U.K. cigarette maker Imperial Brands Plc is testing caffeine energy products as its home market starts prohibiting cigarette logos on packaging, posing one more obstacle to tobacco companies in how they market their products.
The company sees growth prospects in caffeine energy boosters as well as in nicotine vapor, Chief Executive Officer Alison Cooper said on a call with reporters Wednesday. Imperial has been testing caffeine products in formats including a tab that melts on the tongue.
About a year after jettisoning the word “tobacco” from its name, Imperial Brands is stepping up efforts to move beyond its main product as the cigarette market becomes more competitive and government regulations and taxes weigh on the industry outlook. Later this month, the U.K. is prohibiting the sale of cigarettes with logos on the packages, requiring them to be sold in standardized, dull packs with large pictorial warnings on the effects of smoking. France also implemented such measures this year.
Exploring New Areas
“We’ve been increasingly looking in other areas,” said Matthew Phillips, the company’s chief development officer. Imperial Brands set up a venture called Fontem about five years ago for such businesses, which include e-cigarettes.
Phillips spoke Wednesday as the company said adjusted operating profit fell 7.6 percent at constant exchange rates to 1.74 billion pounds ($2.3 billion) in the six months through March. Analysts expected 1.65 billion pounds.
Imperial also forecast stronger second-half earnings and raised its goal for cost savings this year to 130 million pounds from November’s forecast of 90 million pounds.
The stock traded 0.2 percent higher at 3,769.5 pence as of 8:20 a.m. in London.
The increased target provides a boost for a company that previously warned of slowing profit growth this year as it invests 300 million pounds in its main brands and cuts weaker ones to defend its market share. Imperial Brands faces increasing competition as larger rivals introduce heat-not-burn tobacco alternatives and after British American Tobacco Plc offered $47 billion to buy out Reynolds American Inc.
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