Big Tobacco is Increasingly Going Brick-and-Mortar

By Saabira Chaudhuri 

On Thursday, British American Tobacco PLC opened a store in Milan to sell its vapor product Vype and educate customers about how to use it.

The strategy mirrors that of rival Philip Morris International Inc., which on Wednesday opened a store in London to launch its heat-not-burn product iQOS and already has stores in markets like Switzerland, Japan and Italy.

Apart from just selling its e-cigarettes, BAT hopes the new store will serve as a marketing tool: helping drive awareness about fledgling products like a new Vype-branded vaping device it launched Thursday, called Pebble.

Shaped like a pebble and designed to fit in the palm of one's hand, the new device has an all-day battery charge and can be used with liquids that have four different nicotine levels and six flavors.

"If we're going to massify the market--inject life into it--we have to come up with these innovative, groundbreaking products," said Kingsley Wheaton, BAT's head of so-called next-generation products.

The London-based company has spent $1 billion on next-generation products over the past five years.

BAT's product launch comes after Philip Morris's chief executive on Wednesday said the tobacco giant could walk away from selling traditional cigarettes altogether someday and is shifting its resources to focus on cigarette alternatives.

BAT CEO Nicandro Durante has been more circumspect, indicating that e-cigarettes and other vaping devices will be slow to catch on, a situation that could mirror the beer industry's decadeslong quest to turn nonalcoholic beer into a mainstream offering.

Mr. Wheaton estimated the next-generation-products market will be worth GBP15 billion ($18.7 billion) in the next five years but said he thinks traditional cigarettes are here to stay for at least the next several decades.

BAT, which is in the midst of buying the rest of Reynolds American Inc., has been working to develop a broad spectrum of cigarette alternatives. Besides the Vype e-cigarette line, BAT is launching a new heat-not-burn product called Glo later this month in Japan. The company also plans to release next year a new product called Vype Raptor, which Mr. Wheaton said uses a different way of atomizing and vaporizing e-liquids than existing products. He declined to elaborate, saying the details are confidential.

The company also has a medicinal license in the U.K. for a nicotine inhaler called Voke, although a year after Britain's drug regulators granted the license, there still is no sign of it being commercially available.

"We're still working through the many manufacturing challenges of Voke," Mr. Wheaton said. "It is a very complex and challenging product to miniaturize at speed."

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

December 01, 2016 07:58 ET (12:58 GMT)

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