For the last decade or so, cigarette companies such as British American Tobacco (LSE: BATS) (NYSE: BTI.US) have been complacent as the number of cigarettes sold around the world has continued to rise. Indeed, between the year 2000 and 2010 the annual number of cigarettes smoked around the world increased by 3%.
However, as more and more smokers are kicking the habit within developed economies, tobacco companies are having to become more innovative in the way they sell their products.
British American is proving to be more successful at this than its international peers.
Beating the best
In particular, while other tobacco companies are trying to grapple with falling sales by increasing the price of their cigarettes, British American is still reporting rising sales. For example, sales of the company’s ‘global drive’ brands increased 1.9% during the first nine months of this year. Specifically, the company’s Dunhill brand led the field with volumes rising 9.6% during the period. Meanwhile, sales of the company’s Pall Mall brand rose 5.2% for the period.
Elsewhere, the world’s largest and possibly most notorious tobacco company, Philip Morris reported that its volume of cigarettes sold for the nine months ending September fell 3%. However, what was of most concern for the tobacco giant was the fact that sales of its infamous Marlboro brand declined 2.5% during the third quarter alone.
Technology leader
What’s more, British American is leading the field when it comes to development of the tobacco industry’s newest technology — the electronic cigarette. Indeed, British American has already rolled out its electronic cigarette offering here within the UK and plans further roll-outs within Europe and the United States during 2014.
Unfortunately, British American’s only London listed peer, Imperial Tobacco has yet to roll-out its first electronic cigarette product, although the company plans a roll-out next year. Philip Morris is also yet to roll-out an electronic cigarette device.
All in all, this should give British American the ‘first mover’ advantage in the electronic cigarette market, allowing the company to convert customers to its product before its peers get their offering to the market.
That begin said, Imperial Tobacco recently acquired the company that invented the electronic cigarette and this could be a game-changer for the company.
Foolish summary
So overall, international tobacco companies are having to fight to the death to keep their market share and it would appear that British American is winning the war.
