British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Investor Presentation (2023)
36 slides from British American Tobacco P.l.c's investor presentation, 2023
Slide 1: A Purposeful and Profitable Pathway to A Better Tomorrow
A Purposeful and Profitable Pathway to A Better Tomorrow TM Our New Category Journey 1 Classified - Confidential
Slide 2: Important Information
Important Information The information contained in this presentation in relation to British American Tobacco p.l.c. (“BAT”) and its subsidiaries has been prepared solely for use at this presentation. The presentation is not directed to, or intended for distribution to or use by, any person or entity
Slide 3: Important Information
Important Information Forward-looking Statements (continued) Additional information concerning these and other factors can be found in BAT’s filings with the U.S. Securities and Exchange Commission (“SEC”), including the Annual Report on Form 20-F and Current Reports on Form 6-K, which may be obtain
Slide 4: Today's Themes
Today’s Themes 01 02 03 A Multi- Tobacco New Categories Category Harm are Portfolio is Reduction value accretive essential is a journey 4 Classified - Confidential
Slide 5: Our purpose is to build…
Our purpose is to build… …through reducing the health impact of our business by offering a greater choice of enjoyable and less risky*† products for our consumers *Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictiv
Slide 6: Our Objective: Delivering value for all of our stakeholders
Our Objective: Delivering value for all of our stakeholders 6 Classified - Confidential
Slide 7: 100m of 1.1bn…and we've only just begun
…and we’ve only just begun 100m of 1.1bn Global consumer numbers for New Categories and Smokers at an Industry Level 7 Source: Statista 2023, Kantar Incidence & Track Studies Classified - Confidential
Slide 8: Increasingly a global phenomenon
Increasingly a global phenomenon ~60% ~30% BRA MEX TUR Of T-50 markets Countries restrict Key global fully open to New 1 or more New markets remain Categories Categories inaccessible 8 Classified - Confidential Source: BAT Data of current market regulations H1 2023
Slide 9: Markets and consumers are not homogeneous
Markets and consumers are not homogeneous Accessible NC markets Access restricted to one or more NCs Highly restricted or inaccessible to NCs SATISFACTION FLAVOUR PREFERENCES IDENTITY VALUE HARM REDUCTION CONVENIENCE Fundamental Drivers Occasions & Consumption Regulation & Access No single solution
Slide 10: So… we are investing now in a Multi-Category future
So… we are investing now in a Multi-Category future 10 Classified - Confidential
Slide 11: Beliefs to Challenge
Beliefs to Challenge 11
Slide 12: Beliefs to Challenge
Beliefs to Challenge 1 2 3 4 There is a THP attracts the THP encourages Modern Oral is a ‘one size fits all’ most consumers more switching Scandinavian solution than vaping phenomenon 5 6 7 8 Nicotine is a New Categories (NCs) NCs are used Poly-users tend to substantial cause of are often a gateway
Slide 13: Theme 1: Multi-Category
Theme 1: Multi-Category 1 2 3 4 There is a THP attracts the THP encourages Modern Oral is a ‘one size fits all’ most consumers more switching Scandinavian solution than vaping phenomenon 5 6 7 8 Nicotine is a New Categories (NCs) NCs are used Poly-users tend to substantial cause of are often a gatew
Slide 14: Belief #1 There is a 'one size fits all' solution
Belief #1 There is a ‘one size fits all’ solution >80% >70% of THP of Vapour 60% FACT 80% 50% 70% THP and Vapour Vaping Penetration (%FMC*) THP Penetration (%FMC*) 60% 40% correlate 50% 30% inversely to 40% Weighted 30% 20% 20% Average Tar 10% 10% levels 0% 0% 8.5mg 8.5mg Average Weighted Average We
Slide 15: Belief #2 THP attracts the most consumers
Belief #2 THP attracts the most consumers 62 # Total Adult Users* (Mn) 54 FACT 40 43 +36 Vapour is the biggest 34 contributor to 26 consumer growth +24 21 and accelerating 13 17 10 11 10 7 2 2 2018 2019 2020 2021 2022 Vapour THP MO Source: Kantar Incidence & Track Studies 2022 *Adult users based on
Slide 16: Belief #3 THP encourages more switching than vaping
Belief #3 THP encourages more switching than vaping NC Consumers: Still Smoking Daily Stopped Smoking Daily 39% 37% FACT 61% 63% Vapour* and THP THP Vapour are equally effective 54% 65% at encouraging 66% 71% smokers to switch 34% 29% 46% 35% Vapour THP Vapour THP 65% 64% 61% 63% 35% 36% 39% 37% Vap
Slide 17: Belief #4 Modern Oral is a Scandinavian phenomenon
Belief #4 Modern Oral is a Scandinavian phenomenon MO Revenue Contribution 1.5 FACT 22% 1.1 MO will have a critical 21% positive role to play as 0.8 market expansion 19% 53% and the US accelerate 50% 52% growth 27% 25% 31% 2021 2022 2023 Est Nordics USA RoW 17 MO Industry Revenue, £bn Classified - C
Slide 18: Implication 1
Implication 1 1 2 3 4 THP & Vapour correlate Vapour is the biggest Vapour & THP are Modern Oral will inversely to Weighted contributor to equally effective at have a critical Average Tar levels consumer growth encouraging positive role to play and accelerating smokers to switch A Multi-Category Port
Slide 19: Theme 2: THR
Theme 2: THR 1 2 3 4 THP & Vapour correlate Vapour is the biggest Vapour & THP are Modern Oral will inversely to Weighted contributor to equally effective at have a critical Average Tar levels consumer growth encouraging positive role to play and accelerating smokers to switch 5 6 7 8 Nicotine is a
Slide 20: Belief #5 Nicotine is a substantial cause of disease
Belief #5 Nicotine is a substantial cause of disease from smoking It’s the other chemical compounds in tobacco, and in the smoke created by setting tobacco on fire, that directly and FACT primarily cause the illness and death, not the nicotine Most of the harm from DR. SCOTT GOTTLIEB US FDA COMMISSI
Slide 21: Belief #6 New Categories are often a gateway to smoking
Belief #6 New Categories are often a gateway to smoking % Solus Vapour Entrants switching to FMC* Globally ** FACT In general, new adult nicotine % Solus Vapour Entrants consumers don’t go switching to FMC 2022 on to smoke 2.2% 1.8% 1.7% 3.1% % of adult 0.1% 0.1% 0.04% 0.05% population 2.2% 2.1% 202
Slide 22: Belief #7 New Categories are used equally across cohorts
Belief #7 New Categories are used equally across cohorts Category use - Age Cohorts 2018 2022 FACT AU30 24% 23% 53% AU30 35% 22% 43% NC penetration correlates inversely to the age cohorts of 30-44 21% 17% 62% 30-44 28% 23% 49% adult consumers AO45 13%13% 73% AO45 22% 16% 62% Solus NC** Dual FMC-NC**
Slide 23: Belief #8 Poly-users tend to smoke just as much
Belief #8 Poly-users tend to smoke just as much FMC* Average Daily Consumption reduction among Poly-Users vs. FMC Solus FACT Index The consumer journey FMC + THP 92 often involves poly-usage where cigarette 100Index FMC + MO 83 consumption is reduced FMC + Vapour 81 Consumption in leading 9 NC marke
Slide 24: Implication 2
Implication 2 1 2 3 4 THP & Vapour correlate Vapour is the biggest Vapour & THP are Modern Oral will inversely to Weighted contributor to equally effective at have a critical Average Tar levels consumer growth encouraging positive role to play and accelerating smokers to switch 5 6 7 8 Most of the h
Slide 25: Theme 3: Industry Value
Theme 3: Industry Value 1 2 3 4 THP & Vapour correlate Vapour is the biggest Vapour & THP are Modern Oral will inversely to Weighted contributor to equally effective at have a critical Average Tar levels consumer growth encouraging positive role to play and accelerating smokers to switch 5 6 7 8 Mos
Slide 26: Belief #9 New Categories are less profitable
Belief #9 New Categories are less profitable Annual Consumer Profitability Index VAPOUR VAPOUR Rechargeable Disposable FACT NCs are already positive at Gross Margin level in almost all Categories **Europe Avg. *World Avg. *World excl. US Avg. >120 Solus FMC† 80-120 Solus FMC <80 Solus FMC Source: BA
Slide 27: Belief #10 Industry value is declining with cigarette sales
Belief #10 Industry value is declining with cigarette sales T10 Industry Value vs FMC Volume FMC** VOLUME 654bn FACT -6.3 613bn Total nicotine revenue % CAGR 570bn is growing year-on-year £8bn £10bn £12bn with New Categories INDUSTRY VALUE driving value accretion +3.4 £43bn £43bn £43bn % CAGR 2021 2
Slide 28: 10 Facts
10 Facts 1 2 3 4 THP & Vapour correlate Vapour is the biggest Vapour & THP are Modern Oral will inversely to Weighted contributor to equally effective at have a critical Average Tar levels consumer growth encouraging positive role to play and accelerating smokers to switch 5 6 7 8 Most of the harm f
Slide 29: Today's Themes
Today’s Themes 1 2 3 A Multi-Category Tobacco Harm New Category Portfolio is Reduction is Products are Essential a journey Value Accretive 29 Classified - Confidential
Slide 30: Belief #11 Japan is the 'bellwether' transformation story
Belief #11 Japan is the ‘bellwether’ transformation story Sweden FMC* Incidence 2008 - 2022 14.3% 13.4% Sweden has 11.8% 11.3% successfully delivered a 10.0% 9.0% multi-decade Tobacco 6.9% Harm Reduction policy 5.9% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 *Factory
Slide 31: Video
Video * This slide includes materials publicly shared by third parties, which do not necessarily reflect BAT’s views and positions - Source: Smoke Free Sweden 2023**, Twitter 31 **Health Diplomats is a global network of public health experts committed to developing and delivering solutions to global
Slide 32: In Summary
In Summary + Delivering High Quality, Multi- Stakeholder = Sustainable Business Model, Value Long into the Future 32 Classified - Confidential
Slide 33: NC value contribution growing fast in the top 12 markets
NC value contribution growing fast in the top 12 markets BAT Non-Combustibles Revenue as % of Total Revenue in TOP12 NC markets 74% 72% 2021 2022 52% 47% 46% 43% 41% 38% 40% 38% 32% 25% 26% 26% 23% 16% 17% 16% 15% 14% 10% 12% 4% 5% SWE JAP UK POL FRA DEN ITA S.KOR USA SWI CAN GER Non-combustibles in
Slide 34: >30% Non Combustible revenue in 23 investment markets
>30% Non Combustible revenue in 23 investment markets Our non-Combustible products revenue % H1’23* FRA AUS EST JPN UK DEN POR SLO ITA POL KAZ LIT SWE FIN GUA LAT D REP NOR GRE ICE CZE SLK UAE >30% >40% >50% >70% 34 * Revenue from Non-Combustible products (NCs & Traditional Oral) as a % of total rev
Slide 35: 100m of 1.1bn…and we've only just begun
…and we’ve only just begun 100m of 1.1bn 35 Global consumer numbers for New Categories and Smokers at an Industry Level Classified - Confidential Source: Statista 2023, Kantar Incidence & Track Studies
Slide 36: A Purposeful and Profitable Pathway to A Better Tomorrow
A Purposeful and Profitable Pathway to A Better Tomorrow TM Our New Category Journey 36 Classified - Confidential
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