E-cigarettes slow to light up the market: BAT says smokers are bored of rang and that's hit sales
Rothman and Dunhill maker British American Tobacco has warned that sales of electronic cigarettes are in danger of stalling because smokers are bored with what’s being offered.
Chief executive Nicandro Durante said there would be a lag before a raft of innovations, including different flavours and longer battery life, inject fresh interest in what was thought to be a fast growth category.
The tobacco boss used a disappointing half year update in which profit and sales were hit by the strong pound, to admit shortcomings with the alternative to traditional cigarettes.
Bored: British American Tobacco has warned that sales of electronic cigarettes are in danger of stalling because smokers are bored with what's being offered
‘At the moment the products are not delivering what people expect,’ said Durante. ‘It is not a category that has taken the industry by storm. But I’ve invested because I believe it is a category that will be important for the future of the business.’
Traditional cigarettes are being replaced by electronic versions in what has become a £1.2billion industry.
British American Tobacco launched its Vype brand last summer and rival Imperial Tobacco introduced its first e-cigarette in the UK in February.
Brand: British American Tobacco launched a Vype e-cigarette in 2013
Durante said e-cigarettes contribute up to 2 per cent of the total cigarette market in Europe and it would take more than 100 years to take just a fifth of the market.
The firm blamed the strong pound and a slight decline in volume for a fall in pre-tax profit to £2.6billion for the six months to June 6 2014 from £2.9billion.
Total revenues fell to £6.7billion from £7.5billion, while the interim dividend was increased by 6per cent to 47.5p-a-share.
The shares fell 44p to 3523.50p after the firm warned foreign exchange would have a 12 per cent hit on profit and sales for the full year.
BAT was hit hard by a lack of strength in the Brazilian real, and Russian rouble.
Durante said the market would continue to consolidate in the wake of Reynolds America’s acquisition of Lorillard in America. BAT owns a 42 per cent stake in Reynolds. He also said the government would lose £600million in tax if it introduced plain packaging.
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