It is a sector that has beaten global equities in each of the past 10 years bar one (1999), and by 277 per cent since 1996 in dollar terms. Yet demand is stagnant and shifting to low-margin developing markets. Its products face bans and punitive taxes and its companies litigation. Tobacco is an unlikely success story. Japan Tobacco’s approach to Gallaher may spark wider consolidation aimed at kickstarting further performance.

It is easy to see why deals are on the agenda. Although 12-month forward earnings estimates continue to tick up – by 9 per cent so far in 2006, according to FTSE – the four engines of performance are running out of steam. First, most companies have by now adopted the consumer goods strategy of promoting core brands. Second, bolt-on acquisitions of inefficient businesses are now hard to find and no longer big enough to move the needle. Third, litigation risk has already, as Philip Morris put it recently, “substantially improved”. Fourth, more generous cash payouts – JT excepted – are now reflected in a forward price/earnings ratio, which at 15 times, exceeds the market’s for the first time in a decade.