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4-Traders Homepage  >  Equities  >  London Stock Exchange  >  British American Tobacco    BATS   GB0002875804

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British American Tobacco : Big Tobacco to Spend Millions on Self-Critical Ads in U.S.

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10/03/2017 | 12:15pm CET
By Jennifer Maloney 

Broadcast television networks and metro newspapers are about to get a boost from an unexpected but familiar source: Big Tobacco.

It's an old media buy to resolve an old fight. Starting as soon as next month, Altria Group Inc. and British American Tobacco PLC will begin running court-mandated ads to put to rest a lawsuit brought nearly two decades ago by the U.S. Department of Justice over misleading statements the industry had made about cigarettes and their health effects.

The television spots, between 30 and 45 seconds long, will run in prime time five days a week for 52 weeks, and will appear mostly on ABC, CBS or NBC, Altria said. They won't have the graphic images of a typical antismoking public service announcement. Instead, these ads will be reminiscent of the disclosure statement at the end of a pharmaceutical ad, displaying court-mandated text in black on a white screen with a voice narration.

"Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA intentionally designed cigarettes to make them more addictive," one ad will say. Another reads: "More people die every year from smoking than from murder, AIDS, suicide, drugs, car crashes, and alcohol, combined."

Although the starkness of the black-and-white text ads could be persuasive because they are so out of the ordinary, ad executives said, it is unclear how effective they will be in an age when fewer young people are watching broadcast TV or reading newspapers.

"The good news for the tobacco companies is they'll avoid a lot of their younger audience" who would be more likely to see a video ad on Facebook than a prime-time TV ad, said John Boiler, co-founder of 72andSunny, an agency that does work for the antitobacco nonprofit Truth Campaign. "I think they're getting off kind of lightly."

Marlboro maker Altria, which owns Philip Morris USA, estimates that it will spend $31 million to broadcast and publish the statements on TV, in newspapers, on company-owned websites and in pamphlets tucked inside the cellophane wrappers on cigarette packs. A spokesman for BAT's U.S. subsidiary Reynolds American, which makes Camels and acquired Newport maker Lorillard in 2015, declined to say how much the company expects to spend.

All the defendants named in the Justice Department's 1999 lawsuit are now owned by either Altria or BAT.

Full-page print ads will appear in at least 45 newspapers, including The Wall Street Journal, starting as soon as Nov. 26, according to a document filed in U.S. District Court for the District of Columbia Monday evening by attorneys for Altria, BAT and the Justice Department, outlining their agreement. The print ads will run on five weekends spread over about four months, according to the court filing. Ads will also appear on the newspapers' websites.

Tobacco companies used to be a staple of Madison Avenue ad agencies with figures like the Marlboro Man and Joe Camel, but they have sharply curbed their advertising spending in the U.S. They are no longer allowed to advertise their products on television or billboards, and their legal settlements have funded more than $1 billion dollars in antismoking campaigns.

"This industry has changed dramatically over the last 20 years," Altria's General Counsel Murray Garnick said in a statement, noting that the company supported the 2009 law that gave the Food and Drug Administration authority to regulate tobacco. "We're focused on the future and... working to develop less risky tobacco products."

The FDA recently unveiled plans to overhaul how it regulates tobacco, aiming to reduce nicotine in cigarettes so they're no longer addictive and encourage cigarette smokers to switch to less harmful alternatives.

Write to Jennifer Maloney at [email protected]

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Financials ( GBP)
Sales 2017 20 536 M
EBIT 2017 8 130 M
Net income 2017 6 768 M
Debt 2017 42 233 M
Yield 2017 3,71%
P/E ratio 2017 15,40
P/E ratio 2018 16,46
EV / Sales 2017 7,60x
EV / Sales 2018 5,79x
Capitalization 114 B
Chart BRITISH AMERICAN TOBACCO
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British American Tobacco Technical Analysis Chart | BATS | GB0002875804 | 4-Traders
Technical analysis trends BRITISH AMERICAN TOBACCO
Short TermMid-TermLong Term
TrendsNeutralNeutralNeutral
Income Statement Evolution
Consensus
Sell
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Mean consensus OUTPERFORM
Number of Analysts 20
Average target price 58,2  GBP
Spread / Average Target 17%
EPS Revisions
Managers
NameTitle
Nicandro Durante Chief Executive Officer & Executive Director
Richard George William Burrows Chairman
Alan Davy Director-Group Operations
John Benedict Stevens Executive Director & Finance Director
David O'Reilly Group Scientific Director & Director-Research
Sector and Competitors
1st jan.Capitalization (M$)
BRITISH AMERICAN TOBACCO7.48%151 716
PHILIP MORRIS INTERNATIONAL17.70%170 355
IMPERIAL BRANDS-13.90%39 183
SWEDISH MATCH12.53%7 049
ESSENTRA10.63%1 767
PHILIP MORRIS CR, A.S.--.--%1 437