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Tobacco Giants Push New ‘Alternative Products’

The heat is on for tobacco and cigarette industry leaders to expand their products outside traditional markets in order to meet the evolving demands of a more health-conscious world. As governments push forward anti-smoking campaigns and a growing number of people in the U.S. and even in developing markets quit smoking, many big players have decided to get creative in order to survive.

Working ‘Across the Harm Spectrum’

Cigarette maker British American Tobacco (BTI) plans to quadruple the number of markets in which it offers products such as e-cigarettes and vaping products. The London-based company plans to expand its e-cigarette and vaping offerings from 12 markets to 48 by 2018. After acquiring Reynolds American in a deal worth $49 billion, BAT says the company won’t have the cash to do anything M&A-wise in the upcoming one to three years. Kingsley Wheaton, managing director of BAT’s next-generation products group, says the company is committed to “creating products across the harm spectrum” in order to reduce the public health burden of smoking. Earlier this week, BAT posted stronger-than-expected earnings for full-year 2016, following a previously announced Q4 beat.

Touting ‘No Burn’ Tobacco Products

Philip Morris International Inc. (PM) recently upped its full-year 2017 guidance as it focuses on new IQOS products—heat sticks that “warm” tobacco instead of burning it. The New York City-based international tobacco and cigarette company hopes to leverage pending FDA approval for its “reduced-risk” tobacco products in order to beat out the competition. Philip Morris has touted significant traction in the Japanese market, where its IQOS product now account for over 5% of the market. (See also: Philip Morris Ups FY17 Guidance.)

Earlier this month, the world’s third-largest tobacco company, Japan Tobacco Inc. (JAPAF), raised its dividend despite lowering annual profit forecasts. The company said its new dividend of 140 yen ($1.24) this year, up about 8%, is set to underline a “very strong feeling” on its Ploom Tech tobacco-based e-cigarettes. The product launch, which has been delayed due to supply issues, is set to begin in Tokyo this June, rolling out in other cities in the first half of 2018.

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