1:00 AM 9th December 2023
Market Analysis: Tui & British American Tobacco
Tui: Single Platform for Bookings and Effective Pricing Strategy Ensure Outperformance; Integration of Musement Segment into Every Business Aspect Offers Exciting Opportunities for Cross-Selling. BAT (British American Tobacco): BAT's strategy of focusing on sales volumes and offering value is a response to the market reality; Potential new regulations could benefit major tobacco companies; Sales can be boosted by entering new markets or offering new price incentives
Alex Smith, Global Sector Lead for tourism at Third Bridge
comments on Tui informed by the insights from industry experts:
“The holiday travel market, particularly in the source markets targeted by Tui, like Western and Southern Europe plus the Nordics, has made a significant recovery with some regions even surpassing pre-pandemic demand levels.
“Our experts say Tui can outperform the market during this winter season as it introduces a single platform for bookings across hotels, activities, and flights.
“Tui's competitive edge against low-cost operators like Ryanair and EasyJet lies in its effective pricing strategy. It offers add-ons separately to reduce base ticket prices, along with opportunities in ancillary services. It also cross-sells accommodation and local tours.
“While the Musement segment remains relatively small, our experts expect it to be integrated into every part of the business, introducing new opportunities for cross-selling.
“Online travel agents like Booking.com and Expedia pose a threat to Tui. However, Tui's ownership of its supply chain allows the company to better manage customer experiences and costs.”
Orwa Mohamad, Analyst at Third Bridge
comments British American Tobacco.
“Our experts say that BAT's strategy of focusing on sales volumes and offering value is a response to the market reality, considering its late entry into heated tobacco products. Consequently its profit margins lag those of PMI, its main competitor.”
“The industry faces an emerging issue regarding the lifetime value of customers, notably for BAT, which aggressively acquires new customers by selling its product, Glo, at a significant discount, hoping to generate enough profits from the consumables or sticks. However, low retention rates threaten that strategy as the profit is not realised on sticks.
“Vaping hasn't proven profitable in any markets due to intense competition. However, our experts believe the situation might change with potential new regulations, which could benefit major tobacco companies and create a sort of monopoly.
“The negative attention surrounding Juul and underage vaping has slowed BAT's business prospects in the US.
“Our experts are confident that BAT will reach GBP 5 billion in NGP sales by 2025. They can then increase sales volume by entering new markets or offering further price incentives.
Third Bridge is a global primary research firm that interviews more than 6,000 internationally recognised industry experts and business leaders a year to compile 360-degree market intelligence for institutional investors. www.thirdbridge.com