Imperial Brands' Leadership Shift: Can Paravicini Navigate the Ashes of Declining Cigarette Demand?

The tobacco industry is in the throes of a seismic shift. Declining cigarette demand, intensifying regulatory scrutiny, and the rise of next-generation products like vaping have turned traditional tobacco giants into firms in existential flux. Imperial Brands (IMB.L), the UK-based leader, faces this reckoning head-on as it transitions its leadership to Lukas Paravicini, a CFO-turned-CEO with no prior tobacco experience but a storied FMCG pedigree. The question now is: Can Paravicini’s financial acumen and consumer goods expertise steer Imperial through regulatory headwinds and shifting consumer preferences, or will the company’s reliance on legacy products prove fatal?

The Paravicini Playbook: FMCG Muscle in a Tobacco World

Paravicini’s ascent to CEO in October 2025 marks a bold pivot for Imperial. A Swiss executive with 22 years at Nestlé and roles at Fonterra and ED&F Man, his career has been defined by FMCG mastery—managing global supply chains, driving digital transformation, and navigating regulated markets. His financial expertise is undeniable: as CFO, he spearheaded Imperial’s 2030 strategy, which aims to triple revenue from next-generation products (vaping, smokeless tobacco) by 2030.

Yet, Paravicini’s lack of tobacco sector experience raises red flags. The industry’s challenges—rising taxes, health litigation, and evolving consumer tastes—are uniquely complex. Can he adapt FMCG tactics to a space where regulatory compliance and legacy brand management are existential? His success hinges on leveraging the board’s deep tobacco expertise while accelerating FMCG-style innovation.

The Board’s Dual Expertise: Tobacco Veterans and FMCG Strategists

Imperial’s board is a masterclass in balancing old and new. Non-executive director Andrew Gilchrist, a Reynolds American and BAT veteran, brings decades of tobacco sector know-how. Meanwhile, FMCG stalwarts like Alan Johnson (ex-Unilever) and Bob Kunze-Concewitz (ex-Campari) provide consumer goods firepower. This hybrid expertise is critical:

• Tobacco Know-How: Gilchrist and regional president Aleš Struminský (a 20-year Imperial insider) anchor the company’s core cigarette business, ensuring regulatory compliance and operational continuity.
• FMCG Momentum: The rest of the board—Johnson, Kunze-Concewitz, and CFO successor Murray McGowan (ex-Yum! Brands/Costa Coffee)—are driving Imperial’s pivot to next-gen products.

This dual focus is reflected in Imperial’s 2030 plan, which allocates £1.5 billion to R&D and next-gen products. But execution risks loom: scaling vaping and smokeless tobacco in a market dominated by tech-savvy startups like Juul and Philip Morris’s IQOS requires speed and agility—qualities not always synonymous with legacy tobacco firms.

Regulatory and Consumer Crossroads: Can Imperial Adapt?

The challenges are stark. In 2025, cigarette demand in developed markets is declining at 5% annually, while vaping adoption among younger demographics is rising. Regulatory hurdles—such as the EU’s Tobacco Products Directive 6, which bans flavored e-liquids—threaten to squeeze margins. Paravicini’s FMCG background could prove vital here:

• Regulatory Agility: His experience in regulated sectors (e.g., dairy at Fonterra) may help navigate compliance costs and lobbying efforts.
• Consumer-Centric Innovation: FMCG’s focus on branding and product differentiation could revitalize Imperial’s image, moving it beyond its “sin stock” reputation.

However, the board’s heavy FMCG tilt risks sidelining tobacco’s operational nuances. Without Gilchrist’s guidance, could Paravicini misstep in managing litigation risks or tax negotiations? The answer lies in the execution of Imperial’s next-gen pivot.

ESG and Valuation: A Discounted Opportunity?

Imperial’s stock trades at a P/E of 12x, a discount to peers like Philip Morris (PMT) at 18x. This undervaluation reflects investor skepticism about the cigarette-to-next-gen transition. Yet, ESG could be a wildcard:

• ESG Risks: The tobacco sector’s inherent ESG liabilities (health impacts, environmental waste) remain a drag. Paravicini’s FMCG background includes sustainability roles at Nestlé, suggesting potential to green Imperial’s operations.
• Valuation Upside: If next-gen products hit their 2030 targets, Imperial’s valuation could re-rate sharply.

Verdict: Hold for the Transition, but Watch the Execution

The case for holding Imperial hinges on two factors:

1. Leadership Synergy: Paravicini’s FMCG vision must be balanced with Gilchrist’s tobacco expertise. The board’s hybrid composition offers this, but cultural clashes or missteps in R&D could derail progress.
2. Valuation Floor: At current prices, the stock offers a 4% dividend yield and a P/E discount to peers. If next-gen adoption accelerates, this could prove a bargain.

The risks are clear: regulatory missteps, execution delays in next-gen scaling, or a faster-than-expected cigarette decline could crater the stock. Yet, the blend of Paravicini’s financial discipline and the board’s sector knowledge suggests Imperial is better positioned than peers to navigate this transition.

Recommendation: Hold Imperial Brands (IMB.L) for now. The stock’s valuation offers a margin of safety, and the leadership transition—while risky—could unlock growth if next-gen products thrive. Monitor closely for execution milestones and regulatory outcomes in 2026.