The drop in the overall number of smokers in Europe and the US has nudged British American Tobacco (BAT) into planning a rapid expansion of its share of the e-cigarette market. Even though sales declined, BAT, which is the second largest producer of cigarettes in the world, has seen an increase in its sales revenues and profits, attributable to a hike in the prices of cigarettes.
The company posted a 2% increase in the revenues for the first half of the current year as compared to the previous year, to touch £7.57bn ($11.4bn or €8.6bn). Profits rose from £2.8bn to £3bn resulting in an adjusted diluted earnings per share of 109.1p, which was higher by 7%.
The volume of cigarette sales was a matter of concern, dropping by 3.4%. The drop would have been higher had it not been for a stronger performance by the company in the Asia Pacific Markets and a rise in the sales of premium cigarette brands. A weak European market saw the volumes drop to 332 billion cigarettes.
The company was trading marginally higher at the BST in London shortly after the results were declared. The company chairman, Richard Burrows was positive while describing the results. He said that the company had performed well in spite of adverse economic conditions and was confident that the company would continue to witness a growth in earnings over the next year.
BAT’s electronic cigarettes, launched under the brand name Vype, were made available online at the start of this week. The company, which already owns premium cigarette brands like Lucky Strike and Dunhill, could be the first major tobacco company to market these devices in the UK. Burrows confirmed that the company will also introduce its e-cigarettes to other markets across the globe within a short span of time.
E-cigarettes are devices which use the power from a battery to convert a nicotine-containing liquid into a vapour which the user inhales. Smokers looking to quit are increasingly using the device to support their efforts at kicking the tobacco habit. Euromonitor, a Market consultant estimates the market for e-cigarettes to be around $2bn.
Tobacco majors including Reynolds America, Altria and Imperial Tobacco have already invested heavily in e-cigarettes which is a growing niche. A number of analysts predict that the sales of e-cigarettes will overtake that of tobacco cigarettes within a decade.
Analysts estimate that there will be 1.3 million vapers (as smokers of e-cigarettes are called) as compared to 700,000 in 2012. From 2020, the UK will regulate e-cigarettes as non-prescription medicine. BAT revealed that Vype will be available in shops across Britain as early as this September.