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Big Tobacco Bets on E-cigarette Future - FT

Big Tobacco Bets on E-cigarette Future - FT

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Published by: Matt Zukowski on Aug 14, 2012
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08/14/2012

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 August 12, 2012 4:45 pm
Big Tobacco bets on e-cigarette future
By Mark Wembridge and Christopher Thompson
 When a passenger on an intercity Megabus coachservice reported seeing smoke emanating from acarry-on bag last month, British authorities feareda terrorist attack, and closed down a bigmotorway. What armed police, fire crews and bomb disposalexperts discovered was altogether less sinister:the “smoke” was in fact vapour from an electronic cigarette device.E-cigarettes contain nicotine-infused water that is inhaled asa vapour and can be legally consumed indoors, not tomention on intercity coaches.Some contain a red glowing end to resemble the burning tip of a cigarette, and areavailable with various tobacco-like flavours such as menthol.They retail from about £20 for a “starter kit” containing a battery powered tube and vapour charges that contain several hundred doses. As conventional smokers are encouraged to extinguish their butts through a mix of increasing state regulation of public consumption and high taxes, Big Tobacco and a host of independent companies – such as Skycig, Vapestick, Vapouriz, Ploom and Steamlite – are betting that smokeless cigarettes could be a future substitute.E-cigarettes have been on the market for several years, but few solid statistics areavailable on their uptake among the UK’s 10m smokers.Estimates for the size of the UK’s e-cigarette market range from £10m up to £70m. According to figures from some of the multitude of e-cigarette makers, about 2m Britonshave a tried the devices and 650,000 have become regular users.
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However, that number could grow as greater regulation looms, such as plain packagingproposals that would remove brands from cigarette packs.Last year British American Tobacco established Nicoventures, a company division devotedto cigarette alternatives. It plans to launch a nicotine inhaler by the end of 2014.“With both increased regulation and increased demonisation of smoking, you need to givesmokers safer choices,” says David O’Reilly, BAT’s group scientific director.“The vision is for another product which can compete with enjoyment of smokingcigarettes, and e-cigarettes are closest thing on market that meets those needs.” A private company called Kind Consumer, backed by BAT and advised by Sir TerrLeahy, is seeking to raise £10m from private investors for research and development of acigarette substitute to launch around 2015.“Our aim is to give addicted smokers craving nicotine an alternative option to a cigarettes,”said Paul Triniman, Kind Comsumer’s chief executive. “If you can allow smokers to get thenicotine hit without tar, there would be a significant improvement on a harm-reduction basis whereby they can satisfy their craving without carcinogens and toxins.”E-cigarettes are almost entirely unregulated in the UK, are not subject to uniformstandards, and have been outlawed in countries including Australia, New Zealand, Braziland Canada.That has not stopped companies such as FTSE 100 company Imperial Tobacco taking anundisclosed stake in an e-cigarette company, or Japan Tobacco International signing anagreement to commercialise the nicotine “vaporisers” made by San Francisco-based Ploomabroad.“E-cigarettes are growing at a phenomenal rate because of cigarette restrictions .
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. we’ve been monitoring that and we want to build our knowledge and understanding of theindustry,” says Alex Parsons, Imperial’s director of communications.Much of the UK’s e-cigarette market is geared towards smokers trying to give up. Thenicotine replacement therapy industry – which includes nicotine replacement chewing gumand patches – is worth some £150m a year.No e-cigarette has yet gained UK approval as a medicinal nicotine replacement therapy,although the Medicines and Healthcare products Regulatory Agency (MHRA) isinvestigating the devices and is scheduled to report back next year. The US Food and Drug Administration has also examined the product.

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