Tobacco giant shares burnt by menthol ban report

Mae Love
November 15, 2018

British American Tobacco plc's (BAT) shares plunged to the lowest level in more than four years on news of a possible ban on menthol cigarettes in the USA, which would eliminate products such as Newport that generate as much as one quarter of the company's profit.

BAT owns Newport, the leading menthol brand in the United States, and sales of the mint-flavoured products there are estimated to bring in a quarter of the company's revenues, according to analysts at Morgan Stanley. The study found that the percent of young people who smoked non-menthol cigarettes declined, while menthol smoking rates increased.

The same year, the FDA also said that menthol cigarettes pose a larger health risk to the public than traditionally-flavored brands because they tend to be more hard for users to quit.

If the ban goes through, it would be a win for public health advocates who say a large number of African Americans have become addicted to menthol cigarettes.

A ruling on menthol in traditional cigarettes would come in a separate action from the FDA's planned restriction on e-cigarette flavors, according to the official.

The former has taken a bigger hit as it owns the Newport brand of menthol cigarettes after acquiring Reynolds American past year.

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"The FDA are now said to considering banning them altogether".

Dow Jones quoted analyst firm Jefferies saying it would require a lengthy evidence-gathering process to get the ban through USA courts.

The proposal is part of the FDA's renewed crackdown on nicotine products, including e-cigarettes, the New York Times reported.

"While many menthol smokers would likely move over to non-menthol products, it would still be a major blow".

Shares in BAT, the sixth-biggest company in the FTSE100 and maker of brands including Lucky Strike, Dunhill, Rothmans and Benson & Hedges, tumbled by 11%, sending its market value plummeting from £76bn at close on Friday to £69bn on Monday.

"We are not aware of anything that has changed to suggest the FDA would deviate from its existing multi-year comprehensive, rule-making process on flavours in tobacco products, which includes menthol", BAT spokesman Simon Cleverly said in a statement.

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