Big Tobacco bets a packet on e-cigarettes

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail.Big Tobacco in the US is raising its bet on the growth of CE4 to offset the decline of traditional smoking with Reynolds American, the maker of Camel and Pall Mall launching its first smokeless, battery-powered device.

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Reynolds’ move comes as the industry steps up its investment in alternatives to traditional cigarettes. Marlboro-maker Altria, the biggest US manufacturer with about half of the US’s market share, plans to launch its own ego batteries this year. Lorillard was the first big manufacturer to enter the US electronic market last year with the acquisition of Blu Ecigs for $135m.

Goldman Sachs estimated that the electronic cigarette sector generated sales of about $300m in 2012 while analysts predict that revenues will reach $1bn in the next few years – a fraction of the $90bn US cigarette market but one of the few areas where sales are growing.dsaDE3D

Smoking rates in the US have been falling for years due to higher taxes, smoking bans in public places and health concerns. With traditional cigarette sales dropping an average 3 per cent a year, according to executives and analysts, the industry has come to view e-cigarettes as an opportunity to hold on to customers.ego e cig users inhale a nicotine-laced vapour, replicating the experience of smoking without the smoke and carcinogens that are released through combustion. This means that they can be consumed indoors .

Mr Delen said e-cigarettes were a category where Reynolds hoped “expanding growth [would] mitigate some of the volumetric decline” in traditional smoking.The US market is highly fragmented with about 300 companies selling Chinese-made e-cigarettes to American consumers, mainly over the internet, said Ray Story, chief executive of the Tobacco Vapor Electronic Cigarette Association, an industry group.

He added that it was a simple process for the large manufacturers to enter the market, as “they have distribution points already set up”. Reynolds said that it would market its device, called Vuse, to existing smokers.

Mr Delen said about 30 per cent of US smokers had tried ego cigarette in the past six months, but few had made the permanent switch. Vuse will be sold in a similar way to razors and blades, with disposable cartridges that click on to a long, silver battery-powered unit.

Mr Delen acknowledged that the electronic market faced an uncertain regulatory environment. The US Food and Drug Administration has said it plans to regulate e-cigarettes, but has yet to propose formal rules.