Tobacco giants invest billions in products that replace cigarettes

March 25, 2013

Possible ban on electronic cigarettes may become unpleasant surprise for tobacco giants: they are going to invest billions USD to alternative nicotine-containing products. Particularly, British American Tobacco forecasts that in 20 years 40 % of Company earnings fall on them. If Companies will not be able to sell electronic cigarettes, they will create other products that provide nicotine in person's body, for example, spray.

There is no unified regulatory practice in respect of electronic cigarettes. Partly it gas to do with the fact that product appeared on the market not so long ago, in 2004-2005 and there were no made any serious researches of its influence on the body. In majority of countries turnover of this devices is not regulated. In Austria and Denmark, for example, electronic cigarettes are classified as pharmaceutical products that help smoker refuse traditional cigarettes.

Nevertheless there are countries with active bans or restrictions on turnover of electronic cigarettes. Total ban was introduced in Australia, New Zealand, Hong Kong, Singapore, Malaysia, Panama, Lebanon, UAE, Brasilia, Mexico. In USA and some other countries turnover of electronic cigarettes is legal but in regard to their consumption in public places are in force the same bans as for usual cigarettes.

Earlier it was considered that bans and restrictions on turnover of electronic cigarettes are lobbied by tobacco Companies that are afraid of consumers' outflow. However, for the last one and half-two years namely they have declared that they plan to invest considerable funds in manufacturing alternative nicotine-containing products.

In August 2011 JTI declared about creation of joint venture with American manufacturer of electronic cigarettes Ploom. The launch of products of this joint venture hasn't took place as of yet, but consumers will be able to become familiar with new offer in the nearest years.

BAT has created in its' structure new division - Nicoventures that will answer for "alternative" directions. In the framework of this project in the middle of 2012 BAT has acquired research Company Kind Consumer, but in December of the same year - Britain manufacturer of electronic cigarettes CN Creative. According to the words of CEO BAT Nicandro Durante, in 20 years part of profits from selling alternative products will make 40 % in the structure of Company profits.

According to Euromonitor data, in 2011 non-smoking tobacco products, including electronic cigarettes, chewing tobacco, snuff and snus have made 2 % of the price of total world tobacco market that experts have estimated in 664 billions USD.

Growing manufacturing volumes and competition on the market of electronic cigarettes push the prices on such products down, while because of excise tax growth in entire world price of traditional cigarettes is growing steadily. Soon, these two differently directed price graphics will intersect. As the hugest world manufacturers couldn't ignore this tendency.

If ban of electronic cigarettes will become global, tobacco Companies will pay more attention to other devices of nicotine delivery to the body, considers expert. BAT has already declared about introduction on the market at the end of 2014 nicotine-containing spray-inhaler.