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BAT Wants E-Cigarettes Go Mainstream And Restructures Company Accordingly

BAT Wants E-Cigarettes Go Mainstream And Restructures Company Accordingly
In a push by the world’s biggest listed tobacco company to help cigarette alternatives go mainstream, British American Tobacco has reorganized its regional management structure to integrate its vaping products with its core business.
While the BAT portfolio that includes Lucky Strike cigarettes, Vype e-cigarettes and the glo tobacco-heating device, the company’s $49 billion takeover of U.S. peer Reynolds American, which added Camel cigarettes and Vuse e-cigarettes to the BAT portfolio and the move, announced on Thursday, follows that acquisition.
“Now that we have built a successful NGP (next generation products) business which is poised for substantial growth, we will be fully integrating NGP to leverage the scale and expertise of the whole group to drive growth in an area that is fast becoming a key part of our mainstream business,” BAT said in a statement.
At the moment, BAT is jostling for position in a growing market against rivals Philip Morris International and Imperial Brands and the company wants to double the number of countries where it sells vaping products this year and again in 2018.
Taking cue from the growing health consciousness reduces traditional smoking, the first of the big tobacco firms to invest in cigarette alternatives a few years back was BAT and Philip Morris.
Some analysts believe that the tobacco-based vaping device will be more popular than traditional e-cigarettes with regular smokers and Philip Morris, maker of Marlboro cigarettes, is ahead of BAT in the market for tobacco-based vaping devices. This has seen the shares of the company reaching a bigger premium compared to its peers.
In a push to move smokers toward potentially less harmful e-cigarettes, the U.S. Food and Drug Administration (FDA) proposed cutting nicotine in cigarettes to “non-addictive” levels last month.
For the newly created role of chief operating officer for the international business, excluding the United States, BAT appointed Asia-Pacific Director Jack Bowles to the position under the management reorganization announced on Thursday.
Shares were up around 1.5 percent at 1322 GMT on Thursday.
While the changes in the longer term will reinforce the importance of cigarette alternatives to tobacco companies, which face slowing sales globally, it could add some uncertainty for BAT in the near term, said Jefferies analyst Owen Bennett.
“Whereas those companies that were better positioned for emerging market growth in the past were favoured, the key differentiator now is likely to be who is positioned best in emerging products, given the recent slowdown in emerging market cigarettes,” the analyst said.
While Japan Tobacco deepens its push into emerging markets, in what will be its second large deal in Southeast Asia this month, the company had announced last week that it would buy the Philippines’ No. 2 cigarette maker Mighty Corp for about $936 million.

Christopher J. Mitchell

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