28th Jun 2023 17:26
(Alliance News) - A presentation hosted by Imperial Brands PLC left Jefferies cautiously optimistic, and impressed at the massive culture shift away from the strategy of "cheap smokes for good blokes."
Jefferies said the investor seminar in New York titled 'Start with the Consumer' involved presentations from a number of senior management and focused on how all the decisions that are being made today are being guided by the consumer.
"While we have struggled to get any conviction in IMB's RRP prospects, we came away more encouraged and cautiously optimistic, on a medium to longer-term view at least," the broker said.
Reduced-risk products refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to those products versus continued smoking.
They include e-cigarettes, skin patches, chewing gum and tablets.
Jefferies continues to believe the company will face a difficult task to have any meaningful traction over the near-term, but thinks it does have the ability to move towards its fair share of the RRP space to the medium to longer-term.
"We were also impressed with how new management has clearly shifted the company culture, something that was no easy task."
Jefferies explained that when they began coverage of the tobacco space around 13 years ago, the then Imperial Chief Finance Officer's approach to innovation was that the company is simply about "cheap smokes for good blokes."
Jefferies noted that while the new approach "should have been done 4-5 years ago" for maximum upside, it was "better late than never".
The broker was also encouraged by a realistic view of its limitations against certain better resourced peers.
This is reflected in its strategy based around a challenger mindset, and therefore having to think and do things differently.
However, "it is OK saying this, but we need to see it in practice," Jefferies said.
Examples given by the company were the targeting of females, innovative approaches to getting key customer buy-in in the US and targeting very specific segments and demographics of RRP consumers in order to win.
Jefferies has a 'hold' rating on the company and a price target of 1,680 pence.
Shares in Imperial Tobacco closed 0.2% lower at 1,751.50p each in London on Wednesday.
By Jeremy Cutler, Alliance News reporter
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