Speculation that the UK government is drawing up plans for a ban on disposable vapes in a bid to tackle underage vaping has hit Supreme (SUP:AIM) hard. Shares in the company have lost 15% this past week.

Supreme, which supplies disposable vapes to the likes of Tesco (TSCO), Morrisons and discounter B&M European Value Retail (BME), as well as complete vaping kits and flavoured e-liquids, defended its business model and expressed confidence that vaping will continue to be ‘the most credible and effective alternative to cigarettes’ in a statement issued on the 13 September.

In the event of a ban on ‘single use vapes, Supreme expects most of its current customers to shift to alternative forms of vaping, including rechargeable buy-to-keep devices, for which it provides e-liquids, coils and other consumable supplies. 

That helped the stock stage a modest recovery, the shares adding around 2% to 96p in response to the announcement.  

There was also relief as the fast-moving consumer products supplier, which also distributes batteries, vitamins and lighting products, assured investors it remains on track to achieve the 30% growth in adjusted earnings before interest, depreciation and amortisation (EBITDA) to £25.6 million called for by consensus for the year to March 2024.

SUPREME SAYS IT IS SUPPORTING A TOBACCO-FREE UK

Health experts fear youth vaping is fast becoming an epidemic and argue disposable vapes are deliberately sold in bright colours and made with sweet and fruity flavours to target youngsters.

Leading doctors have called for action from Westminster to protect the health of children.

Led by CEO Sandy Chadha, Supreme, perhaps best-known for its 88Vape brand, said it welcomes any government initiative that seeks to tackle underage vaping and will undertake a comprehensive review to ‘measure the impact of any proposed changes across the medium to long term once further clarity is provided’.

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The Manchester-based group reminded investors its overarching strategy has always been to ‘support a tobacco-free UK by offering both credible and safer alternatives for nicotine consumption’ with 88Vape playing ‘a significant role in assisting people in quitting smoking’.

Notwithstanding potential legislative restrictions on disposables, Manchester-based Supreme remains confident that vaping will continue to be ‘the most credible and effective alternative to cigarettes’.

A recent YouGov (YOU:AIM) poll commissioned by Supreme, whose customers also include Asda, Costcutter, Home Bargains and HM Prison & Probation Service, suggests that only 6% of former smokers who now vape would return to smoking if disposable vapes were no longer available.

CAN FULLY COMPLIANT ALTERNATIVES FILL THE GAP?

Supreme also pointed out that it has a range of fully compliant alternative vaping products which continue to generate year-on-year growth.

The company also plans to launch its own 88Vape pod system as another alternative to its disposables range; pod-system vapes are rechargeable and better for the environment as a result.

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