Focus on emerging markets is key

THERE is no getting away from it: the outlook for cigarette makers is increasingly bleak. Last week, Citigroup released a comprehensive 72-page report on the future of smoking, which predicted that the habit could virtually disappear in developed countries within 30-50 years. Eventually, higher prices won’t be able to offset rapidly falling volumes. Somewhat fittingly, the industry will die a long, slow death, eventually expiring in 2040-60 (at least that’s Citi’s most bearish prediction).

The short-term isn’t particularly rosy either, with the EU and Australia set to recommend generic packaging – the only form of advertising that most tobacco firms have.

That’s why Paul Adams is right to pursue opportunities in emerging markets, a strategy he has long pursued (as evidenced by BAT’s £303m acquisition of Indonesia’s biggest maker of clove cigarettes, Bentoel).

BAT is already well diversified, with emerging markets accounting for 75 per cent of volumes, 66 per cent of revenues and 60 per cent of profits. When Adams’ successor Nicandro Durante begins next month, his job will be to grow those numbers even further.