 cases of lung injury were linked to vaping and e-cigarettes. Several states are moving to ban e-cigarettes altogether.

The crackdown on products that tobacco companies view as the future of the industry represents a rapid reversal. Until recently, vaping had been marketed as a safer alternative to smoking, and regulators in some countries had signed on to that view.

Last week, US retail giant Walmart announced that it would no longer sell vaping products.

Tobacco giants Altria and Philip Morris on Wednesday ended discussions to reunite in a merger that could have been worth more than $200 billion as uncertainty mounted. The e-cigarette startup Juul, meanwhile, replaced its CEO with K.C. Crosthwaite, who had been chief growth officer at Altria.

Juul also announced a new marketing strategy: It will suspend all TV, print and digital ads and will stop some of its lobbying efforts. The company, which controls an estimated 70% of the US market, said it is committing to fully support and comply with any new federal policy related to vaping products.

 

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