ET Intelligence Group: India has joined countries such as Mexico, Brazil, Singapore, Uruguay and Cambodia in banning electronic cigarettes. What does it mean to the countrys top cigarettes maker ITC?
The blanket ban on import, manufacture and sale of ecigarettes and other electronic nicotine delivery systems, which are gaining ground with young smokers globally, has nipped ITCs plans of entering the space in the bud, but the company might just be saved from the threat of disruptive competition ruining its cigarette market in the country.
Being smokeless, e-cigarettes are perceived to be less harmful than conventional cigarettes, though the jury is still out on validating this perception.
E-cigarettes and other vaping devices are supposed to help smokers quit smoking in search of healthier alternatives. Their sleek design and convenience also make them popular with the youth.
Global cigarette majors like Philip Morris, Reynolds and Japan Tobacco have established their presence in this market. In the face of product innovations in the tobacco industry, many players feel that conventional cigarettes business alone may not be enough to forge sustainable growth in the long term.
The global e-cigarette market is estimated to grow at a CAGR of 16.6 per cent to reach $27,670 million by 2022.
In India, use of e-cigarettes is still in its infancy. ITC launched e-cigarettes in 2014 under the brand name Eon. But, the company has not committed any major investment towards the product — probably pending clarity of regulation and awaiting social trends to catch on.
Now, the ban prevents the entry of globally popular products such as Philip Morris iQOS vaping device into a market that has worlds second largest number of smokers.
Little wonder then that ITCs stock closed positive despite yet another regulatory measure being introduced to discourage smoking.
It nevertheless remains to be seen how the countrys top tobacco company looks at innovating its conventional cigarettes business besides the strategy of premiumising its portfolio.
Smoking rates are declining globally amidst increased regulatory curbs, forcing tobacco companies to look for alternatives. Incidentally, ITC joined the bandwagon of pharma companies selling nicotine replacement products in 2013 and launched Kwiknic, a chewing gum for those intending to quit smoking. But the companys latest annual report has no mention of this product. Investors would want to know the companys Plan B for innovation in its breadand-butter business.
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