Two leading tobacco makers, Reynolds American Inc. RAI and British American Tobacco plc. (BAT), have joined forces to share their technology know-hows to beef up their unconventional cigarettes. Per the multi-year vapor technology-sharing and licensing agreement, Reynolds American's subsidiary R.J. Reynolds Tobacco Company and Nicoventures Holdings Limited, a subsidiary of British American Tobacco Plc. will develop next-generation vapor products. The companies had signed a term sheet in September, providing a framework for collaboration and mutual cross-licensing of vapor product technologies through 2022.
The agreement also includes exclusive technology cross licenses, technical information sharing and cooperation on scientific assessment related to these products.
Reynolds’ e-cigarette brand Vuse was rolled out across the U.S. in Jun 2014. Vuse is a “digital” cigarette fitted with a proprietary computer chip that modulates its performance. The chip delivers consistent flavor giving Vuse an edge over other e-cigarettes.
Like Reynolds, Philip Morris International PM and Altria Group Inc.MO had also collaborated in Dec 2013 to combine their marketing powers to ramp up the distribution of their unconventional cigarettes. While Altria sells Marlboro exclusively in the U.S., Philip Morris sells them internationally.
E-cigarettes are becoming increasingly popular, especially among youngsters. These battery-powered devices turn a nicotine-based liquid into vapor. They were considered less harmful than tobacco products and therefore the major tobacco players capitalized on them. Most of the tobacco biggies are geared up to capture share in the e-cigarette category.
This technology sharing agreement will enable companies to seek innovation in the vapor category and would offer more smoke-free options to adult tobacco consumers.
Reynolds holds a Zacks Rank #2 (Buy).
A better-ranked stock in the broader consumer staple sector is B&G Foods, Inc. BGS, sporting a Zacks Rank #1 (Strong Buy).
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