The impending buyout of Reynolds American by British American Tobacco has prompted speculation that vaping may become even more popular, due to heavy investment in the popular market.
In the last ten years, the popularity of vaping and e-cigarettes have had the chance to deliver the final blow to Big Tobacco as cigarette sales continually decrease. Today, however, several traditional cigarette businesses appear poised to make a comeback with their own vaping products.
London-based British American Tobacco (BAT) has pushed for a takeover of Reynolds American, potentially creating one of the larger mergers in history. The reason behind this move is unclear at first if taking account of figures alone – paying $47 billion for a company that would only save $400 million a year – but when factoring in the benefit of the existing infrastructure for distribution in the US provided by Reynolds American, it begins to make a lot more sense.
Both companies have been trialling e-cigarettes for years, but only in the last decade have they started to see the market potential. Unlike many of the smaller start-ups producing e-cigarettes, they have billions of dollars invested in first-class research laboratories and enough capital to market their products effectively.
The increasing buzz around e-cigs
BAT and Reynolds American aren’t the only big companies getting in on the game, either, with Philip Morris and Imperial Brands also making headway into the e-cig boom. But interestingly, not all companies are using the same approach.
While BAT favour vaping using e-liquid, both Reynolds American and Philip Morris are pushing towards ‘heat not burn’ devices that use actual tobacco, similar to the devices used for herbal purposes over the past few decades.
Despite already having a 35% market share in the vaping market, the purchase of Reynolds American means that BAT will have a strong arm in both approaches, giving them a great ability to weather the storm and push their business in whichever direction makes the most sense.
Shifting attitudes and approaches
Big Tobacco managed to keep the proverbial wolves at bay for many years, but it became clear that sooner or later another plan would be needed. Governments began to sponsor anti-smoking groups, as well as increasing tax on tobacco as a measure to force smokers to give up.
If the merger does go through, ultimately it will aid the e-cigarette movement across the world. Big Tobacco is known for its lobbying abilities throughout political spheres, so will add a hefty clout to the vaping market, even if it’s at the expense of their own traditional product.
This perhaps makes a distinct statement that Big Tobacco never really cared about keeping people smoking traditional cigarettes – they simply want to go where the money is.