December 19, 2012 5:51 pm

BAT acquires ecigarette start-up

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British American Tobacco has bought an electronic cigarette company as the world’s second-largest tobacco company by sales ramps up investment in cigarette substitutes.

BAT, which makes the Lucky Strike and Pall Mall brands, announced it had acquired CN Creative, a UK-based start-up which specialises in the development of ecigarettes, for an undisclosed sum.

The company said the purchase formed part of a strategy to invest in technologies that offer smokers less risky alternatives to satisfy their cravings.

“Our core business is and will remain in tobacco, but we’ve always made it clear that our goal is to provide those adult smokers who are seeking safer alternatives to cigarettes with a range of reduced-risk products that will meet their varying needs,” said Kingsley Wheaton, director of corporate and regulatory affairs.

“We believe the innovative ecigarette technologies that CN Creative has been developing over the past few years will help us move closer to achieving this goal.”

CN Creative’s bestseller is Intellicig, which contains a nicotine vaporiser that produces a vapour which is inhaled by the user.

The company also plans to submit its Nicodex ecigarette to the government’s Medicines and Healthcare products Regulatory Agency (MHRA) to be classed as a medicinal product and go on sale in pharmacies.

In September Nicandro Durante, BAT’s cigar-smoking chief executive, said the company was investing more than £100m to develop smoking alternatives as new tobacco bans and higher taxes persuade more smokers to break the habit.

Mr Durante said the size of the market for tobacco alternatives could account for as much as 40 per cent of BAT’s revenues – which were £15bn in 2011 – in 20 years’ time.

BAT’s London-listed rival Imperial Tobacco has an undisclosed stake in an ecigarette company, and Japan Tobacco International has a commercial agreement with a company that makes nicotine “vaporisers”.

The smokeless tobacco market, which also includes chewing tobacco and snuff, was worth $14bn of the $664bn world tobacco market in 2011, according to Euromonitor, with cigarettes accounting for more than 90 per cent of the total.

The move into smoking alternatives comes as the tobacco industry faces increasing regulation in western markets and also emerging economies such as Brazil, South Africa and Uruguay.

In the 1980s, the US conglomerate RJR Nabisco developed one of the first smokeless cigarettes, called Premier, at an estimated cost of more than $300m. But it turned out to be a commercial flop amid concerns about its poor taste and bad smell.

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