Just How Bad Is It For Big Tobacco? And A Business Idea For An Ambitious Investment Banker

Big tobacco stocks have had a bad month. Philip Morris had its worst day (for stock performance) in a decade. Electronic cigarettes and vapes etc are taking market share - and they are interrupting the big (old) brands of combustibles. There has been plenty of press - here is an example from Fortune.

I just want to throw up a single data point. Swedish Match (a tobacco company with no cigarette brands) owns the world's biggest match and lighter business. If you live in Latin America, Asia-Pacific or Europe you have almost certainly used the products. Here are the main brands:
 

Main brands:
Matches: Solstickan, Swan Vestas, Tres Estrellas, Fiat Lux, Redheads
Lighters: Cricket


Redheads and Cricket are totally dominant in Australia.

Here, from the last quarter, are the results for the "lights" business - just the volumes. 

Yes, you are seeing 11 percent volume decline for matches, 23 percent decline for cigarettes.

If you are a big tobacco investor your only reaction has to be oh f--k.
--
Now if you are an investment banker here is a deal from heaven. This match and lighter business has distribution almost every place in the world outside North America where you want to sell cigarettes.

It is thus a perfect distribution entree to a new e-cig business - and this e-cig transition is a once-in-a-lifetime opportunity to break the big tobacco brands.

The business is only a partial fit for Swedish Match (who mostly sells Snus in Scandinavia and chewing tobacco and machine rolled cigars in North America).

There has to be a deal to be done, a billion dollars to be made.

Disclosure: The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog ...

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