Big tobacco is in the process of reforming their business and they intend to maintain their oligopoly status in the US with next generation products.
None of this is a well-kept secret. Phillip Morris has been advertising its intentions at creating a “smoke free future” for as long as I’ve been investing. Literally.
But something interesting from Altria’s latest slide deck caught my eye.
My understanding of what they’ve shown here is that when Louisiana began enforcing their state registry of "directory products,” it handed the entire market over to big tobacco companies. In turn illicit sales of disposable vape products fell off a cliff and the eligible “directory products” began to grow in a year where those products were otherwise stagnant.
This is the description of what is and isn’t a “directory product,” and the associated fines for violating the state’s laws. You can access this document here as a PDF.
This is no microcap - in tobacco you play with the big boys and that’s your only option. Which means in terms of information, there’s not a lot of edge to be had here over the 15,000+ well oiled, highly trained and overcompensated excel jockeys hammering away at expert interviews, CPG conferences, and all the other nifty little sources of data that I don’t have access to.
But I’m going to be honest, this is just calling out to me as an interesting lead to begin following. Perhaps I’m falling into a value trap that will rend my soul into dozens of pieces and leave me broken 5 years down the line, just like investors in BTI are probably feeling after achieving an earth shattering 1.88% 5-year total return. These equities are in such a sorry state that it’s honestly kind of funny. Especially because Altria is the best performing large cap stock of all time.
What I’m going to do is begin following the legislation as it relates to state enforcement of federal law of e-vapor products. This will be a running series of long form posts. I’d like to do maybe 1 every 3 or 6 months.
As an example of applicable content, just yesterday the state of Alabama had a hearing with the house judiciary committee about a bill titled HB 65.
The following are words from a pro-vape lobbyist group.
Seems bullish.
Until next time,
-Left
Great post. Have you been tracking state-by-state progress recently? Seems like the thesis may not be predicated on such progress on vaping enforcement, but it certainly would still benefit.