You know things are going downhill when even the Rupert family, a dynasty practically built on tobacco money, decides to jump ship.
Reinet Investments’ decision to offload its stake in British American Tobacco (BAT) isn’t just a tickle in the stock market — it’s a thunderous slap in the face for Big Tobacco. It’s like Mali’s Keita Dynasty saying: “Meh, kings and emperors are so last century.”
Let’s get one thing straight: the nearly R30bn sale wasn’t just to stump up some spare cash for the Ruperts’ next investment opportunity. From where this reporter stands, the move reflects a deliberate, conscious shift driven by the harsh reality of an industry under siege.
BAT’s decision last year to take a hefty $32bn (R600bn in today's money) writedown charge on its traditional cigarette brands is exhibit A to the shifting tides. It is more than an accounting hiccup, it’s a big red flag. The once-potent empire of combustible tobacco is catching fire, and not in a good way.
The Ruperts, having seen the writing on the wall, have been gradually cutting BAT’s overwhelming dominance in their investment portfolio from 80% in 2009 to a paltry 24% last week. This isn’t an “if it ain’t broke, don’t fix it” situation. It is more of a “fix it before it blows up in your face” kind of a deal.
It tells a larger tale — one of diversification away from a sinking ship. The family that once crowned nicotine is now calling it quits. You don’t need a crystal ball to see where the ship is heading.
Switching to noncombustible products might sound like an easy pivot. But the reality is far harsher. Vaping products, snus and nicotine pouches are also coming under intense regulatory scrutiny worldwide. Governments, alarmed by rising nicotine addiction rates among youths, are tightening the noose with new restrictions and outright bans.
Take New Zealand and Australia. Strict regulations have cracked down on e-cigarettes, enforcing plain packing and severe restrictions on marketing. In the US, the Food & Drug Administration has been relentless in its pursuit of stringent rules on the sale and distribution of vape products.
At home, the Tobacco Products & Electronic Delivery Systems Control Bill, which has been sent back to Nedlac for review, drags e-cigarettes and other new-generation products into the regulatory abyss, exposing them to bans on smoking and vaping in public spaces.
The family that once crowned nicotine is now calling it quits. You don’t need a crystal ball to see where the ship is heading.
The dream of nicotine-delivery turning into a smooth ride? More like a bumpy scramble through regulatory minefields. Continuing to lean on hazardous, antiquated products is not just unsustainable, it is disastrously risky. Other tobacco giants, including Philip Morris International and Japan Tobacco, face similar messages: adaptability is not optional, it is compulsory.
This not only indicates a broader investment shift but also signals that once unassailable industries are up for scrutiny regarding their long-term viability and ethical standings. The Rupert family strategy serves as a blueprint to reinvent themselves.
For instance Sasol, a company that is interwoven in the fabric of SA both as an economic powerhouse and an environmental enigma, can learn from the Ruperts. It’s profiting handsomely from an industry that is increasingly perceived as a pariah. Yet it is spending only about R1bn to secure its future, hopelessly insufficient if the goal is to reinvent the company in the next two decades, as stated by CEO Simon Baloyi last year.
The media industry is another sector undergoing transformative changes. Not long ago, when newspapers were delivered to virtually every home and glossy magazines graced coffee tables, media companies were swimming in advertising revenue. They had oodles of cash, but did most of them use this windfall to future-proof themselves in a rapidly changing digital era?
Nope. Instead, they threw lavish parties, handed out expensive Scotch whiskies, bought yachts and dished out bonuses to executives. Along came the tech titans of Silicon Valley with their algorithms and user data, ready to pounce. Digital advertising exploded and platforms such as Google and Facebook hoovered up the ad money.
Now media companies are wondering why the digital revolution has left them gasping for air. The list of newspapers and magazines that have shut down is too long to list in this column. What’s the outcome of this grand miscalculation? Our democracy teeters as one of its most crucial watchdogs is in ICU.
But all is not lost. Print isn’t dead — it’s gasping for air, true, but it’s still alive. There are sparks of resilience. Beyond the quiet magic of holding a physical newspaper, newspapers offer a refuge from the digital storm and slot into the narrative about the dangers of excessive screentime.
There are still millions of readers who see value in a curated selection of news and less clutter, thousands of advertisers seeking to reach readers who engage more deeply with content, and media executives who see an opportunity to blend the new with the old to create a hard-to-overlook value proposition.
For the few print media that are left, all of that creates a foundation robust enough for the media industry to take a leaf out of the Ruperts’ book. As the family turns its focus to more promising investments such as Grab Holdings, a $20bn super app woven into the fabric of life in Southeast Asia, the message is clear: adaptability is the name of the game, not basking in the glory of past successes.
The Ruperts and Financial Times, to name just two, have figured it out.
• Motsoeneng is Business Day’s acting editor
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