British American Tobacco "Higher quality, higher growth business" (Buy) Baig

Research evidence excerpt

British American Tobacco "Higher quality, higher growth business" (Buy) Baig

driven by the rise of illicit disposable vapes over the past 6 years, which are convenient,

effective, offer flavours, and are the most affordable nicotine product. We estimate the

vapour category accounted for almost 30% of total nicotine volumes in the US last year,

of which 75% are illicit disposable products.

Figure 5: US nicotine volume breakdown by product Figure 6: US equivalised price per pack across nicotine

FY25E, total 280bn sticks equivalent products/brands, $

a pric

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icks equivalent

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otal 280bn

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US nicotin

ct FY25E, e v

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US

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olume breakdown by pr

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cross nicotine products/brand

s, $

Source: UBS Tobacco Transformation model Source: UBS analysis, 1 pack = 20 cigarettes = 2ml vape liquid = 20 pouches

Figure 7: US June 2025 survey - Reasons behind quitting/ Figure 8: US June 2025 survey - Response to change in

reducing smoking cigarettes availability of vapes compared to 12 months ago

beh ey

ons

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eas

- R

5 s

ey

202 ne

ne

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ind q uitting/ g smokin ettes US

reducin g cigar - Response to cha availability of vapes compa red to 12 months

nge in ago

Source: UBS Evidence Lab Source: UBS Evidence Lab

For background, in early 2020, the FDA finalised enforcement policy on unauthorised

flavoured 'cartridge-based e-cigarettes' (excluding menthol and tobacco), but it left the

door open for (and started) the rise of illicit flavoured disposable vapes that have taken

over the marketplace, in our view. Whilst the FDA is legally mandated to review

Premarket Tobacco Product Applications (PMTA) within 180 days, we understand the

FDA faced challenges given it was a new standard released for products that were not