Despite the fact that the entire world now knows about the danger of smoking, it seems that tobacco companies have never seen brighter days.
Companies listed in the Bloomberg tobacco producers’ index have seen their shares increase by more than 350% since 2009. This rise makes the tobacco industry one of the most lucrative business to go into.
We had seen in a previous article that, despite decreasing cigarette sales and fewer smokers, cigarette manufacturers were reaching record revenue levels in the US. It seems that their valuation is, quite similarly to their revenue, not impeded at all by growing health concerns and higher tax policies on tobacco products.
The valuation of these tobacco companies is actually driven by growing revenue and profits. Most investors keep their shares in this rewarding business. Some pension funds and life insurers got rid of their stock but they were not enough of them to inflict a major blow to the sector.
The tobacco industry should pay more taxes
According to Jeremias Paul, from the World Health Organization, the tobacco industry should pay more taxes. “If they cause death, they should be taxed to death. In the latest global adult tobacco survey, there was a reduction in tobacco use of about 20 percent. This essentially proves increasing taxes regenerates a lot of revenues but at the same time reduces consumption.”
And it seems that the tobacco industry is sensing that higher taxes. And a lowered tobacco consumption could be foreseen in the future. They have recently invested massively in other nicotine products such as vaping products, electronic cigarettes or tobacco heat sticks.