British American Tobacco (BAT), the maker of Camel cigarettes, has announced a significant write-down of $31.5 billion from the value of its U.S. cigarette brands. This move comes as the company shifts its focus away from traditional tobacco products, acknowledging the declining future of the cigarette market. The write-down is the largest of a U.S.-listed company since AOL's $35.6 billion write-off in 2014.
The write-down is primarily attributed to the diminishing value of the company's acquired U.S. combustible brands over the next 30 years. The CEO of BAT has stated that it is challenging to defend the existence of a finite value for some of these combustible brands in the U.S., given the current market trends.
The decision reflects the economic challenges in the United States, including inflation-weary consumers downgrading to cheaper brands and the rise of illicit disposable vapes. The company is also facing increased competition in new categories such as vapes, nicotine pouches, and heated tobacco. BAT is battling for market share in these tobacco alternatives as demand for traditional cigarettes cools.
The Centers for Disease Control and Prevention has reported that U.S. cigarette smoking is at an all-time low, while electronic cigarette use is on the rise. This trend has been welcomed by anti-tobacco lobby groups, although they have criticized the industry's continued marketing efforts.
The announcement of the write-down led to a significant drop in BAT's stock value. Shares fell by 9.3%, reaching their lowest level since 2010. U.S.-listed tobacco stocks also declined in response to the news. Despite these challenges, BAT's full-year revenue growth is expected to be at the lower end of its 3-5% range.