Now, in the wake of bans in Canada and California, and planned curbs in the European Union, the US Food and Drug Administration is set to kill the minty weed.
For BAT, that’s a choker. Morgan Stanley analysts reckon 25% of its profits come from US menthols. BAT’s Newport is the biggest selling menthol in the US, and its Camel brand comes in mint too. Imperial Brands will also be hit; Kool and Salem are big menthol sellers.
All the more galling for Big Tobacco is that previous administrations had considered and rejected a ban, but the FDA’s present commissioner, Dr Scott Gottlieb, says that was a mistake.
Gottlieb is also set to clamp down on flavoured e-cigarettes; another big market for BAT, which has pushed into vaping to compensate for falling cigarette sales.
The thinking is that vaping — particularly fun-sounding flavours such as chicken-and-waffles — encourage kids to get into e-cigs, which in turn serve as a gateway for real cigs. Profit-wise, that clampdown will affect the vaping specialists such as Juul Labs more than BAT, which focuses on mainstream flavours.
But just look at the direction of travel. Decades on from slaying the multi-billion dollar dragon of litigation over smoking-related diseases, Big Tobacco once again finds itself subject to shock decisions by the authorities. And that despite BAT-Reynolds spending $1.8 million and $5.5 million a year on lobbying.
Since the cancer litigation settlements of the late Nineties, Big Tobacco shares have been considered defensive stocks for investors; large, reliable cashcows paying large, reliable dividends.
No more. BAT shares crashed 11% at one stage today, Imperial Brands nearly 5%. We haven’t seen the sector fall like that for nearly 20 years.
Time to revisit tobacco’s safe-haven status. Jittery investors might want to reach for a soothing menthol, while they still can.
