The Advertising Standards Authority (ASA) in the UK on December 18, 2019 asked the British American Tobacco Plc that seven Instagram posts by Vype, an e-cigarette brand ad must not appear on any public account of Instagram.
The self-regulatory organisation has asked British American Tobacco UK Ltd that “marketing communications with the direct or indirect effect of promoting nicotine-containing e-cigarettes and their components which were not licensed as medicines should not be made from a public Instagram account in future unless they had taken steps to ensure they would only be distributed to those following their account and would not be seen by any other users and if advertising in media permitted under rule 22.12, they must not show people who are, or seem to be, under 25, using e-cigarettes or playing a significant role.”
Smoking and Health, Campaign for Tobacco-Free Kids and STOP (Stopping Tobacco Organizations and Products) claimed that “ads has breached the Code of advertising non-licensed nicotine-containing e-cigarettes and their components on Instagram, ads have breached the Code by being likely to appeal particularly to people under 18 years old and breached the Code by featuring someone with an e-cigarette who appeared to be under 25 years of age.”
In response to the allegation made by Smoking and Health, Campaign for Tobacco-Free Kids and STOP, British American Tobacco said that “they ensured the information they provided online was precise in nature. This was done by ensuring the content of their posts related to their product, either by focusing on its characteristics, linking it to events where the product was presented or to collaborations focused on the product or by providing news on awards won by the product. They said their online platforms focused on communicating precise information regarding their products but stopped short of direct or indirect promotion. British American Tobacco stated that it believed the Instagram was analogous to a website because it was an online media where only precise content was permitted, and users who were over 18 years old only saw information that was relevant for them, based on the content they had actively sought out in the past, and according to their age. They said that the Vype Instagram account in question had a restricted profile such that for a user to follow the Vype account, the user must have declared themselves 18 years or older. In addition, they said the Vype Instagram page contained a message that stated "Vype e-cigarettes contain nicotine. 18+ only. Read leaflet in the pack.". They added that all of Vype's Insta posts also contained text which stated "Vype e-cigarettes has nicotine content.
The company also stated that “they were not selling their products through social media platforms such as Instagram. Instead, they used these social media platforms to interact with their end-users when they raise questions or seek information and to communicate precise information about Vype that adult vapers and smokers might not be aware of or not able to find on their e-commerce website. With regard to whether or not the content was precise or promotional, British American Tobacco said that followers of the Vype Instagram account signed up to see product information relating to products that were alternatives to smoking. They said that Vype’s followers were interested in wider precise information related to the products, the brand collaborators and other followers. Based on that interest, they provided Vype followers with precise information of events which were either centred on the launch or presentation of a new product or, alternatively, related to an award presented to their own product. They said the imagery that was used in those posts ensure that there was a genuine and logical connection to the product.”
British American Tobacco Plc is the UK's largest tobacco company in terms of the market capitalization and a constituent stocks of the FTSE 100 Index as well. The outstanding market capitalization of the group stood at £73.4bn.
It also stated that the Instagram post was designed to assure Vype's presence at the London Fashion Week and included a model who was a vaper and was part of the cast of the House of Holland show and was wearing makeup appropriate for that event. They believed the model was targeting population of above 25-years of age.
Committee of Advertising Practice (CAP) Code rule 22.12 entails a legal ban on advertising of unlicensed, nicotine-containing e-cigarettes in certain media. The rule reverberated that in online media, newspapers, magazines and some other source of electronic media, marketing communications with the straight or indirect impact of advertising nicotine-containing e-cigarettes and their constituents which were unlicensed as medications were not allowed, except the media targeted solely to the trade.
It further emphasised that fact-based assertions about goods were allowed on marketers’ own websites and, in some conditions, in other space online which are non-paid-for and under the marketer’s own control.
However, the Advertising Standards Authority's ruling would have a considerable impact in the direction to prevent Tobacco companies from using social media platforms or online media platforms to commercialise and promote their products to young people in Britain and around the globe.
This move could have some impact over BAT’s UK revenue stream through its e-cigarette products but would have a very nominal or no impact at all on the bottom line.
In the second-half pre-close trading update released on November 27, 2019, the group reported that Vype continues to expand its value share to 11.8% in Britain, recording a surge of 260bps, and in France Vype value share surged to 19.2%, an increase of 790bps in October, and in Canada, Vype is the rapidly growing brand, attaining a value share of 27.6%, up 570bps since July 2019.
Despite the Advertising Standards Authority’s ruling, shares of BATS traded 53.0 points or 1.66% higher to GBX 3,252.50 in the December 18, 2019 trading session (before the market close at 11:46 AM GMT). On a YoY basis, its shares have delivered a price return of approximately 22%, up by approximately 28% on a YTD basis, it handed around 9% of in a month-over period and bagged approximately 7% in the past five trading sessions.
Also, despite a decent gain its shares had handed in the past couple of months, the company is offering an attractive dividend yield of 6.34%, which is significantly above the benchmark FTSE 100 index’s dividend yield of 4.45%.
Also, during the day session, stocks of BATS registered a 52-week high of GBX 3,252.50, while it had a 52-week low of GBX 2,249.00, and at the current trading level, its shares traded approximately 45% higher against its 52-week low level.
From the technical standpoint, BATS shares traded above its immediate and crucial short-term as well as long-term support levels of 5-day, 10-day, 20-day, 50-day, 100-day and 200-day simple moving averages (SMAs), which is perceived to be a favourable trend in any stock.
However, 14-day and 9-day Relative Strength Index were hovering above 80, reflecting stock is in steep overbought territory. The Moving Average Convergence Divergence is also rising, with the gap between 12-day EMA and 26-day EMA remaining positive.
With the decent performance of BATS shares during the day, ASA's ruling does not seem to have dented the investors as well as traders’ sentiment, as the stock is oscillating in green and has also registered a new 52-week high level during the day trading.
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