BAT Launches a New Tobacco Device in Japan

British American Tobacco will begin selling its e-cigarette product Glo in Japan next month.

Glo, a one-silver device similar to an iPod that doesn't burn to produce secondhand smoke and only heats tobacco. The product will be sold in about 600 stores in the northern Japanese city of Sendai. The starter kit will cost 8,000 yen ($77), about 20 percent cheaper than Philip Morris International's rival iQOS device.

“Japanese consumers are always hungry for innovation, and we want to be number one in the Japanese market,” said Donato Del Vecchio, a spokesman for BAT's next-generation products.

Gadget-loving Japan - the world's fifth-largest tobacco market - is the only country with three non-smoking alternatives on the market. There, BAT is trying to catch up with Japan Tobacco and Marlboro maker Philip Morris.

With smoking in decline around the world, tobacco companies are scrambling to come up with safer products to perpetuate the nicotine market. Philip • Morris has spent a lot of money on such research, and since IQOS was launched nationwide a year ago, it has captured 5% of Japan's cigarette market.

When Japan Tobacco began selling Ploom Tech, a vapor tobacco alternative, in Fukuoka Prefecture in March this year, sales were cut off for about a week in between as demand outstripped supply. The Tokyo-based company said in September that it would expand sales of Ploom Tech to several other major Japanese cities in early 2017 and increase its e-cigarette production capacity tenfold next year.

At a briefing in Tokyo on Tuesday, Roberta Palazzetti, president of BAT Japan, said: “Certainly we are learning from the supply issues that some of our competitors are facing. We don't expect to have capacity issues and we have enough capacity to cover the Japanese market. ”

Japanese tobacco stocks, which are down 12 percent this year, were up 2.2 percentage points in Tuesday trading in Tokyo on Monday, and BAT shares, which closed up 0.6 percent in London trading on Monday, are up 21 percent this year.

Besides relatively affluent consumers, Japan has strict rules on liquids containing nicotine, limiting competition from e-cigarettes. That makes the country an ideal testing ground for heated tobacco devices.

“If iQOS can replicate the firestorm of demand elsewhere in Japan, it will really lock in a first-mover advantage,” said Euromonitor analyst Shane MacGuill. “This could become a major issue for BAT.

A pack of twenty so-called Neostik - recycled tobacco pipes that users insert into Glo devices for use - will retail for ¥420.

Once activated, the Glo device heats the Neostik to about 240 degrees Celsius. They last roughly the same amount of time as a standard cigarette. By avoiding combustion, Glo produces 90% less toxicity than cigarettes, but that doesn't necessarily make them safer, BAT says.

Glo is a new product introduced under Renault USA's board review of BAT's $47 billion takeover bid, in preparation for the development of next-generation smoke devices following an inter-company alliance.

Japan Tobacco is the market leader for cigarettes in its country, with about 60% of the share.

BAT, which says it has a 13% stake in Japan, plans to sell the Glo device across the country and then expand to other markets.

“Our goal is to become the undisputed market leader in the world in the next-generation product category,” Palazzetti said. “We have offered consumers more choice in the past and made it happen. We are now doing the same thing in Japan.