British American Tobacco Ahead in US Vaping Battle
BRITISH American Tobacco (BAT) plans to test its new tobacco heating device in the United States later this year, allowing it to pull ahead of its rivals Philip Morris in the world's biggest vaping market.
The London-based company has confirmed it has received approval from the U.S. Food and Drug Administration to begin selling its Neocore heated-tobacco device, formerly known as Eclipse.
It comes as shares in the second biggest global tobacco company have risen 5 per cent after reporting a better-than-expected first-half profit since its $49.4bn acquisition of cigarette giant Reynolds American in 2017.
BAT inherited Neocore from Reynolds when it acquired the business last year, and since it came with already received FDA approval, it was able to fast-track its application this time around.
Neocore is a carbon-tipped product that looks like a cigarette and is lit with a match, yet doesn’t burn the tobacco. Its rival, Marlboro-makers Philip Morris, is currently leading the tobacco heating market with its IQOS e-cigarette outside the US with nearly 4 million people in 30 markets using it, but it is still waiting on FDA approval.
The smokeless device, which stands for “I quit original smoking”, has cost $3billion to develop by PMI and is a battery-operated device which works by having a “heat stick” inserted inside containing a tobacco plug. The heat produces a vapor rather than smoke.
As well as its iQOS device, PMI has developed its own carbon-tipped product called Teeps, which hasn’t officially launched in any markets besides a consumer trial in the Dominican Republic.
It is now expected BAT’s new product will be on the market in America before PMI’s iQOS.
Chief Executive of British American Tobacco, Nicandro Durante said: "We are delighted to be the first tobacco company to be able to launch a THP (tobacco heating product) proposition in the United States."
He told Reuters news agency the plan was to test the product in a small U.S. area by the end of 2018. The full market launch would probably then occur in 2019, he said.
The test, whose location has yet to be decided, will help the company understand how it should be priced and sold. "It remains to be seen how popular heated tobacco will be in the U.S. but being first ... positions (BAT) well," Jefferies analyst Owen Bennett said.
Around the world, Philip Morris has also made a marketing application to the FDA for iQOS, one that if passed would allow the company to sell it with a claim of reduced risk.
BAT is not seeking a reduced risk application. BAT said another application for its Glo device, filed in February, has passed into scientific review. In addition, the company said it expects a scientific hearing regarding its Camel Snus to take place in September. The maker of Lucky Strike and Dunhill cigarettes said it remains confident of exceeding £1billion of reported revenue from next generation products this year, as new launches should bolster growth in the back half of the year following a slowdown in some key markets such as Japan and Korea.