British American Tobacco to test tobacco e-cigarette in Japan

By Taiga Uranaka and Martinne Geller

TOKYO/LONDON (Reuters) - British American Tobacco PLC (BAT) plans to test a new tobacco-based cigarette alternative in Japan next month, it said on Tuesday, taking aim at Philip Morris International Inc's popular iQOS and Japan Tobacco Inc's Ploom Tech.

BAT said it plans to launch its new product, called "glo", on Dec. 12 in the northeastern city of Sendai. It will then use learning from that launch to expand the product nationwide.

Glo electronically heats tobacco enough to create an inhalable vapour. That vapour, according to BAT, has about 90 percent less toxicant than smoke. The temperature of glo and the Kent Neostiks that go with it, is about 240 degrees Celsius, whereas combustion in traditional cigarettes takes place at over 800 degrees.

BAT has invested more than $1 billion (0.80 billion pounds) over the past five years in the development, scale up and launch of cigarette alternatives.

It sells Vype e-cigarettes, which use nicotine liquid, in several European markets and is testing iFuse, a liquid-based e-cigarette that also uses tobacco, in Romania.

BAT has also developed a nicotine inhaler called Voke that can be licensed as a medical product in Britain, but it is not yet on the market.

The glo device will cost 8,000 yen ($76.61) with packs of twenty Kent Neostiks, which come in three flavours, costing 420 yen ($4.02).

BAT is also in the process of buying U.S. peer Reynolds American Inc in a $47 billion takeover that would create the world's biggest listed tobacco company.

SMOKELESS WAR

All big tobacco companies are investing in tobacco alternatives, as the cigarette market in most Western countries declines with more people giving up the habit. Some analysts think tobacco-based vapour products will be more successful at attracting cigarette smokers since they use tobacco and might therefore be more satisfying for smokers who cannot quit.

Philip Morris chose Japan as a test market for its "heat not burn" product due in part to regulations around nicotine liquid. Its iQOS, introduced nationwide in Japan in April, has turned out so popular that supplies are short.

"At this moment, we are seeing far greater demand than our expectations and iQOS devices sell out as soon as they hit stores," said a Philip Morris Japan spokeswoman.

Japan Tobacco has also said production of its Ploom Tech has not caught up with demand. It has suspended taking orders on its online store and is limiting supply to stores in the city of Fukuoka, where it is test sold.

(Corrects headline to show product uses tobacco)

(Reporting by Taiga Uranaka and Martinne Geller)