January 3, 2020 / 9:09 AM / 15 days ago

British American Tobacco welcomes FDA flavor ban; minimal impact seen

Jan 3 (Reuters) - British American Tobacco, the world’s No.2 tobacco company, welcomed the U.S. health regulator’s move to ban popular e-cigarette flavors, saying it would comply with the new guidelines aimed at curbing teenage vaping.

Under a new policy that will go into effect in February, e-cigarette makers will be banned from selling pod-based e-cigarette flavors, including fruit and mint, in the United States, leaving only menthol and tobacco flavors on the market.

Tobacco companies have doubled down on vaping products in recent years to offset falling demand for cigarettes, but a spate of vaping-related deaths and concerns around a surge in teenage vaping have attracted intense regulatory scrutiny and hit e-cigarette sales.

“Following a significant period of disruption and uncertainty, this regulatory clarity is a welcome step towards returning the U.S. vapour market to stability,” the maker of Lucky Strike, Dunhill and Vuse e-cigarettes said.

Brokerage Jefferies wrote earlier this week that while vaping sales would take a near-term hit from the move, the overall financial impact for the major tobacco companies would be minimal as most users would switch to menthol or tobacco, or even higher-margin traditional tobacco products.

“We are actually bullish on implications of this final guidance,” the brokerage wrote in a note.

BAT was one of the first to apply to the FDA for permission for continuing the sale of Vuse, a requirement that applies to all cigarette makers before May 2020.

The company’s shares were up marginally in morning trading on Friday. (Reporting by Siddharth Cavale in Bengaluru Editing by Saumyadeb Chakrabarty)

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