BAT acquires Polish e-cig business, whilst partnering with RAI

British American Tobacco, (BAT), has announced that it is purchasing Polish e-cigarette company Chic, whilst partnering with Reynolds American Inc, (RAI), for the purpose of sharing research whilst maintaining its direction in expanding beyond tobacco cigarettes.

Diane Caruana

November 2, 2016

Only five years ago, Milosz Dziurlaj’s small vaping business, Chic, consisted of only nine people selling imported products to Poland’s then small vaping population. Things have grown dramatically as the same company currently employs over 1,200 personnel and has 800 points of sale in Poland. Additionally it boasts a dedicated e-liquids production facility, a modern research and development centre. The company sells leading Polish e-cigarette brands including VOLISH, P1, Provog, Cottien, LiQueen and Aromativ, controlling approximately 70% of Poland’s vaping market. It also distributes famous chinese brands on the Polish market like Joyetech or Kangertech. Hence it comes as no surprise that it would stand out as an attractive asset to BAT, as they aim to take over the vaping world by storm.

Big tobacco companies are taking over the vaping industry

Managing Director of Next Generation Products (NGP) at British American Tobacco, Kingsley Wheaton said: “Acquiring the CHIC Group is strategically significant and makes commercial sense. It provides BAT with scale and market reach through Europe’s largest e-cigarette retailing network, as well as important manufacturing and R&D capabilities. It further demonstrates our commitment to the NGP category.”

While the Polish market is ranking as one of the world’s largest, it is expected to grow by approximately 31% to $572 million this year. This is mainly attributed to the fact that high taxes on regular cigarettes are expected to lead to a decrease in smoking, and consequently a further increase in vaping, according to market research Euromonitor.

Regulating tobacco products is only helping big tobacco (who are well positioned in the vaping market), change direction.. but thrive nevertheless.

On the partnership with Reynolds, BAT said that the technology-sharing term sheet will provide a framework for collaboration and mutual cross-licensing of the parties’ vapour product technologies up to 31 December 2022. The partnership will include joint R&D activities and collaboration on regulatory, scientific and manufacturing issues relating to vapour products.

BAT and Winston-Salem, North Carolina-based Reynolds expect to formalize their agreement and sign on it by the end of this year after agreeing on a term sheet for the partnership. The Chic acquisition on the other hand is subject to approval from Polish antitrust authority, the Office of Competition and Consumer Protection (OCCP), BAT said. Managing Director Kingsley Wheaton concluded “Today, we’ve announced two significant milestones to enhance our next generation product business globally, further enabling us to meet the demands of today’s consumer.”

Big tobacco thriving in spite of regulations

Ventures like these are proof once again that regulating tobacco products is somehow helping the big tobacco companies (who are already well positioned in the vaping market), change direction and focus more one line of products rather than the other, but thrive nevertheless. Additionally in countries such as the US where vaping products are over regulated, the small vaping businesses whose sole source of income comes from selling these less harmful alternatives, are being wiped out… allowing big tobacco to reign once again.