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Exec: British American Tobacco bets on vaping

By Sam Chambers, Bloomberg
Published: December 5, 2016, 6:02am

Trailing Philip Morris International Inc. in the contest to move smoking alternatives beyond e-cigarettes is just fine with British American Tobacco.

According to Kingsley Wheaton, head of BAT’s next-generation products, longer-established electronic smokes hold more promise than the heat-not-burn technology pioneered by its main rival. The high acceptance of Philip Morris’s iQOS tobacco device in its debut market of Japan won’t be easy to replicate elsewhere, he said in an interview Thursday.

“Are we behind Philip Morris on the tobacco-heating journey? The answer is yes,” Wheaton said. “But we have a different take. Vapor is going to be a bigger category worldwide.”

More than 1 million smokers have switched to Philip Morris’ iQOS since it first went on sale in 2014. Demand has proven strongest so far in Japan, where Philip Morris has had a two-year head start on BAT. While analysts at Exane BNP Paribas and Wells Fargo say the Marlboro maker has invented the most promising smoking substitute, BAT contends that heat-not-burn will only become dominant in a few countries, and that Japan alone may represent as much as half of the potential demand.

For now, Wheaton said the bulk of BAT’s efforts will remain in the vapor market.

In the second half of next year, BAT will start selling a new product called Vype Raptor. The device gets nicotine into the bloodstream faster and more closely mimics the sensation of smoking because the vapor particles are larger, according to BAT.

The company is also opening a store in a fashionable neighborhood of Milan as well as pop-up shops in London to sell Vype-branded vapor products. And it will introduce a 17.99-pound ($23) brightly colored plastic device called Pebble that delivers nicotine infused with flavors such as wild berry and smooth vanilla.

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