Traditional cigarettes are likely to suffer a backlash in the long run, as substitutes like e-cigarettes are gaining momentum at a steady pace in the smoking market, particularly among the younger demographic.
This has made the leading tobacco brand, Marlboro maker Altria Group Inc., invest in e-cigarette company Juul Labs and cannabis company Cronos Group Inc.
Morgan Stanely (MS) analysts have recently predicted a decline in the sale of traditional cigarettes as demographic modeling reveals cigarette smoking volume is expected to witness deceleration of around 6% a year over the next decade, with young people not taking it up. The stock might also hit low single-digits.
Merging with Juul in the production of e-cigarettes does not eliminate risks for the Marlboro maker. Strict new regulatory laws from the FDA could prove to be counter-productive for the company’s revenue growth, and ironically, the growth of Juul and other e-cigarettes is likely to come at the expense of traditional cigarettes.