BAT - quick update before 1H 2024 result announcement
I am planning to publish an article to summarise its upcoming earnings announcement, but in the interim would like to share with you some data and findings. I am trying to avoid reading too much into these data so I will keep them as factual as possible. Will wait till BAT management offer their thoughts before I jump into any meaningful conclusion. Without further ado, here we go!
Consumer offtake of VUSE globally and in the U.S.
Historically Google Trend data has been a good proxy of consumer offtake of e-cigarette products, as new consumers tend to search on Google before making their purchase decision. Hence it could be a leading indicator to Nielsen data which tracks the actual retail sales value at tracked channels. Investors mostly track Nielsen data in the U.S., as there’s limited availability of data outside of the U.S.
There’s still no sign of recovery of VUSE in the U.S. based on the latest Nielsen data as of 29 June 2024. Dollar sales declined by 11.7%/11.4%/11.7% for the 2 week/4 week/12 week period ending 29 June 2024. However, Google search interest of VUSE increased from 25 in May 2024 to 40 as of the latest, largely driven by BAT’s launch of Vuse Prismatic Series in June and the nationwide rollout thereafter.
Search interest of VUSE globally also bounced back strongly from 50 in May 2024 to 67 as of the latest, partly contributed by search interest in the U.S. and partly due to launch of Vuse Go products in various international markets.
Source: Google Trend 
Source: Google Trend Launch of Vuse Prismatic Series
BAT launched a revised version of Vuse with higher selling price than the existing Vuse Alto pods. It is called Vuse Prismatic, which is compatible with the exisiting device, but also comes with a new design of the exterior. Here is how it looks. This product is being actively discussed on Reddit. You may take a look at the discussion on Reddit to gauge the initial customer feedback.
Glo vs Iqos
While I mentioned in an earlier article that BAT launched a new version of Glo Neo stick in Japan with improved feature, I have continued to monitor user feedback in Japan. It seems that many customers still complain that while there’s no ash falling from the stick, there’s still “resin” or “moist” left in the device after usage. It means the device will still need to be cleaned regularly. As we know, IQOS Iluma doesn’t require cleaning. Furthermore, PMI launched a new version of IQOS, called IQOS Iluma i in Japan in Mar 2024. Since then, Google search interest of IQOS surged and remained elevated in Japan, indicating further market share gain. Search interest of IQOS globally also accelerated in Q2 2024, partly due to interest from Japan and partly due to launch of IQOS Iluma in international markets, for example Mexico in Apr 2024. Just a reminder that Google search data is a closer proxy to offtake by new customers than overall sales volume, as existing customers don’t need to search on Google for repeated purchase. Traffic to IQOS.com continued to be very strong compared to discoverglo.jp which is the e-commerce website of Glo in Japan.
Source: Google Trend 
Source: Google Trend 
Source: Similarweb 
Source: Similarweb BAT is a top-10 donor of Trump campaign
I don’t want to elaborate too much on this topic, but the outcome of the U.S. presidential election does have some significant impact on the regulatory landscape of the nicotine industry in the U.S. Period.
Source: OpenSecrets U.S. cigarette market
While downtrading continued in 1H 2024, BAT’s value share of the cigarette market has stabilised at 33.1% based on the latest Nielsen data. Dollar sales declined by 4.8%/4.4%/5.9%/6.9% for the last 2-week/4-week/12-week/52-week period, showing sign of improvement. It may inspire some confidence in a 2H 2024 recovery of the cigarette dollar sales.
Velo in the U.S. and globally
Dollar sales of Velo increased by 90% yoy in the U.S. recently probably due to supply chain bottleneck of ZYN. But overall speaking it only contributed to low single digit % of BAT’s oral nicotine sales in the U.S., so it will not move the needle. While globally, Velo continues to deliver strong growth in 1H 2024 based on Google Trend data.
Source: Google Trend Conclusion: Given the above mentioned data and findings, I am not too concerned about the prospect of U.S. cigarette dollar sales, VUSE and VELO performance. The most problematic product category is still heated tobacco, as I see IQOS extending its leadership globally as well as in Japan. But again, valuation of BAT still trades at a huge discount to PMI and also at a discount to IMB, so in essence BAT doesn’t need to check all the boxes to be a good investment.
