BAT has made wholesale changes in its regional management structures to ensure that electronic cigarettes are seen as the future for the business. The strategy to drive market-based change was triggered following BAT’s takeover of Reynolds American. The £38-billion purchase meant that BAT acquired Reynolds’ Vuse e-cigarette brand to sit alongside its Vype products and the new heat-not-burn range.
The BAT press release states: “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.”
The move makes sense due to the declining sales of tobacco products in the global market – plus, the legislative framework is more favourable to the new vape products.
Plus, with America’s Food & Drug Administration announcing that it would like to see nicotine levels restricted in traditional tobacco cigarettes, “to non-addictive levels”, with a view to shifting smokers into vaping, the tobacco industry sees investment in its ecig sector as a logical step.
This is by no means a slam-dunk for BAT as the overall vape market has witnessed shrinkage recently. This adds, what has been described as, a level of uncertainty for those wishing to become dominant with their products. A leading market sector business analyst is quoted as saying: “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.”
Another challenge BAT faces is making its products acceptable to current smokers, given that the greatest success they have in switching is with third generation mods and atomisers – not to mention the superior quality of juices found in the independent sector.
As part of this structural overhaul, BAT is aiming to double sales of its vape products during the remainder of 2017 and into 2018. Again, analysts believe this is optimistic and that tobacco product users will prefer the heat-not-burn products due to its similarity to smoking.
It needs to be noted that this doesn’t indicate a change to BATs traditional business practises, as highlighted by the fresh UK investigation into a new bribery scandal.