Difference between revisions of "E-Cigarettes: British American Tobacco"

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  [[Image:Vype 1.jpg|250px|thumb|right| BAT gave away free samples of Vype online]]
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[[British American Tobacco]] (BAT) has been in the [[E-cigarettes|e-cigarette]] business since 2013, initially in the UK, then in the US, with its acquisition of [[RJ Reynolds |R.J. Reynolds]] and its parent company Reynolds American Inc. (RAI). By 2019 its main markets were the United Kingdom (UK), Europe, Canada and the United States (US), with further global expansion underway or planned.  <ref name=titcomb> J. Titcomb, [http://www.telegraph.co.uk/finance/newsbysector/epic/bats/10213091/BAT-plans-to-dominate-e-cigarette-market.html BAT plans to dominate e-cigarette market], ''the Telegraph'', 31 July 2013, accessed September 2019</ref> It was one of the first tobacco companies to enter the e-cigarette market.
 
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[[Image:BAT_Vype_HH.PNG|1000px|thumb|right|Image 1: Vype collaborated with fashion designer Henry Holland on a range of e-cigarettes and accessories<ref> British American Tobacco, [https://www.govype.com/gb/en/house-of-holland Vype x House of Holland], GoVype website, undated, accessed September 2019</ref>]]
British American Tobacco (BAT) was the first tobacco company to launch an e-cigarette in the UK in July 2013, calling it ''Vype'.
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==2012-2014: Acquisitions and Alliances==
The e-cigarette was developed by [[CN Creative]], a start-up company acquired by BAT in December 2012. When the e-cigarette was launched, CN Creative was merged with BAT Research and Development and [[Nicoventures]] set up by BAT in 2011 to develop nicotine replacement therapy products. The merged company continued under the name Nicoventures Holding Ltd.<ref>Companies House, Nicoventures Ltd, latest entry 2 December 2013, via search for Nicoventures Ltd  at [http://wck2.companieshouse.gov.uk// Companies House Webcheck], accessed January 2014</ref><ref>Companies House, Nicoventures Holding Ltd, latest entry 21 January 2014, via search for Nicoventures Holding Ltd at [http://wck2.companieshouse.gov.uk// Companies House Webcheck], accessed January 2014</ref>
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===Planned Licenced Nicotine Products ===
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In 2012, it appeared that BAT intended to submit its e-cigarette Nicodex (or a similar nicotine product Oxette) to the UK Medicines and Healthcare products Regulatory Agency (MHRA) to be classed as a medical product.<ref> C. Thompson, [https://www.ft.com/content/a20af76e-49fb-11e2-8002-00144feab49a BAT aquires e-cigarette start up], ''Financial Times'', 19 December 2012, accessed September 2019</ref> Instead it developed an agreement with a UK company called [[Kind Consumer Limited]] to commercialise their nicotine inhaler, Voke.<ref> O. Gill, [https://www.telegraph.co.uk/business/2019/09/15/voke-nicotine-inhaler-available-prescriptiondespite-health-risks/ Voke nicotine inhaler to be available on prescription], ''The Telegraph'', 15 September 2019, accessed September 2019</ref> While BAT said this was their intention in 2014, it had stated in 2013 that “Alignment of e‑cigarettes to medicines would increase complexity and increase research and development costs, whilst reducing channel access.”<ref> British American Tobacco, Interim Results 2014: Presentation Transcript, July 2014, accessed September 2019</ref><ref name=ARthirteen> British American Tobacco, [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO9DCL3B/$FILE/medMD9HEGPT.pdf?openelement Delivering today. Investing in tomorrow.], BAT Annual Report 2013</ref>  BAT subsequently abandoned this plan and handed back all rights to Kind Consumer in 2019.
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For more information see [[Kind Consumer Limited]] and [[Nicoventures]]
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===Vype===
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The Vype e-cigarette was developed by [[CN Creative]], a British start-up company acquired by BAT in December 2012 for an estimated GB£30-50 million.<ref>British American Tobacco, [https://web.archive.org/web/20190611121111/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DO935CVT British American Tobacco buys UK based e-cigarette technology company], BAT Press Release, 19 December 2012, accessed June 2019</ref><ref>[https://web.archive.org/web/20190611121634/https://www.manchestereveningnews.co.uk/business/business-news/cn-creative-sold-to-british-american-699308 CN Creative sold to British American Tobacco], ''Manchester Evening News'', 19 December 2012, accessed June 2019</ref>
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When the product was launched, CN Creative was merged with BAT Research and Development and [[Nicoventures]], which had been set up by BAT in 2011 to develop nicotine replacement therapy products.
  
 
* See [[Nicoventures]] and [[CN Creative]] for more detail.
 
* See [[Nicoventures]] and [[CN Creative]] for more detail.
  
== Launching Vype Online==
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BAT released Vype in July 2013 in the UK, followed by Germany and France.<ref>[https://web.archive.org/web/20190611082229/https://www.huffpost.com/entry/france-electronic-cigarettes-ban-public_n_3365823 France To Ban Electronic Cigarettes in Public], ''Huffington Post'', last updated 31 July 2013, accessed June 2019</ref> [[Kingsley Wheaton]], BAT’s Director of Corporate Affairs at the time, announced:
 
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<blockquote>
BAT released Vype e-cigarettes in July 2013, first for sale online only. The first roll-out of internet sales was to be in the UK, Germany and France.<ref>Reuters, [http://www.huffingtonpost.com/2013/05/31/france-electronic-cigarettes-ban-public_n_3365823.html France To Ban Electronic Cigarettes in Public], ''Huffington Post''', 31 May 2013, accessed 11 June 2013</ref> BAT intended to become a leader in the e-cigarette market, Kingsley Wheaton, BAT’s director of corporate affairs, said when presenting company’s half year financial results in July 2013:
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"Our declared intent is to be the leading player in [the e-cigarette] business. The market is currently small and fragmented but showing movement, creating a buzz. [...] For us it’s a natural extension of where we are trying to go in harm reduction. We believe it will create profitable growth over time."<ref name=titcomb/>
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</blockquote>
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In the last two months of 2013, BAT spent GB£3.6 million on an advertising campaign for Vype called “Experience the Breakthrough”, involving press, digital and outdoor ad campaigns which aimed to build awareness of Vype as an alternative to smoking tobacco.<ref>[https://web.archive.org/web/20190611082859/https://lbbonline.com/news/vype-e-cigarettes-experience-the-breakthrough/ Multi-million pound campaign by iris London. Vype E-Cigarettes 'Experience the Breakthrough'], LBBOnline.com, 11 November 2013, accessed June 2019</ref> BAT claimed that it used “responsible” TV and cinema advertising “aimed solely at adult smokers and users of other [medicinal] nicotine products”. <ref name=ARfourteen> British American Tobacco, Delivering Today, Investing in Tomorrow: BAT Annual Report 2014</ref><ref name=rossel> S. Rossel, [http://www.tobaccoreporter.com/2016/02/fun-in-harm-out/ Fun in harm out], ''Tobacco Reporter'', 1 February 2016, accessed September 2019</ref> Nigel Hardy, Head of UK and Ireland for BAT’s [[Nicoventures]], said:
 
<blockquote>
 
<blockquote>
"Our declared intent is to be the leading player in [the e-cigarette] business. The market is currently small and fragmented but showing movement, creating a buzz. [...] For us it’s a natural extension of where we are trying to go in harm reduction. We believe it will create profitable growth over time."<ref> J. Titcomb, [http://www.telegraph.co.uk/finance/newsbysector/epic/bats/10213091/BAT-plans-to-dominate-e-cigarette-market.html  BAT plans to dominate e-cigarette market], the Telegraph, 31 July 2013, accessed December 2013</ref>
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“In Vype we are creating a modern brand that we need to communicate in a way that really appeals to smokers. We’re not focusing on the product, we’re building a brand which will be here for the long term.<ref> S. Vizard, [https://web.archive.org/web/20190919084259/https://www.marketingweek.com/bat-looks-to-create-modern-brand-with-first-e-cig-ads/ BAT looks to create ‘modern brand’ with first e-cig ads], ''Marketing Week'', 17 February 2014, accessed September 2019</ref>
 
</blockquote>
 
</blockquote>
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[[Image:BAT_Vuse_recall.png|250px|thumb|right| Image 2: Vuse Vibe.<ref> R. J. Reynolds, [https://www.fda.gov/safety/recalls-market-withdrawals-safety-alerts/urgent-voluntary-product-recall-vuse-vibe-power-units Urgent: Voluntary Product Recall of Vuse Vibe Power Units], Company Statement on FDA website, April 2018, accessed July 2019</ref>]]
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In 2016, the UK introduced [https://www.asa.org.uk/type/non_broadcast/code_section/22.html| new restrictions on e-cigarette advertising, including TV and cinema].
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* For more on BAT’s advertising practices see [[E-cigarettes: Marketing]]
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From 2014, Vype was sold at several national retail chains in the UK, including supermarkets, convenience stores and petrol stations.<ref name = grocer> R. Hegarty, [https://web.archive.org/web/20190611083045/https://www.thegrocer.co.uk/fmcg/e-cigarette-vype-from-nicoventures-secures-raft-of-listings/351328.article E-cigarette Vype from Nicoventures secures raft of listings], ''The Grocer'', 10 November 2013, accessed June 2019</ref> LloydsPharmacy began selling Vype in January 2014.<ref name = PJ> [https://web.archive.org/web/20190822142259/https://www.pharmaceutical-journal.com/news-and-analysis/boots-and-lloydspharmacy-join-the-vaping-fold-by-selling-e-cigarettes/11134333.article?firstPass=false Boots and Lloydspharmacy join the vaping fold by selling e-cigarettes], ''The Royal Pharmaceutical Journal'', News & Analysis, 13 February 2014, accessed June 2019</ref>
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* See [[E-cigarettes: At The Pharmacy]]
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===R. J. Reynolds Vapour Company and Vuse===
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In July 2014, BAT formed a “strategic partnership” with [[RJ Reynolds|Reynolds American Incorporated (RAI) in order to commercialise each other’s e-cigarette and [[Heated Tobacco Products | heated tobacco products]] (HTPs).<ref name=surgeon> US Department of Health and Human Services, [https://www.cdc.gov/tobacco/data_statistics/sgr/e-cigarettes/pdfs/2016_SGR_App_4-1_508.pdf E-Cigarette Use Among Youth and Young Adults: A Report of the Surgeon General. Appendix 4.1: Major E-Cigarette Manufacturers], Centers for Disease Control and Prevention, 2016</ref>
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When BAT bought RAI in 2017<ref> British American Tobacco, [https://web.archive.org/web/20190702154045/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOAPKCXS BAT Completes Acquisition of Reynolds], BAT press release, 25 July 2017, accessed June 2019</ref> it acquired R. J. Reynolds Vapour Company (RJRVC, a subsidiary of RAI) which had launched Vuse e-cigarettes in 2013. By 2015, Vuse was the leading e-cigarette brand in the US although it was overtaken by Juul in 2017 (see below).<ref name=surgeon/><ref> K. Arcieri, [https://web.archive.org/web/20190805161119/https://www.bizjournals.com/triad/news/2016/11/11/r-j-reynolds-expands-distribution-of-next.html R.J. Reynolds expands distribution of next generation Vuse product to 25K stores], ''Triad Business Journal'', 11 November 2016, accessed July 2019</ref>
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==2015-2019: Acquired More Independent Companies==
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===CHIC in Poland===
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In December 2015, BAT bought CHIC, a Polish e-cigarette business with around 65% of the Polish market.<ref name=ARfifteen> British American Tobacco , [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO9DCL3B/$FILE/medMDA87PVT.pdf?openelement Delivering Today, Investing in Tomorrow], BAT Annual Report 2015</ref><ref name=chicpr> British American Tobacco, [https://web.archive.org/web/20190819143904/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOA2LBUA?opendocument CHIC Group Agreement], BAT Press Release, 22 September 2015, accessed August 2019</ref><ref name=rossel/><ref name=foy> H. Foy, [https://www.ft.com/content/12268374-975f-11e6-a1dc-bdf38d484582 Polish arm gives BAT firepower to dominate ecigarettes industry], ''Financial Times'', 1 November 2016, accessed August 2019</ref> Although the amount paid was not disclosed, BAT’s 2015 annual report gave a valuation of GB£82 million.<ref name=ARfifteen/>
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BAT saw Poland as a potential “hub” for entry into other markets in Eastern Europe.<ref name=foy/> Kingsley Wheaton said that the acquisition of CHIC was “strategically significant” and provided “BAT with scale and market reach through Europe’s largest eCigarette [sic] retailing network, as well as important manufacturing and R&D capabilities".<ref name=chicpr/> In 2019, BAT said that it had 636 retail outlets in Poland, a drop from 2015, but considerably more than the numbers in the UK and in Germany which had around 100 each. <ref name=SApr> British American Tobacco, [https://web.archive.org/web/20190816110306/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOBF2J6G Green Light for Twisp Acquisition to Further Drive BAT's Strategic New Category Growth], BAT Press Release, 14 August 2019, accessed August 2019</ref> According to Euromonitor data, in 2018 Poland was by far BAT’s biggest European e-cigarette market by value,  worth over UK£835 million (US$1 billion),  four times the value in the UK (just over UK£200 million, US$250 million).<ref> Euromonitor International, Vapour Products: World, accessed September 2019</ref>
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In October 2019, the Polish GoVype website was under construction, apparently ”due to new legal regulations”.<ref> [https://www.govype.com/pl/ Ze wzgledu na nowe regulacje prawne strona zostala samknieta], GoVype.com Poland, undated, translated from Polish, accessed October 2019</ref> The holding page contained a redirect to the CHIC Group website, eSmokingWorld, where non-BAT brands continued to be listed as part of the portfolio alongside Vype.<ref name=esmoke> [https://www.esmokingworld.com/en/ecigs The widest portfolio of brands of e-cigarettes and liquids], eSmokingWORLD.com (English version), undated, accessed October 2019</ref>
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===Ten Motives in the UK===
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In April 2016, BAT acquired another UK e-cigarette company, Ten Motives, whose existing brands at the time included Cirro and Aspire.<ref name = burrows> R. Burrows, Speech by BAT's Chairman at the BAT Annual General Meeting, 27 April 2016</ref><ref> British American Tobacco, [https://web.archive.org/web/20190819162726/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOA9GK3C  British American Tobacco acquires UK e-cigarette company Ten Motives], BAT Press Release, 29 April 2016, accessed August 2019</ref> Although the amount paid was not disclosed, BAT gave a valuation of GB£56 million in its 2018 annual report. <ref name=AReighteen> British American Tobacco, [https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOAWWGJT/$file/Annual_Report_and_Form_20-F_2018.pdf Transforming Tobacco], BAT Annual Report 2018</ref> This purchase, along with its other e-cigarette brands, helped BAT considerably expand its market share, and retail outlets, in the UK.<ref name=ARfifteen/><ref name=AReighteen/> By 2019, the Ten Motives website was promoting a range of BAT products (including Vype) alongside some independent brands.<ref>[https://web.archive.org/web/20191008100613/https://www.10motives.com/ 10 Motives] website, undated, accessed October 2019</ref> The ‘About Us’ section of the website contained statements about [[Harm Reduction|harm reduction]] but did not state that the company is owned by BAT (although references to Nicoventures and BAT can be found in the policy small print).<ref name=tenmotives>[https://web.archive.org/web/20190819141104/https://www.10motives.com/about-us About Us], Ten Motives website, undated, accessed August 2019</ref><ref> Ten Motives, [https://web.archive.org/web/20191008101213/https://www.10motives.com/cookie-policy Cookie Policy], website, undated, accessed October 2019</ref><ref> Ten Motives, [https://web.archive.org/web/20191008101344/https://www.10motives.com/ie-privacy-policy Privacy Policy], website, undated, accessed October 2019</ref>
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===VIP in the UK===
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In July 2017, BAT acquired e-cigarette company VIP for GB£11.9 million from Must Have Ltd (MHL) GB, which faced closure due to its inability to meet a large tax bill.<ref> D. Casey, [https://web.archive.org/web/20190819115236/https://www.insidermedia.com/insider/northwest/sales-talks-underway-for-vaping-company Sales Talks Underway for Vaping Company], ''Insider Media Limited'', 7 March 2017, accessed August 2019</ref><ref> [https://web.archive.org/web/20190819121500/https://www.insidermedia.com/insider/northwest/lucky-strike-owner-confirms-e-cig-acquisition Lucky Strike Owner Confirms E-Cig Acquisition], ''Insider Media Limited'', 7 March 2017, accessed August 2019</ref> This enabled BAT to further expand its retail network in the UK.<ref>British American Tobacco, [https://web.archive.org/web/20190822150321/https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO6FKEVZ/$FILE/medMDANB9WX.pdf?openelement Deutsche Bank Global Consumer Conference Presentation], 14 June 2017, accessed August 2019</ref> VIP products continued to be sold on its own website, although by 2019 the company was “fully integrated into the British American Tobacco UK business”.<ref> [https://web.archive.org/web/20190819113303/https://www.vipelectroniccigarette.co.uk/about-us About VIP Premium Vaping & E-Cigarette Liquids], VIP website, undated, accessed August 2019</ref>
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At the same time as buying VIP, BAT also acquired another e-cig company owned by MHL, Vapestick Group. This company had ceased trading by November 2018 and was dissolved in July 2019.<ref>[https://web.archive.org/web/20181119000115/https://www.vapestick.co.uk/ Vapestick has now ceased trading and no more orders will be taken], Vapestick.co.uk, archived 19 November 2018, accessed August 2019</ref><ref> The Vapestick Group Limited: Company number 07081021, Companies House record, accessed August 2019</ref><ref>  [https://opencorporates.com/companies/gb/07081021 The Vapestick Group Limited], Open Corporates, accessed August 2019</ref> Although some Vapestick cartridges were still on sale on the VIP website in 2019, by October the device was no longer available.<ref> British American Tobacco, [https://web.archive.org/web/20191010152712/https://www.vipelectroniccigarette.co.uk/tobacco-cartomizers/product/vapestick-xl-max-cartomisers-original-tobacco Vapestick XL/MAX Cartomiser Original Tobacco], VIP website, undated, accessed October 2019</ref>
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===TWISP in South Africa===
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In December 2017, BAT announced its intention to buy the South African e-cigarette company Twisp, which would give the company a new local product and direct access to a large number of retail outlets in the country. The sale was blocked by the South African Competition Commission in 2018 as it was deemed anti-competitive. However in August 2019 BAT was given the go-ahead to complete the purchase.<ref name=approval> [https://web.archive.org/web/20190813195548/https://af.reuters.com/article/investingNews/idAFKCN1V31CK-OZABS British American Tobacco's takeover of Twisp wins S.Africa approval], ''Reuters'', 14 August 2019, accessed August 2019</ref> Wheaton said that Twisp’s retail presence in South Africa was “of strategic importance to our future; allowing us to develop direct-to-consumer relationships, gain substantial consumer insight and the ability to fast pilot and test new product lines from our New Category brands”. <ref name=SApr/>
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For more information see [[South Africa- Country Profile]].
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===High End Smoke in Germany===
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In November 2018, BAT acquired “Germany’s leading vapour retail chain”, Quantus Beteiligungs-und Beratungsgesellschaft mbH.<ref name=AReighteen/>  In 2019 the company’s website, ‘High End Smoke’ sold a range of Vype products and a number of independent brands.<ref> Quantus Beteiligungs-und Beratungsgesellschaft mbH, [https://www.highendsmoke.de/ E-zigaretten] highendsmoke.de, undated, accessed October 2019</ref>
  
==Vype: ''Experience The Breakthrough'' ==
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== Key Brands And Markets==
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From 2014 BAT developed and launched a range of products under the Vype and Vuse brand names. It also discontinued some existing Vuse products after acquiring Reynolds.
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* For a detailed list of products see [[E-Cigarettes: BAT’s Vype and Vuse]]
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===Brand Launches===
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In 2015, BAT launched Vype in France, Germany, Italy, Poland and Colombia (under a subsidiary Vype Colombia) which the company claimed gave them “the largest vapour business in the world outside of the US”.<ref name=ARfifteen/><ref name=ARsixteen> British American Tobacco, [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO9DCL3B/$FILE/medMDAKAJCS.pdf?openelement Delivering Today, Investing in Tomorrow], BAT Annual Report 2016</ref> It subsequently also expanded its e-cigarette business within the US, with Vuse, after the acquisition of RAI in 2017.<ref name=BAThalf> British American Tobacco, [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO72TJQU Half-year Report for the six months to June 2019], 1 August 2019, accessed August 2019</ref><ref name=eurbrief> Euromonitor International,  What’s Happening in Tobacco? Q2 2019, Briefing, 25 July 2019</ref>
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Further launches in 2018 and 2019 expanded BAT’s market reach:
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* December 2018 - Vype launched in New Zealand, after the removal of a ban on e-cigarette sales, with BAT’s marketing approach criticised for contravening tobacco control regulations (see below for details).<ref> Fuseworks Media, [https://web.archive.org/web/20190919160514/http://www.voxy.co.nz/lifestyle/5/328235 Vype e-Pen 3 launches in New Zealand], Voxy.co.nz, 11 December 2018, accessed September 2019</ref><ref> J. Hoek, B. Freeman, [https://tobaccocontrol.bmj.com/content/early/2019/07/16/tobaccocontrol-2019-054967 BAT(NZ) draws on cigarette marketing tactics to launch Vype in New Zealand], ''Tobacco Control'': Industry Watch, 17 July 2019</ref>
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* February 2019 - Vype launched in Mexico.  BAT declared itself the first international company to enter the e-cigarette market in the country.<ref name=BAThalf/>  At the time there was a ban in place on the sale of e-cigarettes in Mexico.<ref name=ggtc> Global Centre for Good Governance in Tobacco Control (GGTC), [https://ggtc.world/2019/06/26/e-cigarette-ban-regulation-global-status-as-of-june-2019/ E-cigarette ban & regulation: Global Status as of June 2019], 26 June 2019, accessed September 2019</ref> However there was also a sizeable ‘grey market’ in the country, with multiple websites and shops selling e-cigarettes.<ref name=fermin> S. Sanchez Fermin, [https://web.archive.org/web/20191014161841/https://expansion.mx/empresas/2019/10/04/cual-sera-el-futuro-para-el-vapeo-y-el-cigarro-electronico Qual sera el future para la industria del vapeo y el cigarro electronico], Expansion/CNN,  4 October 2019, accessed October 2019</ref> In October 2019 Catalina Betancourt, BAT Mexico’s Vice President Institutional Relations (Assuntos Institucionales), argued that regulation of e-cigarettes was a “necessity” in Mexico, rather than an outright ban, in order to protect consumers and prevent them from returning to smoking cigarettes.<ref name=fermin/> At the time BAT was already promoting and selling a range of Vype products on its own Mexican website in direct contravention of the Mexican ban.<ref> British American Tobacco, [https://www.govype.mx GoVype], GoVype Mexican website, undated, accessed October 2019</ref> It also provided a search function for customers to find local retailers of BAT’s e-cigarette products.<ref> British American Tobacco, [https://www.govype.mx/google-maps Mapa de Tiendas (Map of Stores)], GoVype Mexican website, undated, accessed October 2019</ref>
 
   
 
   
The last two months of 2013 saw an advertisement campaign worth £3.6 million running in the UK – ''Experience The Breakthrough'' – involving press, digital and outdoor ad campaigns which aimed to build awareness of Vype as an alternative to smoking tobacco. The campaign was developed by iris worldwide (spelled without caps, slogan: [http://www.iris-worldwide.com| We create Participation Brands]). At the launch Philippe Zell, Global Sales & Marketing Director of Nicoventures Holding, stated that there was still confusion about the category, about how to put the product in the market. Steve Bell, CEO Iris London explained how this element of newness and ambiguity was translated:
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* March 2019 - BAT announced plans to launch its e-cigarettes (and HTPs) in the United Arab Emirates (UAE) after the lifting of a national ban in April.<ref> N. Webster, [https://web.archive.org/web/20190820102904/https://www.thenational.ae/uae/health/big-tobacco-firms-plan-launch-of-vaping-products-in-uae-1.840201 Big tobacco firms plan launch of vaping products in UAE], ''The National UAE'', 22 March 2019, accessed August 2019</ref>
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===Seeking FDA Approval for Vuse===
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The US Food and Drug Administration (FDA) requires companies to submit a Premarket Tobacco Product Application (PMTA) for any new e-cigarettes they wish to sell. As a large number of products were coming onto the market without approval, the FDA stipulated that companies needed to submit applications for those already on the market as of 8 August 2016. As long as a PMTA was submitted within ten months the products could remain on sale and be marketed.<ref> C. Kirkham, [https://web.archive.org/web/20190702171537/https://www.reuters.com/article/us-vaping-regulation-juul-specialreport/special-report-juul-copycats-flood-e-cig-market-despite-fda-rule-idUSKCN1M418W Special Report: Juul copycats flood e-cigarette market, despite FDA rule], ''Reuters'', 14 September 2018, accessed July 2019</ref> BAT did not market Vuse Alto until late 2018, but BAT’s then Chief Executive [[Nicandro Durante]] claimed that it did not need to submit a PMTA for this product as it had been on the market before August 2016, although not widely available. In its 2018 annual report, BAT said that it would in fact be submitting a PMTA for Vuse.<ref name=AReighteen/>  On 11 October 2019, the company announced that RAI had submitted a PMTA for Vuse and claimed to be the first US e-cigarette company to do so.<ref name=fdasub> British American Tobacco, [https://web.archive.org/web/20191014144048/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOBGUJVD British American Tobacco’s U.S. subsidiary submits vapour Premarket Tobacco Application to U.S. FDA for VUSE products], press release, 11 October 2019, accessed October 2019</ref> ''The Wall Street Journal'' reported that the submitted PMTA related to Vuse Solo, and that BAT was planning more submissions.<ref name=maloney> J. Maloney, [https://www.wsj.com/articles/reynolds-files-for-fda-review-of-vuse-e-cigarettes-11570808409 Reynolds files for FDA review of e-cigarettes], ''The Wall Street Journal'', 11 October 2019, accessed October 2019</ref> [[Ricardo Oberlander]], RAI CEO, said in a press release at the time: “We continue to support the FDA’s efforts to create, implement and enforce a science and rule-based regulatory regime to protect the public health”.<ref name=fdasub/>
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===Market Share===
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In 2018, Euromonitor International put BAT’s share of the global e-cigarette market (by value) at 4.4%, slightly down from 4.5% in 2017 (while JUUL Lab’s share had risen significantly from 4% to 18.6% over the same period).<ref name=vapour> Euromonitor International, Vapour Products: World, accessed September 2019</ref> By mid-2019, BAT stated that its e-cigarettes were sold in 20 countries.<ref name=BAThalf/> Europe (particularly the UK, France, Germany and Poland) and the US, are key markets for BAT’s e-cigarettes.<ref name=vapour/> 
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In June 2019, BAT reported that the market share for its flagship brand Vype was 11.6% in the UK and 17.3% in France. <ref name=BAThalf/><ref name=halftrans> British American Tobacco, [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO72TJQU Half-year Report for the six months to June 2019: Presentation Transcript], 01 August 2019, accessed August 2019</ref><ref name=eurbrief/> (Overall the UK e-cigarette market is three times bigger than the French market).<ref name=vapour/>  Vype’s share of the significant Polish market was not specified.<ref name=BAThalf/><ref name=halftrans/>  The Vype ePen3 in particular was credited with bringing in high revenues for the company in Western Europe.<ref name=AReighteen/><ref name=BAThalf/><ref name=halftrans/><ref name=investnineteen> P. Lageweg, “Step-Changing New Categories: A very significant growth opportunity”, British American Tobacco Investor Day Presentation, 14 March 2019</ref><ref name=deutsche> British American Tobacco, [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO6FKEVZ/$FILE/medMDBD3 ALX.pdf?openelement Deutsche Bank Global Consumer Conference Presentation], 12 June 2019, accessed August 2019</ref><ref name=eurbrief> Euromonitor International,  What’s Happening in Tobacco? Q2 2019, Briefing, 25 July 2019</ref> 
 +
 
 +
 
 +
In the UK in 2018, BAT claimed that its e-cigarettes had the biggest share of the market; at 41%, with  [[Imperial Tobacco]] at 16%, [[Japan Tobacco International]] at 10%, [[JUUL Labs]] at 4%, and [[Philip Morris International]] at 3%.<ref name=investnineteen/>  According to Euromonitor international, BAT was facing “growing competition” in the UK, including from JUUL Labs.<ref name=investnineteen/><ref name=emjuly> Euromonitor International, ''Smokeless Tobacco, E-Vapour Products and Heated Tobacco in the United Kingdom'', Country Report, July 2019</ref>  By June 2019, BAT said that its UK market had fallen to 39%.<ref name=BAThalf/> 
 +
 
 +
Bowles reported in July 2018 that e-cigarettes were more significant for BAT than its heated tobacco products in the US: “the market in the US is already very strong in terms of new categories and the leading categories are by far e-cigarettes for sure where our performance is improving”.<ref> British American Tobacco, Interim Results 2018: Presentation Transcript, July 2018, accessed July 2019</ref> In 2019, BAT reported that Vuse had 14% of the US market, with Vuse Alto (along with the relaunched Vibe) driving growth, and “narrowing the gap” with JUUL.<ref name=BAThalf/><ref name=halftrans/><ref name=investnineteen/>
 +
 
 +
==Lobbying on E-cigarettes==
 +
In the US BAT/RAI spent US$2.25 million on lobbying in 2017 and over US$2.6 million 2018.<ref>Open Secrets, [https://www.opensecrets.org/lobby/clientsum.php?id=D000067317&year=2017 Annual Lobbying by British American Tobacco], accessed September 2019</ref> While it is not possible to see what proportion was spent on lobbying specifically on e-cigarettes, in the company’s report to the FDA in July 2019, four bills were listed which related specifically to e-cigarettes or youth vaping.<ref> US Government, [https://soprweb.senate.gov/index.cfm?event=getFilingDetails&filingID=A2394CFC-8B04-48D5-AF72-030D529438C4&filingTypeID=60 Lobbying Report], RAI Lobbying Disclosure, 22 July 2019, accessed September 2019</ref> Between 2017 and 2019 the company had contracts with multiple US lobbyists including Ballard Partners, BGR Group and Guidepost Strategies. <ref>Open Secrets, [https://www.opensecrets.org/lobby/clientlbs.php?id=D000067317&year=2019 Lobbyists representing British American Tobacco], accessed September 2019</ref>
 +
 
 +
In 2018, BAT unsuccessfully lobbied the Government of Western Australia to overturn a ban on e-cigarettes.<ref> British American Tobacco, [http://www.parliament.wa.gov.au/Parliament/commit.nsf/luInquiryPublicSubmissions/A38580C3A53098614825832800084689/$file/cs.ccs.078.181005.sub.British%20American%20Tobacco%20Australia.pdf Submission by British American Tobacco Australia in respect of the Select Committee on Personal Choice and Community Safety - Legislative Council of Western Australia], October 2018, accessed September 2019</ref><ref name=Smyth> J. Smyth, [https://www.ft.com/content/84636130-5442-11e9-91f9-b6515a54c5b1 Tobacco groups seek to overturn Australia’s vaping ban], ''Financial Times'' 1 April 2019, accessed September 2019</ref> In Australia nicotine is classified as a poison and can only be sold with a specific permit.<ref> Australian Government Department of Health, [https://www.health.gov.au/health-topics/smoking-and-tobacco/about-smoking-and-tobacco/smoking-and-tobacco-laws-in-australia#ecigarette-laws  Smoking and Tobacco Laws in Australia: E-Cigarette Laws], undated, accessed October 2019</ref><ref> H. Douglas, W. Hall, C. Gartner, [https://www.racgp.org.au/afp/2015/june/e-cigarettes-and-the-law-in-australia/ E-cigarettes and the law in Australia], ''Australian Family Physician'', 2015, 44(6):415-418</ref> As of 2019, no tobacco company had applied for a permit for their e-cigarettes. In response to federal-level lobbying from tobacco companies and their allies, the Australian government did agree to commission an independent study on e-cigarettes.<ref name=Smyth/><ref> P. Karp, [https://www.theguardian.com/society/2019/sep/08/vaping-debate-rages-in-australia-as-critics-accuse-government-of-smokescreenback-in-australian-spotlight-but-critics-say-a-smokescreen-surrounds-its-dangers Vaping debate rages in Australia as critics accuse government of smokescreen], ''The Guardian'', 7 September 2019, accessed September 2019</ref>
 +
 
 +
In the UK, BAT is a member of the [[UK Vaping Industry Association (UKVIA)]], which has lobbied on behalf of BAT in the UK. This organisation is closely linked to the [[All-Party Parliamentary Group (APPG) for Vaping (E-Cigarettes)| All-Party Parliamentary Group (APPG) for Vaping (previously ‘for E-Cigarettes’) ]] a group which has provided a lobbying platform for BAT in the UK Parliament. BAT was also invited to speak to the UK House of Commons Science and Technology Select Committee which submitted a “controversial” report on e-cigarettes to the government in August 2018.<ref name=knapton>S. Knapton, [https://web.archive.org/web/20190401105608/https://www.telegraph.co.uk/science/2018/08/17/mps-behind-controversial-e-cigarette-criticised-vaping-lobby/ MPs behind controversial e-cigarette report criticised vaping lobby], ''The Telegraph'', 17 August 2018, accessed March 2019</ref><ref>House of Commons Science and Technology Committee, [https://publications.parliament.uk/pa/cm201719/cmselect/cmsctech/505/505.pdf  E-cigarettes, Seventh Report of Session 2017-19], Report of Session, 16 July 2018</ref>
 +
 
 +
In September 2019 BAT (via its subsidiary Imperial Tobacco Canada) helped set up a similar trade organisation in Canada, the Canadian Vaping Trade Association (VITA). Founding members include [[JUUL Labs]] Canada and [[Japan Tobacco International]] (JTI), along with two independent e-cigarette companies. Each have committed to contributing $100,000 dollars annually for three years.<ref name=vita> Canadian Vaping Trade Association (VITA), [https://vitaofcanada.com/ A Non-Profit Trade Association Representing the Canadian Vaping Industry], website, undated, accessed October 2019</ref><ref name=weeks> C. Weeks, [https://web.archive.org/web/20191021150553/https://www.theglobeandmail.com/canada/article-e-cigarette-companies-join-forces-to-lobby-against-proposed-vaping/ E-cigarette companies join forces to lobby against proposed vaping regulations], ''The Globe and Mail'', 14 October 2019, accessed October 2019</ref> The organisation says that it aims “to represent and support the Canadian vaping industry in advocating for harm reduction, youth prevention, evidence-based regulations, best in class quality and safety standards”.<ref name=vita/> However it appears that its main goal is to lobby against proposed legislation.<ref name=weeks/>
 +
 
 +
==Claims of Helping Prevent Youth Vaping ==
 +
===Publicised Own Age Verification Schemes===
 +
Between June and September 2018, the FDA issued warning letters and penalties to retailers found to have sold e-cigarette products to children.<ref> Food and Drug Administration, [https://www.fda.gov/tobacco-products/ctp-newsroom/warning-letters-and-civil-money-penalties-issued-retailers-selling-juul-and-other-e-cigarettes  Warning Letters and Civil Money Penalties Issued to Retailers for Selling JUUL and Other E-Cigarettes to Minors], FDA Press Release, 9 December 2018, accessed August 2019</ref> In September 2018, the FDA also sent a letter to RAI (along with [[JUUL Labs]], [[Altria]], [[Fontem Ventures]] and [[JTI]]), giving the company 60 days to provide a written plan to “address the rate of youth use of Vuse products”.<ref> Food and Drug Administration, [https://www.fda.gov/tobacco-products/rules-regulations-and-guidance/ctp-letters-industry Letters to Manufacturers Regarding Plans to Address Youth Access and Use], FDA website, 12 September 2018, accessed October 2019</ref><ref> Food and Drug Administration, [https://www.fda.gov/media/119670/download Letter to Reynolds American regarding Vuse], 12  September 2018, accessed August 2019</ref> BAT’s Annual Report indicated that RAI submitted its plan to the FDA on 9 November 2018.<ref name=AReighteen/>
 +
 
 +
In March 2019, BAT/RAI announced “additional efforts to prevent potential youth access to tobacco products, including vapor products”, alongside the announcement of the launch of a national television advertisement for Vuse Alto.<ref>[https://www.ispot.tv/ad/IzGM/vuse-alto-innovation ‘Innovation’], Vuse Alto TV Commercial, March 2019, accessed August 2019</ref>  According to the company these efforts included new “purchase limits” on the Vuse website, in addition to an “already robust third-party age verification process.”  It also referred to the “We Card” age verification system, set up by Reynolds in 1996.<ref> R J Reynolds Vapour Company, [https://web.archive.org/web/20190821084543/https://www.multivu.com/players/English/8505951-reynolds-american-transforming-tobacco-vapor-vuse-alto/ R.J. Reynolds Vapor Company Announces Important Steps in its Continued Commitment to Transforming Tobacco], RJVC website, 4 March 2019, accessed August 2019</ref>
 +
 
 +
In September 2019, just after the FDA announced further action against [[JUUL Labs]] and the start of investigations into medical cases and deaths thought to relate to vaping in the US, BAT released a statement “in support of robust quality standards and the need for youth access prevention measures in the United States”.<ref name=PRrobust> British American Tobacco, [https://web.archive.org/web/20190916130217/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOBFXJAS British American Tobacco supports robust product quality standards, U.S. youth access prevention measures and stands ready to make PMTA applications], BAT Press Release, 12 September 2019, accessed October 2019</ref>
 +
Wheaton said that BAT had “stringent measures in place” to protect children, while also claiming that:
 
<blockquote>
 
<blockquote>
"At the heart of this campaign is a product that represents breakthrough and transformation. We have visually represented this as an arresting image to allow adult smokers to decide for themselves what that breakthrough means; and be encouraged to open up and try e-cigarettes. We know from our research that smokers will interpret the breakthrough at a category, brand or personal level. Our aim is for this audience to understand that they can leave ‘old smoking’ behind and Vype is better than anything else on the market."<ref> LBBOnline.com,[http://www.lbbonline.com/news/vype-e-cigarettes-experience-the-breakthrough Multi-million pound campaign by iris London. Vype E-Cigarettes 'Experience the Breakthrough'], 11 November 2013, accessed December 2013</ref>
+
“it is hard to overestimate the role that the responsible marketing of flavours plays in helping adult consumers move on from combustible products to alternative tobacco and nicotine products.” <ref name=PRrobust/> 
 +
</blockquote>
 +
===Used UK Parliamentary Group as Promotional Platform===
 +
In February 2019, BAT used a meeting of the UK [[All-Party Parliamentary Group (APPG) for Vaping (E-Cigarettes) |APPG for Vaping]] to launch their age verification scheme “BAT Verify” and to announce a “whistleblowing hotline” to report retailers selling e-cigarettes to under-18s.<ref>L. Wells, [https://web.archive.org/web/20190401144738/https://www.talkingretail.com/news/industry-news/british-american-tobacco-tackles-youth-vaping-26-02-2019/ British American Tobacco tackles youth vaping], ''Talking Retail'', 26 February 2019, accessed March 2019</ref>
 +
Gemma Webb, BAT’s General Manager UK & Ireland, said that this scheme was “further demonstration of our strong commitment to preventing youth vaping”, adding:
 +
<blockquote>
 +
  “I am pleased we have been given the opportunity to discuss this important issue with Members of Parliament. All e-cigarette producers have a role to play in preventing young people from accessing nicotine containing products and at BAT UK we continue to have strict vetting of our marketing communications and are working closely with retailers to improve the processes and checks around sales.<ref>D. Selwood, [https://web.archive.org/web/20190425080125/https://www.thegrocer.co.uk/tobacco/bat-launches-scheme-to-prevent-young-people-vaping/590719.article BAT launches scheme to help prevent young people vaping], ''The Grocer'', 27 February 2019, accessed April 2019</ref>
 
</blockquote>
 
</blockquote>
  
*For more detail, see: [[E-cigarettes: Marketing]]
+
It is not clear whether this scheme progressed. In August 2019 there was no reference to the scheme on the [https://www.bat.com/|company’s website] or in their latest annual report.<ref name=AReighteen/> The same month the company was criticised for using young people in marketing on social media (see below).
 +
For more information see [[All-Party Parliamentary Group (APPG) for Vaping (E-Cigarettes)]]
  
== High Street Deals ==
+
==Accused of Breaching Advertising Regulations==
 +
In 2019, a complaint was made to the UK Advertising Standards Authority by the Campaign for Tobacco Free Kids and ASH UK regarding the promotion of Vype via social media. It argued that this activity, including the UK pop singer Lily Allen promoting the Vype e-Pen3 via Instagram, appealed directly to young people and therefore breached advertising regulations.<ref> Action on Smoking and Health, [https://web.archive.org/web/20190816150941/https://ash.org.uk/media-and-news/blog/bat-asa-e-cigarettes/ BAT under investigation by the ASA for promoting e-cigs to young people on social media], ASH blog, 29 April 2019, accessed August 2019</ref> As of October 2019 this complaint was still being considered.
  
In November 2013, BAT announced that in 2014 Vype would be sold at several of the main British supermarkets and shops at petrol stations. The deal included Sainsbury’s, Tesco, Shell, McColl’s and Spar.<ref name = grocer>R. Hegarty, [http://www.thegrocer.co.uk/fmcg/e-cigarette-vype-from-nicoventures-secures-raft-of-listings/351328.article E-cigarette Vype from Nicoventures secures raft of listings], ''the Grocer'', 10 November 2013, accessed December 2013</ref> LloydsPharmacy started to sell Vype e-cigarette at its 1,500 branches in January 2014.<ref name = PJ>''PJ Online'', [http://www.pjonline.com/news/boots_and_lloyds_join_the_vaping_fold_by_selling_ecigarettes Boots and Lloydspharmacy join the vaping fold by selling e-cigarettes], Royal Pharmaceutical Society, 13 February 2014, accessed February 2014</ref>  
+
In 2018, after a relaxation of the law to allow the sale of e-cigarettes, BAT began heavily marketing the Vype ePen3 in New Zealand, focussing on young adults via brand alliances, event sponsorship and the use of social media influencers. BAT were criticised for contravening New Zealand’s tobacco control regulations.<ref> J. Hoek, B. Freeman, [https://tobaccocontrol.bmj.com/content/early/2019/07/16/tobaccocontrol-2019-054967 BAT(NZ) draws on cigarette marketing tactics to launch Vype in New Zealand], ''Tobacco Control'': Industry Watch, 17 July 2019</ref>  
  
* See [[E-cigarettes: At The Pharmacy]]
+
Also in 2018, after a complaint by Johnson & Johnson (a multinational company selling nicotine replacement products), the UK [https://www.asa.org.uk/|Advertising Standards Authority] (ASA) ruled that descriptions used on the Vype website were not factual but “promotional” and therefore breached the ASA advertising code for e-cigarettes.  The company was forced to remove phrases such as “Peach Swirl”, “fresh menthol tones and fruity notes” and “delivering rich vapour at the click of a button”, as well as claims that the product could be trusted.<ref> Advertising Standards Authority, [https://web.archive.org/web/20190816151639/https://www.asa.org.uk/rulings/nicoventures-trading-ltd-a18-443559.html ASA Ruling on Nicoventures Trading Ltd T/A Vype], 17 October 2018, accessed August 2019</ref> A previous complaint by Johnson & Johnson in 2017 led to the withdrawal of a music video on the Vype website which used the promotional phrase “Vaping Rocks”.<ref> Advertising Standards Authority, [https://www.asa.org.uk/rulings/nicoventures-trading-ltd-a17-383588.html ASA Ruling on Nicoventures Trading Ltd T/A Vype], 21 June 2017, accessed October 2019</ref> 
 +
==2019: A New E-cigarette Sales Strategy?==
 +
BAT reported that the value of its total global e-cigarette sales increased by 26% in 2018 and 58% in the first half of 2019.<ref name=AReighteen/> In mid-2018, BAT had claimed that revenue from sales of all products in their “Potentially Reduced Risk Products” (PRRP) category, including HTPs, would rise by “30-50%” in the next year.<ref name=BAThalf/><ref name=London>[https://web.archive.org/web/20190805094308/https://londonlovesbusiness.com/british-american-tobacco-reveals-will-see-strong-growth-in-vapes/ British American Tobacco reveals will see strong growth in vapes], ''London Loves Business'', 12 June 2019, accessed August 2019</ref> It appears that BAT’s Next Generation Products (NGP) business was not growing as fast as expected, as a year later it had only achieved growth of 27%. However, it still claimed it was “on track to deliver” 58% by the end of 2019.<ref name=BAThalf/>
 +
 
 +
=== Consolidate Brands===
 +
In August 2019, BAT announced that it aimed to “slim down” the NGP portfolio and “focus on fewer stronger brands”, specifically Vuse and glo (its HTP).<ref name=BAThalf/> [[Jack Bowles]], BAT CEO,  said that this process of consolidation would be completed by the end of 2020 and would see Vype “migrating” to the Vuse brand portfolio.<ref name=halftrans/> A month later BAT announced that it would be cutting 2,300 jobs, including 20% of senior roles, reportedly to help it re-invest in its vaping business.<ref>[https://www.bbc.co.uk/news/business-49673133 UK Tobacco Giant to cut 2,300 jobs], ''BBC'', 12 September 2019, accessed September 2019</ref><ref>[https://www.cityam.com/british-american-tobacco-to-axe-2300-jobs-as-it-focuses-on-vaping/ British American Tobacco to axe 2,300 jobs as it focuses on vaping], ''City A.M.'', 12 September 2019, accessed September 2019</ref>
 +
 
 +
===Developing Consumer Relationships and Collecting Customer Data ===
 +
In July 2019 BAT announced that it would be moving to a “direct-to-consumer model” with Chief Technical Officer, Nick Giannakakis, saying
 +
<blockquote>
 +
"We want the consumer to be part of our community hub, to have an omni-channel experience at every touchpoint with us, and technology is a key enabler for that".<ref> T. Macaulay, [https://web.archive.org/web/20190805095820/https://www.cio.co.uk/cio-interviews/bat-cto-reveals-digital-foundations-of-evolving-business-3699118/ British American CTO Nick Giannakakis reveals the digital foundations of an evolving business], ''CIO UK'', 5 July 2019, accessed August 2019</ref>
 +
</blockquote>
 +
In 2019, the UK Vype website featured descriptions of the full product range, ‘news’ items (including where to vape at [[Motorsport Sponsorship|motorsports events]) and advice on “how to vape”, illustrating the company’s aim of developing a long term relationship with Vype users:<ref name=blog> [https://www.govype.com/uk/blog/ Vaping News and Information: Vype UK], Vype UK website, undated, accessed August 2019</ref>
 +
 
 +
<blockquote>
 +
“Newcomers to vaping are best concentrating on the art of inhaling and exhaling vapour in the correct amounts, getting used to the way their e-cigarette works, and figuring out which e-juices they like the best. There’s plenty of time in the future to explore other styles of vaping, such as stealth and sub ohm, (blowing out clouds of vapour).”<ref> [https://www.govype.com/uk/blog/ How to Vape], Vype UK website, undated, accessed August 2019</ref>
 +
</blockquote>
 +
 
 +
BAT has created a phone app for use with the Vype iSwitch Maxx, which “allows consumers to take control and customise their vaping experience”.<ref name=maxx> British American Tobacco, [https://web.archive.org/web/20190820111735/https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOB7CJSR British American Tobacco unveils new-to-world vaping technology], BAT Press Release, 11 December 2018, accessed August 2019</ref> As of August 2019, the product page for the Maxx did not give any information about this tracking function. On Google Play Store, the app connected to the Vype website Privacy Policy, which did not refer specifically to myVype, or explain how any data collected via the app might be used.<ref> British American Tobacco, [https://www.govype.com/uk/privacy-policy Privacy Policy], Vype website, undated, accessed August 2019</ref> Concerns around the use of personal data have been raised around similar products sold by [[Philip Morris]] (IQOS)<ref>T. Lasseter, D. Wilson, T. Wilson, et al., [https://www.reuters.com/investigates/special-report/tobacco-iqos-device/ Philip Morris device knows a lot about your smoking habit], ''Reuters'', 15 May 2018, accessed September 2019</ref> and [[JUUL Labs]] (C1).<ref> A. Hancock, [https://www.ft.com/content/a66e527a-b505-11e9-bec9-fdcab53d6959 Juul launches ecigarettes that monitor users’ vaping], ''Financial Times'', 4 August 2019, accessed September 2019</ref>
 +
 
 +
===‘Traditional’ Stores and Online Price Promotions===
 +
In 2019, BAT said that the ‘traditional retail’ channel (i.e. supermarkets and convenience stores) was expected to grow, at the expense of “dedicated vape shops”.<ref name=investnineteen/> The company had experimented with a concept store for the Vype Pebble in 2018.<ref name=ARsixteen/><ref> CBA Design, [https://web.archive.org/web/20190807140429/https://www.cba-design.it/en/work/british-american-tobacco-vype Envisioning a new brand experience], CBA website, undated, accessed August 2019</ref> In July 2019, BAT made trademark applications for “Vype Inspiration Store” in the EU and “Vuse Inspiration Store” in the US.<ref> European Union Intellectual Property Office, [https://euipo.europa.eu/eSearch/#details/trademarks/018096561 Vype Inspiration Store], EUIPO application, 16 July 2019</ref><ref> United States Patent and Trademark Office, [http://tsdr.uspto.gov/#caseNumber=88528540&caseType=SERIAL_NO&searchType=statusSearch  Vuse Inspiration Store], USPTO application, 22 July 2019</ref> It is not clear if these stores were intended primarily to sell e-cigarettes, as both trademark applications also covered the sale of tobacco products.
 +
BAT also used a traditional style of price promotion such as 10% coupons for Vype in the UK, and heavily discounted Vuse power packs at US99 cents (usually US$25).<ref> [https://web.archive.org/web/20190924102107/https://ecigarettereviewed.com/vype-coupon/ Vype coupon], ecigarettereviewed.com, undated, accessed September 2019</ref><ref name=investnineteen/><ref name=halftrans/><ref> A. La Vito, [https://web.archive.org/web/20190917093651/https://www.cnbc.com/2019/08/20/juuls-momentum-slips-as-njoy-woos-customers-with-dollar-e-cigarettes.html Juul’s momentum slips as NJOY woos customers with dollar e-cigarettes], ''CNBC'', 20 August 2019, accessed September 2019</ref> It also promoted Vuse Alto with discount coupons inserted in its Camel Crush cigarette packets.<ref name=maloney/>
  
== Voke and eVoke ==
+
[[Image:BAT_nicotineusers_2019.PNG|500px|thumb|right| Image 2: BAT tells investors that nicotine users are a growth market<ref name=investnineteen/>]]
In September 2014, BAT was granted a license by the Medicines and Healthcare products Regulatory Agency (MHRA) for Voke, a nicotine inhaler developed by a company called [[Kind Consumer Limited]],<ref>G. Thesing, [http://www.businessweek.com/news/2014-09-12/bat-to-sell-voke-tobacco-substitute-after-u-dot-k-dot-medical-approval BAT to sell Voke tobacco substitute after UK medical approval], ''Business Week'', 12 September 2014, accessed July 2016</ref> a subsequent license was granted in 2016 for a product called e-voke which is rechargable and uses nicotine cartridges.<ref>D. Deans, [http://www.walesonline.co.uk/news/health/e-cigarettes-ruling-could-pave-10688654 E-cigarettes ruling could pave the way for them to be prescribed by GPs in Wales], ''Wales Online'', 5 January 2016, accessed July 2016</ref> As of June 2016 neither of these products were available for purchase.
+
==An “Additive” Business ==
 +
BAT documents clearly show that profits from e-cigarettes are additional to BAT’s core business and do not simply replace revenue lost from falling sales of cigarettes.<ref name=deutsche/><ref name=BAThalf/><ref name=AReighteen/><ref name=chapman> M. Chapman, [https://web.archive.org/web/20190806091437/https://www.t hisismoney.co.uk/money/markets/article-7267587/How-vaping-REVERSED-fall-nicotine-use-tobacco-giants-cashing-in.html How vaping has REVERSED the fall in nicotine use and tobacco giants are cashing in on the surprising trend], ''Financial Mail on Sunday'', 20 July 2019, accessed August 2019</ref> In 2018, BAT described the e-cigarette part of the business as “additive”,<ref name=analyst> British American Tobacco, [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO6FKEVZ/$FILE/medMDB5MNZA.pdf?openelement Analyst Briefing], 16 October 2018, accessed August 2019</ref> with [[Kingsley Wheaton]], then BAT’s Managing Director Next Generation Products, reporting that in the UK it had become more profitable than its conventional cigarette business.<ref name=wheaton>K. Wheaton. Next Generation Products. BAT Investor Day, September 2018</ref> According to Wheaton, in 2017 e-cigarettes generated a £95 annual margin per vaper, compared to the £78 margin generated by a conventional smoker.<ref name=wheaton/><ref name=capital> British American Tobacco, [https://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO6FKEVZ/$FILE/medMDAZN9CH.pdf?openelement Capital Markets Day presentation], 14 March 2019, accessed August 2019</ref>  
  
== Aquisition of Ten Motives ==
+
BAT data showed an increase in nicotine users from 345 million in 2012 to 362 million in 2017, in its markets outside the US. The figure had been falling steadily from 2007 as people gave up smoking, indicating that e-cigarette products were at least partially responsible for the growth in the number of people in the “nicotine consumer pool” since then.<ref name=capital/><ref name=chapman/>
In 2015, BAT acquired ''Ten Motives'' e-cigarette brand in the UK.<ref name = burrows>R. Burrows, Speech by BAT's Chairman at its Annual General Meeting. 27 April 2016</ref>  
 
  
== Aquisition of CHIC ==
+
The company stated that the “consumer pool”<ref name=investnineteen/> for e-cigarettes doubled between 2014 and 2018, the value of this market increased 2.5 times, and that its revenue from e-cigarettes increased by 30% in 2018 alone.<ref name=investnineteen/> 
In 2015, BAT acquired CHIC, the market leader e-cigarette business in France.<ref name = burrows/>  
+
[[Image:BAT_polyusage_2019.PNG|500px|thumb|right|Image 3: BAT’s aim is “poly usage” <ref name=investnineteen/>]]
  
== glo iFuse ==
+
===“New Entrants” and “Poly Users”===
 +
In March 2019, BAT stated that growth in its NGPs being driven by ''new'' consumers of nicotine products, with 58% of the growth in e-cigarettes attributed to “new entrants” and only 42% to people switching from “combustibles”.<ref name=investnineteen/> BAT’s own research indicates that the majority (65-70%) of smokers continued to smoke as well as vape, using e-cigarettes on “new occasions” where they are not able to smoke cigarettes, for example in the workplace, restaurant or car.<ref name=analyst/><ref name=investnineteen/> According to BAT, this ability to vape where other people are present meant that “moments are being regained through poly usage”.<ref name=investnineteen/>
  
BAT launched glo iFuse, a tobacco '''heat not burn’ product''', in Romania in November 2015.<ref>BAT, [http://www.webcitation.org/6iIwPkTUd E-cigarettes and other Next Generation Products], accessed June 2016</ref><ref name = funinharmout>S. Rossel, [http://www.tobaccoreporter.com/2016/02/fun-in-harm-out/ Fun in harm out], ''Tobacco Reporter'', 1 February 2016, accessed June 2016</ref>  According to an article in the industry magazine, ''Tobacco Reporter'', iGlo was launched in Romania because BAT products were commonly smoked but the vaping market was considered underdeveloped.<ref name = funinharmout/>
+
==Business as Usual?==
 +
Even with the additional profits from e-cigarettes, BAT’s traditional tobacco products remain the key driver for the businessIts 2018 Annual Report states:
 +
<blockquote>
 +
“As we develop new and potentially reduced-risk product categories, our conventional cigarette business remains strong and continues to grow. This enables us to invest in the development of better and more innovative products, while continuing to deliver strong results and dividends to our shareholders.<ref name=AReighteen/>
 +
</blockquote>
  
== Other TobaccoTactic Resources ==
+
In October 2018, [[Ricardo Oberlander]], President and CEO of RAI, said that in the US “the Vapour category is small relative to the tobacco market and is having a minimal impact on cigarette volumes”.<ref name=analyst/>
  
 +
== TobaccoTactics Resources ==
 +
*[[E-Cigarettes: BAT’s Vype and Vuse]]
 
*[[E-cigarettes]]
 
*[[E-cigarettes]]
*[[E-cigarettes: Marketing]]
+
*[[E-Cigarettes: Altria]]
*[[E-cigarettes: At The Pharmacy]]
+
*[[E-Cigarettes: Philip Morris International]]
 +
*[[E-Cigarettes: Japan Tobacco International]]
 +
*[[JUUL Labs]]
 +
*[[Fontem Ventures]]
 
*[[Nicoventures]]  
 
*[[Nicoventures]]  
*[[CN Creative]]
+
*[[Harm Reduction]]
 +
*[[Product Innovation]]
  
 
== Notes ==
 
== Notes ==
 
<references/>
 
<references/>
[[category:Next Generation Products]][[category:Harm Reduction]][[category: E-Cigarettes]][[category:Product Innovation]]
+
[[category:Next Generation Products]][[category:Harm Reduction]][[category: E-Cigarettes]][[category:Product Innovation]][[category:Advertising Strategy]]

Revision as of 16:37, 4 November 2019

British American Tobacco (BAT) has been in the e-cigarette business since 2013, initially in the UK, then in the US, with its acquisition of R.J. Reynolds and its parent company Reynolds American Inc. (RAI). By 2019 its main markets were the United Kingdom (UK), Europe, Canada and the United States (US), with further global expansion underway or planned. [1] It was one of the first tobacco companies to enter the e-cigarette market.

Image 1: Vype collaborated with fashion designer Henry Holland on a range of e-cigarettes and accessories[2]

2012-2014: Acquisitions and Alliances

Planned Licenced Nicotine Products

In 2012, it appeared that BAT intended to submit its e-cigarette Nicodex (or a similar nicotine product Oxette) to the UK Medicines and Healthcare products Regulatory Agency (MHRA) to be classed as a medical product.[3] Instead it developed an agreement with a UK company called Kind Consumer Limited to commercialise their nicotine inhaler, Voke.[4] While BAT said this was their intention in 2014, it had stated in 2013 that “Alignment of e‑cigarettes to medicines would increase complexity and increase research and development costs, whilst reducing channel access.”[5][6] BAT subsequently abandoned this plan and handed back all rights to Kind Consumer in 2019. For more information see Kind Consumer Limited and Nicoventures

Vype

The Vype e-cigarette was developed by CN Creative, a British start-up company acquired by BAT in December 2012 for an estimated GB£30-50 million.[7][8] When the product was launched, CN Creative was merged with BAT Research and Development and Nicoventures, which had been set up by BAT in 2011 to develop nicotine replacement therapy products.

BAT released Vype in July 2013 in the UK, followed by Germany and France.[9] Kingsley Wheaton, BAT’s Director of Corporate Affairs at the time, announced:

"Our declared intent is to be the leading player in [the e-cigarette] business. The market is currently small and fragmented but showing movement, creating a buzz. [...] For us it’s a natural extension of where we are trying to go in harm reduction. We believe it will create profitable growth over time."[1]

In the last two months of 2013, BAT spent GB£3.6 million on an advertising campaign for Vype called “Experience the Breakthrough”, involving press, digital and outdoor ad campaigns which aimed to build awareness of Vype as an alternative to smoking tobacco.[10] BAT claimed that it used “responsible” TV and cinema advertising “aimed solely at adult smokers and users of other [medicinal] nicotine products”. [11][12] Nigel Hardy, Head of UK and Ireland for BAT’s Nicoventures, said:

“In Vype we are creating a modern brand that we need to communicate in a way that really appeals to smokers. We’re not focusing on the product, we’re building a brand which will be here for the long term.”[13]

Image 2: Vuse Vibe.[14]

In 2016, the UK introduced new restrictions on e-cigarette advertising, including TV and cinema.

From 2014, Vype was sold at several national retail chains in the UK, including supermarkets, convenience stores and petrol stations.[15] LloydsPharmacy began selling Vype in January 2014.[16]

R. J. Reynolds Vapour Company and Vuse

In July 2014, BAT formed a “strategic partnership” with [[RJ Reynolds|Reynolds American Incorporated (RAI) in order to commercialise each other’s e-cigarette and heated tobacco products (HTPs).[17]

When BAT bought RAI in 2017[18] it acquired R. J. Reynolds Vapour Company (RJRVC, a subsidiary of RAI) which had launched Vuse e-cigarettes in 2013. By 2015, Vuse was the leading e-cigarette brand in the US although it was overtaken by Juul in 2017 (see below).[17][19]

2015-2019: Acquired More Independent Companies

CHIC in Poland

In December 2015, BAT bought CHIC, a Polish e-cigarette business with around 65% of the Polish market.[20][21][12][22] Although the amount paid was not disclosed, BAT’s 2015 annual report gave a valuation of GB£82 million.[20]

BAT saw Poland as a potential “hub” for entry into other markets in Eastern Europe.[22] Kingsley Wheaton said that the acquisition of CHIC was “strategically significant” and provided “BAT with scale and market reach through Europe’s largest eCigarette [sic] retailing network, as well as important manufacturing and R&D capabilities".[21] In 2019, BAT said that it had 636 retail outlets in Poland, a drop from 2015, but considerably more than the numbers in the UK and in Germany which had around 100 each. [23] According to Euromonitor data, in 2018 Poland was by far BAT’s biggest European e-cigarette market by value, worth over UK£835 million (US$1 billion), four times the value in the UK (just over UK£200 million, US$250 million).[24]

In October 2019, the Polish GoVype website was under construction, apparently ”due to new legal regulations”.[25] The holding page contained a redirect to the CHIC Group website, eSmokingWorld, where non-BAT brands continued to be listed as part of the portfolio alongside Vype.[26]

Ten Motives in the UK

In April 2016, BAT acquired another UK e-cigarette company, Ten Motives, whose existing brands at the time included Cirro and Aspire.[27][28] Although the amount paid was not disclosed, BAT gave a valuation of GB£56 million in its 2018 annual report. [29] This purchase, along with its other e-cigarette brands, helped BAT considerably expand its market share, and retail outlets, in the UK.[20][29] By 2019, the Ten Motives website was promoting a range of BAT products (including Vype) alongside some independent brands.[30] The ‘About Us’ section of the website contained statements about harm reduction but did not state that the company is owned by BAT (although references to Nicoventures and BAT can be found in the policy small print).[31][32][33]

VIP in the UK

In July 2017, BAT acquired e-cigarette company VIP for GB£11.9 million from Must Have Ltd (MHL) GB, which faced closure due to its inability to meet a large tax bill.[34][35] This enabled BAT to further expand its retail network in the UK.[36] VIP products continued to be sold on its own website, although by 2019 the company was “fully integrated into the British American Tobacco UK business”.[37] At the same time as buying VIP, BAT also acquired another e-cig company owned by MHL, Vapestick Group. This company had ceased trading by November 2018 and was dissolved in July 2019.[38][39][40] Although some Vapestick cartridges were still on sale on the VIP website in 2019, by October the device was no longer available.[41]

TWISP in South Africa

In December 2017, BAT announced its intention to buy the South African e-cigarette company Twisp, which would give the company a new local product and direct access to a large number of retail outlets in the country. The sale was blocked by the South African Competition Commission in 2018 as it was deemed anti-competitive. However in August 2019 BAT was given the go-ahead to complete the purchase.[42] Wheaton said that Twisp’s retail presence in South Africa was “of strategic importance to our future; allowing us to develop direct-to-consumer relationships, gain substantial consumer insight and the ability to fast pilot and test new product lines from our New Category brands”. [23] For more information see South Africa- Country Profile.

High End Smoke in Germany

In November 2018, BAT acquired “Germany’s leading vapour retail chain”, Quantus Beteiligungs-und Beratungsgesellschaft mbH.[29] In 2019 the company’s website, ‘High End Smoke’ sold a range of Vype products and a number of independent brands.[43]

Key Brands And Markets

From 2014 BAT developed and launched a range of products under the Vype and Vuse brand names. It also discontinued some existing Vuse products after acquiring Reynolds.

Brand Launches

In 2015, BAT launched Vype in France, Germany, Italy, Poland and Colombia (under a subsidiary Vype Colombia) which the company claimed gave them “the largest vapour business in the world outside of the US”.[20][44] It subsequently also expanded its e-cigarette business within the US, with Vuse, after the acquisition of RAI in 2017.[45][46] Further launches in 2018 and 2019 expanded BAT’s market reach:

  • December 2018 - Vype launched in New Zealand, after the removal of a ban on e-cigarette sales, with BAT’s marketing approach criticised for contravening tobacco control regulations (see below for details).[47][48]
  • February 2019 - Vype launched in Mexico. BAT declared itself the first international company to enter the e-cigarette market in the country.[45] At the time there was a ban in place on the sale of e-cigarettes in Mexico.[49] However there was also a sizeable ‘grey market’ in the country, with multiple websites and shops selling e-cigarettes.[50] In October 2019 Catalina Betancourt, BAT Mexico’s Vice President Institutional Relations (Assuntos Institucionales), argued that regulation of e-cigarettes was a “necessity” in Mexico, rather than an outright ban, in order to protect consumers and prevent them from returning to smoking cigarettes.[50] At the time BAT was already promoting and selling a range of Vype products on its own Mexican website in direct contravention of the Mexican ban.[51] It also provided a search function for customers to find local retailers of BAT’s e-cigarette products.[52]
  • March 2019 - BAT announced plans to launch its e-cigarettes (and HTPs) in the United Arab Emirates (UAE) after the lifting of a national ban in April.[53]

Seeking FDA Approval for Vuse

The US Food and Drug Administration (FDA) requires companies to submit a Premarket Tobacco Product Application (PMTA) for any new e-cigarettes they wish to sell. As a large number of products were coming onto the market without approval, the FDA stipulated that companies needed to submit applications for those already on the market as of 8 August 2016. As long as a PMTA was submitted within ten months the products could remain on sale and be marketed.[54] BAT did not market Vuse Alto until late 2018, but BAT’s then Chief Executive Nicandro Durante claimed that it did not need to submit a PMTA for this product as it had been on the market before August 2016, although not widely available. In its 2018 annual report, BAT said that it would in fact be submitting a PMTA for Vuse.[29] On 11 October 2019, the company announced that RAI had submitted a PMTA for Vuse and claimed to be the first US e-cigarette company to do so.[55] The Wall Street Journal reported that the submitted PMTA related to Vuse Solo, and that BAT was planning more submissions.[56] Ricardo Oberlander, RAI CEO, said in a press release at the time: “We continue to support the FDA’s efforts to create, implement and enforce a science and rule-based regulatory regime to protect the public health”.[55]

Market Share

In 2018, Euromonitor International put BAT’s share of the global e-cigarette market (by value) at 4.4%, slightly down from 4.5% in 2017 (while JUUL Lab’s share had risen significantly from 4% to 18.6% over the same period).[57] By mid-2019, BAT stated that its e-cigarettes were sold in 20 countries.[45] Europe (particularly the UK, France, Germany and Poland) and the US, are key markets for BAT’s e-cigarettes.[57]

In June 2019, BAT reported that the market share for its flagship brand Vype was 11.6% in the UK and 17.3% in France. [45][58][46] (Overall the UK e-cigarette market is three times bigger than the French market).[57] Vype’s share of the significant Polish market was not specified.[45][58] The Vype ePen3 in particular was credited with bringing in high revenues for the company in Western Europe.[29][45][58][59][60][46]


In the UK in 2018, BAT claimed that its e-cigarettes had the biggest share of the market; at 41%, with Imperial Tobacco at 16%, Japan Tobacco International at 10%, JUUL Labs at 4%, and Philip Morris International at 3%.[59] According to Euromonitor international, BAT was facing “growing competition” in the UK, including from JUUL Labs.[59][61] By June 2019, BAT said that its UK market had fallen to 39%.[45]

Bowles reported in July 2018 that e-cigarettes were more significant for BAT than its heated tobacco products in the US: “the market in the US is already very strong in terms of new categories and the leading categories are by far e-cigarettes for sure where our performance is improving”.[62] In 2019, BAT reported that Vuse had 14% of the US market, with Vuse Alto (along with the relaunched Vibe) driving growth, and “narrowing the gap” with JUUL.[45][58][59]

Lobbying on E-cigarettes

In the US BAT/RAI spent US$2.25 million on lobbying in 2017 and over US$2.6 million 2018.[63] While it is not possible to see what proportion was spent on lobbying specifically on e-cigarettes, in the company’s report to the FDA in July 2019, four bills were listed which related specifically to e-cigarettes or youth vaping.[64] Between 2017 and 2019 the company had contracts with multiple US lobbyists including Ballard Partners, BGR Group and Guidepost Strategies. [65]

In 2018, BAT unsuccessfully lobbied the Government of Western Australia to overturn a ban on e-cigarettes.[66][67] In Australia nicotine is classified as a poison and can only be sold with a specific permit.[68][69] As of 2019, no tobacco company had applied for a permit for their e-cigarettes. In response to federal-level lobbying from tobacco companies and their allies, the Australian government did agree to commission an independent study on e-cigarettes.[67][70]

In the UK, BAT is a member of the UK Vaping Industry Association (UKVIA), which has lobbied on behalf of BAT in the UK. This organisation is closely linked to the All-Party Parliamentary Group (APPG) for Vaping (previously ‘for E-Cigarettes’) a group which has provided a lobbying platform for BAT in the UK Parliament. BAT was also invited to speak to the UK House of Commons Science and Technology Select Committee which submitted a “controversial” report on e-cigarettes to the government in August 2018.[71][72]

In September 2019 BAT (via its subsidiary Imperial Tobacco Canada) helped set up a similar trade organisation in Canada, the Canadian Vaping Trade Association (VITA). Founding members include JUUL Labs Canada and Japan Tobacco International (JTI), along with two independent e-cigarette companies. Each have committed to contributing $100,000 dollars annually for three years.[73][74] The organisation says that it aims “to represent and support the Canadian vaping industry in advocating for harm reduction, youth prevention, evidence-based regulations, best in class quality and safety standards”.[73] However it appears that its main goal is to lobby against proposed legislation.[74]

Claims of Helping Prevent Youth Vaping

Publicised Own Age Verification Schemes

Between June and September 2018, the FDA issued warning letters and penalties to retailers found to have sold e-cigarette products to children.[75] In September 2018, the FDA also sent a letter to RAI (along with JUUL Labs, Altria, Fontem Ventures and JTI), giving the company 60 days to provide a written plan to “address the rate of youth use of Vuse products”.[76][77] BAT’s Annual Report indicated that RAI submitted its plan to the FDA on 9 November 2018.[29]

In March 2019, BAT/RAI announced “additional efforts to prevent potential youth access to tobacco products, including vapor products”, alongside the announcement of the launch of a national television advertisement for Vuse Alto.[78] According to the company these efforts included new “purchase limits” on the Vuse website, in addition to an “already robust third-party age verification process.” It also referred to the “We Card” age verification system, set up by Reynolds in 1996.[79]

In September 2019, just after the FDA announced further action against JUUL Labs and the start of investigations into medical cases and deaths thought to relate to vaping in the US, BAT released a statement “in support of robust quality standards and the need for youth access prevention measures in the United States”.[80] Wheaton said that BAT had “stringent measures in place” to protect children, while also claiming that:

“it is hard to overestimate the role that the responsible marketing of flavours plays in helping adult consumers move on from combustible products to alternative tobacco and nicotine products.” [80]

Used UK Parliamentary Group as Promotional Platform

In February 2019, BAT used a meeting of the UK APPG for Vaping to launch their age verification scheme “BAT Verify” and to announce a “whistleblowing hotline” to report retailers selling e-cigarettes to under-18s.[81] Gemma Webb, BAT’s General Manager UK & Ireland, said that this scheme was “further demonstration of our strong commitment to preventing youth vaping”, adding:

“I am pleased we have been given the opportunity to discuss this important issue with Members of Parliament. All e-cigarette producers have a role to play in preventing young people from accessing nicotine containing products and at BAT UK we continue to have strict vetting of our marketing communications and are working closely with retailers to improve the processes and checks around sales.”[82]

It is not clear whether this scheme progressed. In August 2019 there was no reference to the scheme on the website or in their latest annual report.[29] The same month the company was criticised for using young people in marketing on social media (see below). For more information see All-Party Parliamentary Group (APPG) for Vaping (E-Cigarettes)

Accused of Breaching Advertising Regulations

In 2019, a complaint was made to the UK Advertising Standards Authority by the Campaign for Tobacco Free Kids and ASH UK regarding the promotion of Vype via social media. It argued that this activity, including the UK pop singer Lily Allen promoting the Vype e-Pen3 via Instagram, appealed directly to young people and therefore breached advertising regulations.[83] As of October 2019 this complaint was still being considered.

In 2018, after a relaxation of the law to allow the sale of e-cigarettes, BAT began heavily marketing the Vype ePen3 in New Zealand, focussing on young adults via brand alliances, event sponsorship and the use of social media influencers. BAT were criticised for contravening New Zealand’s tobacco control regulations.[84]

Also in 2018, after a complaint by Johnson & Johnson (a multinational company selling nicotine replacement products), the UK Standards Authority (ASA) ruled that descriptions used on the Vype website were not factual but “promotional” and therefore breached the ASA advertising code for e-cigarettes. The company was forced to remove phrases such as “Peach Swirl”, “fresh menthol tones and fruity notes” and “delivering rich vapour at the click of a button”, as well as claims that the product could be trusted.[85] A previous complaint by Johnson & Johnson in 2017 led to the withdrawal of a music video on the Vype website which used the promotional phrase “Vaping Rocks”.[86]

2019: A New E-cigarette Sales Strategy?

BAT reported that the value of its total global e-cigarette sales increased by 26% in 2018 and 58% in the first half of 2019.[29] In mid-2018, BAT had claimed that revenue from sales of all products in their “Potentially Reduced Risk Products” (PRRP) category, including HTPs, would rise by “30-50%” in the next year.[45][87] It appears that BAT’s Next Generation Products (NGP) business was not growing as fast as expected, as a year later it had only achieved growth of 27%. However, it still claimed it was “on track to deliver” 58% by the end of 2019.[45]

Consolidate Brands

In August 2019, BAT announced that it aimed to “slim down” the NGP portfolio and “focus on fewer stronger brands”, specifically Vuse and glo (its HTP).[45] Jack Bowles, BAT CEO, said that this process of consolidation would be completed by the end of 2020 and would see Vype “migrating” to the Vuse brand portfolio.[58] A month later BAT announced that it would be cutting 2,300 jobs, including 20% of senior roles, reportedly to help it re-invest in its vaping business.[88][89]

Developing Consumer Relationships and Collecting Customer Data

In July 2019 BAT announced that it would be moving to a “direct-to-consumer model” with Chief Technical Officer, Nick Giannakakis, saying

"We want the consumer to be part of our community hub, to have an omni-channel experience at every touchpoint with us, and technology is a key enabler for that".[90]

In 2019, the UK Vype website featured descriptions of the full product range, ‘news’ items (including where to vape at [[Motorsport Sponsorship|motorsports events]) and advice on “how to vape”, illustrating the company’s aim of developing a long term relationship with Vype users:[91]

“Newcomers to vaping are best concentrating on the art of inhaling and exhaling vapour in the correct amounts, getting used to the way their e-cigarette works, and figuring out which e-juices they like the best. There’s plenty of time in the future to explore other styles of vaping, such as stealth and sub ohm, (blowing out clouds of vapour).”[92]

BAT has created a phone app for use with the Vype iSwitch Maxx, which “allows consumers to take control and customise their vaping experience”.[93] As of August 2019, the product page for the Maxx did not give any information about this tracking function. On Google Play Store, the app connected to the Vype website Privacy Policy, which did not refer specifically to myVype, or explain how any data collected via the app might be used.[94] Concerns around the use of personal data have been raised around similar products sold by Philip Morris (IQOS)[95] and JUUL Labs (C1).[96]

‘Traditional’ Stores and Online Price Promotions

In 2019, BAT said that the ‘traditional retail’ channel (i.e. supermarkets and convenience stores) was expected to grow, at the expense of “dedicated vape shops”.[59] The company had experimented with a concept store for the Vype Pebble in 2018.[44][97] In July 2019, BAT made trademark applications for “Vype Inspiration Store” in the EU and “Vuse Inspiration Store” in the US.[98][99] It is not clear if these stores were intended primarily to sell e-cigarettes, as both trademark applications also covered the sale of tobacco products. BAT also used a traditional style of price promotion such as 10% coupons for Vype in the UK, and heavily discounted Vuse power packs at US99 cents (usually US$25).[100][59][58][101] It also promoted Vuse Alto with discount coupons inserted in its Camel Crush cigarette packets.[56]

Image 2: BAT tells investors that nicotine users are a growth market[59]

An “Additive” Business

BAT documents clearly show that profits from e-cigarettes are additional to BAT’s core business and do not simply replace revenue lost from falling sales of cigarettes.[60][45][29][102] In 2018, BAT described the e-cigarette part of the business as “additive”,[103] with Kingsley Wheaton, then BAT’s Managing Director Next Generation Products, reporting that in the UK it had become more profitable than its conventional cigarette business.[104] According to Wheaton, in 2017 e-cigarettes generated a £95 annual margin per vaper, compared to the £78 margin generated by a conventional smoker.[104][105]

BAT data showed an increase in nicotine users from 345 million in 2012 to 362 million in 2017, in its markets outside the US. The figure had been falling steadily from 2007 as people gave up smoking, indicating that e-cigarette products were at least partially responsible for the growth in the number of people in the “nicotine consumer pool” since then.[105][102]

The company stated that the “consumer pool”[59] for e-cigarettes doubled between 2014 and 2018, the value of this market increased 2.5 times, and that its revenue from e-cigarettes increased by 30% in 2018 alone.[59]

Image 3: BAT’s aim is “poly usage” [59]

“New Entrants” and “Poly Users”

In March 2019, BAT stated that growth in its NGPs being driven by new consumers of nicotine products, with 58% of the growth in e-cigarettes attributed to “new entrants” and only 42% to people switching from “combustibles”.[59] BAT’s own research indicates that the majority (65-70%) of smokers continued to smoke as well as vape, using e-cigarettes on “new occasions” where they are not able to smoke cigarettes, for example in the workplace, restaurant or car.[103][59] According to BAT, this ability to vape where other people are present meant that “moments are being regained through poly usage”.[59]

Business as Usual?

Even with the additional profits from e-cigarettes, BAT’s traditional tobacco products remain the key driver for the business. Its 2018 Annual Report states:

“As we develop new and potentially reduced-risk product categories, our conventional cigarette business remains strong and continues to grow. This enables us to invest in the development of better and more innovative products, while continuing to deliver strong results and dividends to our shareholders.” [29]

In October 2018, Ricardo Oberlander, President and CEO of RAI, said that in the US “the Vapour category is small relative to the tobacco market and is having a minimal impact on cigarette volumes”.[103]

TobaccoTactics Resources

Notes

  1. 1.0 1.1 J. Titcomb, BAT plans to dominate e-cigarette market, the Telegraph, 31 July 2013, accessed September 2019
  2. British American Tobacco, Vype x House of Holland, GoVype website, undated, accessed September 2019
  3. C. Thompson, BAT aquires e-cigarette start up, Financial Times, 19 December 2012, accessed September 2019
  4. O. Gill, Voke nicotine inhaler to be available on prescription, The Telegraph, 15 September 2019, accessed September 2019
  5. British American Tobacco, Interim Results 2014: Presentation Transcript, July 2014, accessed September 2019
  6. British American Tobacco, Delivering today. Investing in tomorrow., BAT Annual Report 2013
  7. British American Tobacco, British American Tobacco buys UK based e-cigarette technology company, BAT Press Release, 19 December 2012, accessed June 2019
  8. CN Creative sold to British American Tobacco, Manchester Evening News, 19 December 2012, accessed June 2019
  9. France To Ban Electronic Cigarettes in Public, Huffington Post, last updated 31 July 2013, accessed June 2019
  10. Multi-million pound campaign by iris London. Vype E-Cigarettes 'Experience the Breakthrough', LBBOnline.com, 11 November 2013, accessed June 2019
  11. British American Tobacco, Delivering Today, Investing in Tomorrow: BAT Annual Report 2014
  12. 12.0 12.1 S. Rossel, Fun in harm out, Tobacco Reporter, 1 February 2016, accessed September 2019
  13. S. Vizard, BAT looks to create ‘modern brand’ with first e-cig ads, Marketing Week, 17 February 2014, accessed September 2019
  14. R. J. Reynolds, Urgent: Voluntary Product Recall of Vuse Vibe Power Units, Company Statement on FDA website, April 2018, accessed July 2019
  15. R. Hegarty, E-cigarette Vype from Nicoventures secures raft of listings, The Grocer, 10 November 2013, accessed June 2019
  16. Boots and Lloydspharmacy join the vaping fold by selling e-cigarettes, The Royal Pharmaceutical Journal, News & Analysis, 13 February 2014, accessed June 2019
  17. 17.0 17.1 US Department of Health and Human Services, E-Cigarette Use Among Youth and Young Adults: A Report of the Surgeon General. Appendix 4.1: Major E-Cigarette Manufacturers, Centers for Disease Control and Prevention, 2016
  18. British American Tobacco, BAT Completes Acquisition of Reynolds, BAT press release, 25 July 2017, accessed June 2019
  19. K. Arcieri, R.J. Reynolds expands distribution of next generation Vuse product to 25K stores, Triad Business Journal, 11 November 2016, accessed July 2019
  20. 20.0 20.1 20.2 20.3 British American Tobacco , Delivering Today, Investing in Tomorrow, BAT Annual Report 2015
  21. 21.0 21.1 British American Tobacco, CHIC Group Agreement, BAT Press Release, 22 September 2015, accessed August 2019
  22. 22.0 22.1 H. Foy, Polish arm gives BAT firepower to dominate ecigarettes industry, Financial Times, 1 November 2016, accessed August 2019
  23. 23.0 23.1 British American Tobacco, Green Light for Twisp Acquisition to Further Drive BAT's Strategic New Category Growth, BAT Press Release, 14 August 2019, accessed August 2019
  24. Euromonitor International, Vapour Products: World, accessed September 2019
  25. Ze wzgledu na nowe regulacje prawne strona zostala samknieta, GoVype.com Poland, undated, translated from Polish, accessed October 2019
  26. The widest portfolio of brands of e-cigarettes and liquids, eSmokingWORLD.com (English version), undated, accessed October 2019
  27. R. Burrows, Speech by BAT's Chairman at the BAT Annual General Meeting, 27 April 2016
  28. British American Tobacco, British American Tobacco acquires UK e-cigarette company Ten Motives, BAT Press Release, 29 April 2016, accessed August 2019
  29. 29.0 29.1 29.2 29.3 29.4 29.5 29.6 29.7 29.8 29.9 British American Tobacco, Transforming Tobacco, BAT Annual Report 2018
  30. 10 Motives website, undated, accessed October 2019
  31. About Us, Ten Motives website, undated, accessed August 2019
  32. Ten Motives, Cookie Policy, website, undated, accessed October 2019
  33. Ten Motives, Privacy Policy, website, undated, accessed October 2019
  34. D. Casey, Sales Talks Underway for Vaping Company, Insider Media Limited, 7 March 2017, accessed August 2019
  35. Lucky Strike Owner Confirms E-Cig Acquisition, Insider Media Limited, 7 March 2017, accessed August 2019
  36. British American Tobacco, Deutsche Bank Global Consumer Conference Presentation, 14 June 2017, accessed August 2019
  37. About VIP Premium Vaping & E-Cigarette Liquids, VIP website, undated, accessed August 2019
  38. Vapestick has now ceased trading and no more orders will be taken, Vapestick.co.uk, archived 19 November 2018, accessed August 2019
  39. The Vapestick Group Limited: Company number 07081021, Companies House record, accessed August 2019
  40. The Vapestick Group Limited, Open Corporates, accessed August 2019
  41. British American Tobacco, Vapestick XL/MAX Cartomiser Original Tobacco, VIP website, undated, accessed October 2019
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