The potential buyout of tobacco giant Reynolds American could open the door for new electronic cigarette technologies and make the new company competitive in the growing market.
British American Tobacco’s (BAT) $47 billion offer to gain full control of Reynolds American will give BAT access to decades of research Reynolds has been pouring cash into since the 1980s. The two companies currently have a technology sharing agreement, but a full acquisition would give BAT access to top scientists and an array of new products, reports The Wall Street Journal.
BAT is currently falling behind its competitors in the alternative cigarette market.
“This isn’t the sole reason to buy Reynolds, but it’s a critical factor,” David Sweanor, a tobacco-control expert, told The Wall Street Journal. “This industry is in the midst of massive transition and companies that get this right are going to succeed while those that don’t will go the way of Kodak.”
Philip Morris International is currently leading the industry on alternative technologies to traditional smoking. Philip Morris wants to introduce its iQOS device, a one of a kind product, into the U.S. following successes this year during test trials in Japan and a number of European cities. Unlike an e-cigarette, which vaporizes nicotine fluid, the iQOS heats tobacco leafs to create a smokeless alternative to burning cigarettes.
Japan is currently the only country where the device is nearly universally accessible and it is already making an impressive dent in tobacco sales. Philip Morris began a national roll out in mid-April and the iQOS device and HeatSticks already account for 4.3 percent of Japan’s overall tobacco sales, cutting into BAT profits.
Reynolds pioneered “heat-not-burn” technology in 1989, however its device proved to be unpopular, even with company executives. By acquiring the technology of Reynolds, BAT could provide added competition within the industry of tobacco alternatives.
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