Most tobacco companies are feeling the squeeze, especially in the UK as prices continue to rise and more people are switching to e cigarettes than ever before. The reduction in tobacco users all over the world are causing massive reductions in sales for tobacco companies.
According to Imperial Tobacco, their decreased number of sales is mostly due to unconducive environments in some of its main market shares such as Russia. Russia is well known for its excessive tobacco smoking population but of late, the market has fallen victim to the numerous smoking bans that limit smoking in certain places across the country. Purchasing and the sale of cigarettes on the street have also been restricted.
Middle Eastern countries have also reduced sales in tobacco owing to the current political instability. According to its trading report it is challenging to get deliveries through to suppliers.
Because of all this upheavel in the tobacco industry, most of the big players are looking at alternative ways to keep their profit margins. Imperial Tobacco in the UK is known one of the most prosperous tobacco companies in the world, ranked as the fourth biggest in its industry.
As a result of less demand in tobacco, and a drop in sales of around 4% annually, Imperial Tobacco has began looking into different markets to replace bolster their bottom line. This has been characterized by the procurement of Reynolds E Cigarettes. Reynolds is a strong e cigarette producing company that is based in Ashton and has one of the biggest brands of e cigs in the United States.
Electronic cigarette brands have recorded tremendous profits and sales increases in the last three to four years. Imperial Tobacco have made no secret about getting into this new market and making a shift towards another type of cigarette.
The first electronic cigarette released by the company was called Puritan having been manufactured by Fontem Ventures a subsidiary of the firm. It was released in Britain early in the year and is usually retailed in chemists. The firm is also the owner of the electronic cigarette brand known as Blu. Other brands under its management include Maverick and Winston.
The takeover comes with a lot of questions on change to expect as well as the future of the company especially by its shareholders. This is the reason for Reynold’s Stock Market announcement to keep the shareholders informed on the intended venture in to new markets.
After completion of a successful takeover, Imperial Tobacco could become the third major tobacco company in the United States, as this new deal alone is estimated to be worth 4.3 billion Euros.
Despite the sale decrease, the company’s shares in the last year managed to rise by 15 percent. According to the firm’s chief executive, Alison Cooper, Imperial Tobacco may face challenges in a few of their markets but company remains stable because of their position in the global market. With the takeovers it intends to make, it will make considerably higher profits and broaden their market, strengthening their competitiveness.
However, with the exploration of other firms into the electronic cigarette market, a lot of activists in health have been trying to push for more stringent controls of e cigarettes similar to those of traditional tobacco.
Author: Kevin Ewbank
Avid vaper & co-founder of SmokShop