British American Tobacco Plc is writing down some of its US cigarette brands by about £25 billion ($31.5 billion), sending shares to the biggest decline in almost four years.

The maker of Lucky Strikes is taking the non-cash impairment to reflect the diminishing carrying value of the brands over the next 30 years as more smokers quit, switch to cheaper brands or adopt smoking alternatives. 

The cigarette maker also alarmed investors Wednesday by saying organic revenue growth this year will reach only the lower end of its forecast range, while the outlook for next year is for growth in the low single digits.

The “disappointing” mid-term guidance highlights challenges in the US cigarette market and increased competition in new categories such as vapes, nicotine pouches and heated tobacco, Morgan Stanley analysts Rashad Kawan and Sarah Simon said.

The shares fell as much as 9.3% in London, the steepest intraday drop since the onset of the pandemic in March 2020. The stock is down about 30% this year, triple the decline in Marlboro maker Philip Morris International Inc. 

Smoking Alternatives

As demand for cigarettes cools in the US and elsewhere, BAT and rivals are battling for market share in tobacco alternatives. The seller of Vuse vapes and Velo nicotine pouches said its alternatives business should break even in 2023 — ahead of schedule — and be profitable next year.

Yet the company has ground to make up against competitors. It predicted alternatives will account for about half of sales by 2035 — about a decade behind a similar goal from bigger rival Philip Morris. 

BAT’s pod refill Vuse vapes are facing stiff competition from disposable vapes from upstart competitors, many of whom are based in China. Chief Executive Officer Tadeu Marroco said recently that disposables now account for more than half of the US market, the biggest market for vapes.

Governments in France, the UK and the US are considering a crackdown on disposables and vape flavors amid concerns the products are targeting underage users. BAT has said it is planning a media campaign to curb underage vaping.

Cigarette giants have been struggling for years to adapt to a more hostile attitude toward smoking by governments and waning demand from consumers in key markets. 

Philip Morris spun-off its US cigarette operations, now known as Altria, more than a decade ago, bowing to pressure from US investors who wanted higher dividends and more share buybacks. The move was also pitched as a way to set free faster-growing overseas operations while the US business was entangled in smoker lawsuits.

Marroco shook up management over the past six months, replacing several business heads and naming a new chief financial officer to jumpstart the company’s sluggish performance.

Still, the outlook looks “grim” as 2024 guidance was disappointing and some investors may have been expecting news of a share buyback, RBC Capital Markets analysts James Edwardes Jones and Emma Letheren said in a note.

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Original: Fortune | FORTUNE: British American Tobacco writes off $32B on U.S. cigarette brands as tobacco alternatives gain popularity