Imperial Brands: Tobacco Core Markets to Drive Growth

Imperial Brands, the U.K.-listed tobacco manufacturer, has outlined its midterm plans to invest in its five largest tobacco markets to drive value in the segment. The company's strategy, which includes a continued focus on the U.S., Germany, U.K., Spain, and Australia, aims to boost sustained growth and cash delivery. These markets account for around 70% of its adjusted operating profit, making them critical to the company's financial performance.

The company's strategy of focusing on these five priority markets aligns with its long-term growth objectives. By concentrating resources and investments in regions that contribute significantly to its profitability, Imperial Brands aims to boost sustained growth and cash delivery through targeted brand building, improvements in sales capabilities, and careful portfolio management. This focused approach has resulted in aggregate market share gains and strong pricing, as evidenced by the 4.6% increase in tobacco & next generation products (NGP) net revenue at constant currency for the year ended September 2024.

However, this strategy faces several potential risks and challenges in the evolving regulatory and consumer landscape. One significant risk is the increasing regulatory scrutiny and restrictions on tobacco products, which could limit the company's ability to grow in these markets. For instance, stricter regulations on packaging, advertising, and sales could impact Imperial Brands' marketing and distribution efforts. Additionally, the shift in consumer preferences towards healthier alternatives and the growing acceptance of next-generation products (NGP) present both opportunities and challenges. While Imperial Brands has seen a 26.4% increase in NGP net revenue at constant currency, driven by growth from all three regions, the company must continue to innovate and adapt to changing consumer demands to maintain its market position.

Furthermore, the company's strategy relies heavily on the performance of these five priority markets, which could expose it to regional economic fluctuations and market-specific risks. For example, economic downturns or changes in consumer spending habits in any of these markets could negatively impact Imperial Brands' financial performance. To mitigate these risks, the company must remain agile and responsive to market changes, continuously investing in consumer capabilities, cultural transformation, and agile ways of working, as highlighted by CEO Stefan Bomhard. By doing so, Imperial Brands can fulfill its role as an effective challenger in the industry, delivering consistently against operational and financial expectations.



Imperial Brands is implementing several specific initiatives and investments in its five largest tobacco markets to drive sustained growth and cash delivery. These initiatives include investment in brands and sales force, pricing strategy, consumer capabilities and cultural transformation, market share stabilization, and next generation products (NGP). The effectiveness of these measures is evident in the company's financial performance for the past year. Imperial Brands reported a 4.6% increase in tobacco & NGP net revenue at constant currency, driven by robust tobacco price mix and NGP growth. The company also achieved aggregate market share gains (+5bps) in its five priority markets, with four out of five markets in share growth. Additionally, the company's adjusted earnings per share increased by 10.9%, driven by profit growth and share count reduction.



In conclusion, Imperial Brands' strategy of focusing on its five largest tobacco markets is a well-calculated move to drive sustained growth and cash delivery. However, the company must remain vigilant of the evolving regulatory and consumer landscape, continuously innovating and adapting to changing market dynamics. By doing so, Imperial Brands can continue to fulfill its role as an effective challenger in the industry, delivering consistently against operational and financial expectations.