The GLObal Market
British American Tobacco’s GLO is recognized by industry insiders as one of the most distinguished Heat-Not-Burn brands. While IQOS still largely dominates the market, GLO is a worthy rival. In most countries it is the second highest grossing HnB brand. In this post, we’ll discuss what investors should know about GLO and British American Tobacco (BAT) before investing.
Reception and Market Value
GLO is a tobacco heating product (THP) that is promoted as one of BAT’s next generation products (NGPs). GLO products were first launched in 2016 in Japan and have since been made available in 11 other countries worldwide: Canada, Croatia, Italy, Malaysia, Poland, Saudi Arabia, South Korea, Switzerland, Russia, Romania, Ukraine. Since its launch GLO’s largest market has been Japan. Despite an overall decline in Japanese tobacco revenue in early 2018, GLO maintained steady growth. In the 2018 Annual Report, BAT claims that the GLO brand “achieved a 4.7% market share (20% category share) in Japan,” making it the second most popular Heat-Not-Burn brand in the nation.
Not everyone was happy with the introduction of GLO into the Japanese market however. In June, 2018, an affiliate of Philip Morris International (PMI), the manufacturer of IQOS, led a legal action against BAT Japan, with the claim that GLO and NeoSticks infringe on a patent which was granted to PMI for the sale of heated tobacco products. Patents are legal documents granting a specific party the right to exclusively sell an invention for a set period of time. If another invention is deemed too similar to the first, the brand which holds the patent can pursue legal action against the manufacturer they feel is infringing on their patent. BAT is currently denying infringement.
Overall, GLO has been doing well in global markets. BAT released in their 2018 Performance Summary, that their company’s THP “revenue increased to […] £576 million, at constant rates.” This is approximately a $537 million profit USD. For those of you who are interested, that is approximately $300 million less in yearly revenue than what PMI is making from IQOS. Nevertheless, it is still a large sum in the developing Heat-Not-Burn industry.
The Future of GLO
GLO products are often paid less attention than their competitor IQOS, but don’t discount them for that. The brand is growing at a rate comparable to IQOS. BAT is continually investing in the GLO brand. In 2018, the company announced their plans to expand and reconfigure their plant in Romanian, at a cost of €800 million (approximately 1.07 billion USD). The plant is expected to be completed by 2022 and will be an important step in “the European expansion of GLO.”
BAT has also spent a fair amount of money on research and clinical studies for their THP products. One of their studies looked at whether or not GLO altered or damaged DNA. Many tobacco related diseases are a direct result of the tobacco damaging a person’s DNA. Tobacco contains carcinogens, cancer causing chemicals, that alter DNA. One of the reasons so many harm reductionists have gotten behind Heat-Not-Burn products is because they are designed to lower the risk of exposure to these chemicals. This study set out to prove that claim. The study investigated whether cell structure changed when using GLO vs. traditional cigarettes. The study’s researchers analyzed a substance known as MucilAir, which replicates the tissues found in human airways. The tissue was exposed to the vapor generated by GLO and then traditional cigarette smoke for one hour each. Changes in the tissue structure were then recorded. Tissue exposed to traditional cigarette smoke saw 2809 changes in DNA genes after a 48 hour period, whereas GLO’s vapor only caused changes in 2. While some may criticise the validity of the report, since it was conducted by BAT, it has been peer reviewed and was published in Scientific Reports, a medial journal. Currently, the BAT research team is working on a publication about the health effects of GLO users, vapers, and traditional cigarette smokers that will hopefully be published sometime in 2019.
Scientific investments such as these are invaluable to the GLO brand as it attempts to move forward. If BAT ever applies to the United States Food and Drug Administration (FDA) for scientific review or the right to sell GLO in the American market, research like this will be reviewed and could help bring about a positive ruling. Slowly, more and more Heat-Not-Burn products are moving towards FDA approval. BAT was one of the first tobacco manufacturers to be approved by the FDA for a trial of carbon-tipped THPs. The BAT Eclipse brand is currently being rolled out in several test regions across the country. The results will be a good indication of how well THPs performs with American consumers, but more importantly it could set a precedent for any THP and HnB devices to follow. This, in addition to the recent FDA announcement that numerous kinds of traditional cigarettes, like menthol cigarettes, are potentially going to be restricted, if not banned, creates an opportunity for BAT and the GLO brand to keep growing and improving in global markets.