With last week’s $50 billion takeover of Reynolds American, British American Tobacco (BAT) became the world’s largest tobacco company. The takeover also allows BAT to reenter the American markets, having left 12 years ago when Reynolds bought out BAT’s Brown and Williamson in 2004.
The takeover may seem like a last-ditch attempt for big tobacco to save itself, but the industry has actually been faring quite well despite worldwide antismoking campaigns. While the rate of smokers has declined, smoking still remains popular in many parts of the world. This steady popularity, along with population growth puts the global number of smokers at 1.1 billion; this number is roughly the same as it was in 2005. Population growth and price inflation has caused a 29% growth of the tobacco industry from 2005-2015.
Vaping, the “healthier” alternative to smoking was supposed to give the tobacco industry a run for its money. Vaping works by inhaling the vapor produced by propylene glycol or vegetable glycerin liquids; the liquids are heated through the vaporizer’s battery-powered atomizer, which is used to dispel the vapors. The resulting effect is that vapes are marketed as healthy version of smoking: the ability to smoke, without the smell and additives involved with traditional cigarettes.
With the increasing popularity of vaping amongst teens and young adults, it may seem like the big tobacco companies are in a losing industry. The vaping industry as whole is currently valued at $8 billion, and is expected reach a worth of $10 billion by the end of this year. However, instead of seeing vapes a threat, the tobacco industry has seen opportunity. Many firms are beginning to invest money in the research and development of vapes, and vape-like alternatives; i.e. other methods of smoking that do not include the burning of tobacco, but just as addictive.
Since BAT is now the largest tobacco company in the world, they possess all the necessary resources to start a new age of smoking. One smoking alternative that is being researched is a nicotine inhaler, called Voke; Voke would look like an e-cigarette, but be breath-activated instead of using a battery.
It will be necessary for BAT to be on the forefront of innovations in “clean smoking”, such as Voke and vapes. Failure to do so would not only be detrimental to the company, but also to the tobacco industry as a whole.