British American Tobacco will become the first tobacco company to launch an e-cigarette in the UK, as City analysts debate the likely effect of the new category on the UK’s $24bn cigarette industry.
The UK’s largest tobacco company by market capitalisation will start selling “Vype” from a dedicated website on Tuesday. It is also in discussions with retailers about broader distribution.
Until now, the embryonic e-cigarette market has been dominated by small private producers, such as Gamucci and E-lites. But tobacco giants, including BAT and Reynolds American, the maker of Camel, have turned their attention to the product.
E-cigarettes account for just 1 per cent of total tobacco products but their use is growing quickly, particularly as they cost 70 per cent less than normal cigarettes.
The rapid growth of e-cigarettes has split City analysts, with some arguing that they will accelerate declining volumes in Europe, while others argue that they will have little significant effect on the tobacco market.
Analysts at Canaccord downgraded BAT from hold to sell – and Bristol-based rival Imperial Tobacco from buy to hold – earlier this month, citing the threat from e-cigarettes to the companies’ normal business model.
BAT has been more bullish on e-cigarettes than some of its rivals, spending about £40m on Manchester-based e-cigarette company CN Creative last year.
“Ultimately, we’d like to become the leading player in the marketplace,” said Kingsley Wheaton, a board director at BAT.
From 2016, e-cigarettes will be regulated in the UK as a medicinal product, providing a headache for smaller companies unused to operating in heavily regulated industries.