A-Brands

Imperial Brands Sets Five-Year Focus On Top Five Cigarette Markets

By Dayeeta Das
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Imperial Brands has laid out a five-year plan, led by its new chief executive, to focus on the company's top five cigarette markets, to fine-tune next-generation products to consumer preferences and to bolster its sales force.

The announcement is the culmination of a six-month review by Stefan Bomhard, who joined as CEO in July.

Since joining, the former Inchcape executive has promised to boost the British company's performance by bringing in new talent, changing incentive structures and sharpening the focus on top markets.

On Wednesday, the maker of Kool and Winston cigarettes said it would concentrate investment on Australia, Germany, Spain, the United Kingdom and the United States, which generate about 72% of group profits.

It will also exit some smaller markets, where it sees no future growth, but did not provide details.

The Next Frontier

Imperial also said it was resetting its next-generation products (NGP) strategy - considered the next frontier for tobacco - redirecting resources to develop heated tobacco products in Europe and e-cigarettes in the United States.

Bomhard said the emphasis would be on heated tobacco products, such as its Pulze device, as those were gaining traction in Europe, had higher customer retention rates and generated higher margins than e-cigarettes.

Imperial has lowered its aspirations for next generation products, mainly e-cigarettes, after missing several sales targets over the last five years.

The company wrote down the value of that business by £124 million ($170.02 million)last year after sales fell 27% in 2020.

'Renewed Emphasis'

"The new strategy will have a renewed emphasis on a more focused group of priority tobacco markets and a more disciplined execution in NGP," Bomhard said at a virtual capital markets event.

Any future growth plans would be informed by extensive testing, local consumer preferences and market data, he said.

Bomhard has blamed underperformance in NGP on rolling out too many products too quickly without sufficient insights into consumers.

"We expect the new plan will deliver a gradually improving trajectory in net revenue over the five years with a compound annual growth rate of 1-2% from FY2020-2025," the company said.

Widely-Expected Buyback

Shares of the FTSE-listed company, however, fell as much as 5.3%, after it did not announce a widely-expected buyback plan.

Imperial said taking on extra debt for buybacks would have put its credit rating at risk. It would buy back shares only after cutting its debt to the lower end of a net debt to EBITDA ratio of 2-to-2.5 times.

The company said it will raise its dividend annually, though from a lower base after it cut it for the first time in 2020.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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