BAT explores alternatives as cigarette market dips

British American Tobacco (BAT), the world’s second-largest cigarette group by sales, is making an investment of £100m to create a line of smoking alternatives as smoking bans and increased taxes convince smokers to give up the habit.

Nicandro Durante, the Chief Executive Officer of British American Tobacco, said that the tobacco firm was intending to create lower-risk alternatives to regular cigarettes such as noncombustible cigarettes, which heat tobacco rather than burn it, and nicotine inhalers.

British American Tobacco Logo

British American Tobacco buiding entrance

Mr Durante said that the size of the market for cigarette alternatives could represent as much as 40 percent of the tobacco company’s profits — which were £15bn last year — in 20 years’ time.

Mr Durante added that tobacco alternatives market will be significant in 20 years’ time as it’s going to increase.

The tobacco industry confronts rising control in Western markets and emerging economies such as Brazil, SA and Uruguay. The market of smokeless tobacco, which contains chewing tobacco and snuff, was worth $14bn of the $664bn world tobacco market, as outlined by Euromonitor in 2011.

In the 1980s, the US conglomerate RJR Nabisco created one of the first smokeless cigarettes, Premier, that cost approximately $300m.

It seemed to be a business flop among issues about its bad taste and awful smell.

“(RJR Nabisco) were not productive mainly because they did not provide any pleasure to the smoker. The consumption of nicotine when compared with regular cigarettes very low so they didn’t feel satisfaction,” said Mr Durante.

Shortly afterwards he was employed as the Chief Executive Officer in March 2011, Mr Durante set up Nicoventures, a BAT unit dedicated to cigarette alternatives.

BAT’s competitor Imperial Tobacco has an undisclosed position in an e-cigarette company and Japan Tobacco International has a commercial arrangement with a company that produces nicotine vaporisers.

British American tobacco provides a leading position in over 50 countries and operations in about 180 countries. The top international cigarette brands of the company are Dunhill, Lucky Strike, Kent and Pall Mall. But, British American Tobacco is not the owner of all of these brands in every nation they are sold.

 

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