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One Reason Why I Would Buy British American Tobacco plc Today

Today I am looking at why a new study into e-cigarette use bodes well for British American Tobacco’s (LSE: BATS) (NYSE: BTI.US) sales outlook.

Report confirms accelerating e-cig demand

Ina bid to hurdle stalling demand for traditional tobacco products across the globe, British American Tobacco entered the potentially explosive e-cigarette market last summer. Through the launch of its much-publicised Vype product, the company is aiming to cotton onto rocketing adoption rates in coming years as an alternative to the classic cigarette.

And a study released by the Harvard School of Public Health this week underlined the growing popularity of the devices by disclosing that 29 million Europeans have experienced ‘vapour’ technologies on at least one occasion.

Interestingly, the institution also noted that, of the 26,566 people taking part in the study, e-cigarettes were mostly used by british american tobacco / imperial tobaccorespondents aged between 15 and 24. Signs that the technology is most popular with young and affluent consumers — obviously a key target demographic — bodes well for manufacturers such as British American Tobacco.

The study will also come as welcome news to makers of the new technologies, as legislators across the globe consider implementing a variety of stringent rules on the battery-powered devices. From restricting advertising and placing warning labels on packaging through to banning use of the technology in public places, governments around the world are considering placing similar restrictions on e-cigs as those seen on traditional products.

Indeed, Harvard’s report revealed that ‘smokers may be experimenting with e-cigarettes as smoking cessation devices, as those who tried to quit in the past year were twice as likely to have ever used e-cigarettes as smokers who had not tried to quit.’

In addition, Harvard also reported that just 1.1% of those who had used e-cigs had never smoked a conventional cigarette before, blasting claims that vapour technology could attract people to take up their traditional, hazardous counterparts.

E-cigarettes are undoubtedly big business, and analysts at Wells Fargo — who note that sales exceeded $1bn for the first time last year — expect uptake of the new technology to overtake demand for traditional cigarettes within the next ten years.

Given the vast sums British American Tobacco is throwing at developing and promoting these new technologies, I believe that the firm is well placed to enjoy rocketing revenue growth from this exciting new area.

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> Royston does not own shares in British American Tobacco.