British American Tobacco BAT sets the pace in Potentially Reduced Risk Products

As well as being a traditional tobacco company, BAT is active in the vaping market with a portfolio of what it refers to as Potentially Reduced Risk Products (PRRP) and has 41% value share of vaping sales in the traditional tobacco retail channel.

BAT’s offering includes Cirro1, the UK’s favourite eLiquid, 10Motives, the UK’s bestselling cigalike product2 in retail and Vype. BAT’s latest launch is the Vype ePen 3 device range, including the Vype ePen 3 and eLiquid cartridges.

Nigel Hardy is British American Tobacco’s Sales Director for UK & Ireland, responsible for their sales in UK/Ireland across all channels, including traditional tobacco outlets, specialist vape stores, e-commerce and owned retail business:

“I have a cross category role, and am responsible for both our combustible tobacco and our Potentially Reduced Risk Products, including vaping and oral nicotine. Our brands include Lyft, Vype and Ten Motives, the VIP vape stores, Pall Mall, Rothmans and Cutters Choice.”

Nigel’s high flying career spans both retailers and suppliers, beginning as an M&S graduate, working for the company in retail, food buying and country management in Spain and Portugal. CV highlights after that include Sales Director at Associated British Foods, a spell at Tesco, where he ran the tobacco, frozen foods and petrol categories, and time as Sales Director with Gallaher, now JTI. He joined BAT seven years ago, to create and launch their PRRP division, and now sits on the board of BAT UK, feeding into the Western Europe Area division.

Nigel explains BAT’s PRRP strategy: “PRRP is a fast growing and dynamic category that covers many different products – vaping, tobacco heating products and oral nicotine. The growth of the category is at the heart of our Transforming Tobacco agenda, which aims at offering a broad choice of nicotine alternatives to adult smokers and our retail partners.”

Nigel Hardy is very clear about the significance of the UK vaping market and the profile of consumers who use these products: “Vaping is an inclusive category that attracts adult smokers looking for potentially reduced risk products as an alternative to tobacco. Availability and good distribution are so important for the PRRP shopper, as purchasing of these products needs to fit into the ritual of their daily life.”

Given the importance these products have in giving consumers the ability to change their daily rituals, their quality is critical. Aimed at adult smokers looking for a high performing product and a trusted brand, the Vype ePen 3 was recently awarded the Product of the Year in the UK’s largest consumer survey of product innovation. Nigel explains the Vype ePen 3 proposition:

“The Vype ePen 3 is at the cutting edge of closed-system vaping technology, providing a genuine alternative to adult smokers and vapers looking for a smoother and more satisfying experience. Its powerful battery delivers an intense flavour, making this our ultimate closed-system device, delivering superior performance versus other leading Pod Mods.”

Vype ePen 3’s innovative design is stylishly compact and the soft touch metallic finish comes in a range of colours to suit all tastes and styles, including red, black, blue, silver and gold. Nigel continues: “The highperformance system guarantees satisfaction with a reliable all-day use battery, and is created with the user in mind. The smooth and compact device fits comfortably in hand and discreetly into pockets.”

With its click in-and-out cartridges, the Vype ePen 3 is made to be convenient and simple to use, while a wide range of flavours and nicotine strengths provide a choice for each vaper.

All BAT’s Potentially Reduced Risk Products are designed and created in the BAT research and development site in Southampton. At present the majority of our sales are going through traditional retail channels but specialist vape stores and ecommerce continue to become increasingly important. Nigel Hardy outlines how the channels fit together:

“Vape stores are much stronger on open system devices and liquids, as customers enjoy a one-on-one experience. Pragmatic smokers, as in new customers to vaping, tend to shop for these devices in traditional retailer channels. As a result, traditional retailers who invest in category space and deliver excellent one-to-one customer service are seeing significant sales growth in the vaping category.”

Given the clear commercial opportunity these products present, Nigel Hardy and colleagues’ advice to retailers is to invest ahead of the curve in the PRRP space to reap the commercial benefits and provide easy navigation of the category for shoppers in store and work with suppliers and purchase merchandise units to make these products visible:

“In supermarkets and convenience format stores, creating category identity and space is critical. Retailers are starting to see the benefits of moving the vaping category away from selfservice and defining their own area in a store.”

Combustible tobacco now has to be sold in plain packs, with no point of sale support and display advertising, but it’s a different story for PRRP, says Nigel:

“There are far less restrictions on POS materials for these products in the UK, which are still prohibited to purchase by anyone under the age of eighteen.”

To support retailers in enforcing these age restrictions BAT UK have launched a youth vaping prevention programme called ‘Verify’, through which they engage with their trading partners to educate them on the importance of verifying age and responsible marketing for vaping products.

“In terms of consumer advertising, there are many media and comms touch points available in the vaping category, although still regulated (with some prohibited entirely), we’re continuing to focus on out of home ad campaigns and building a strong brand identity.”

Tobacco sponsorship of motor sport is banned these days, but it may be permissible to engage in promotional/sponsorship activities for PRRP products. However, this is still subject to restrictions as well as depending on the product and the relevant circumstances. BAT recently announced a partnership with McLaren Racing, focused on innovation and technology, key values shared by both brands. PR has also been a particular focus with Vype, which recently collaborated with House of Holland across two seasons, showcasing a limited-edition skin for Vype ePen 3 at London Fashion Week.

With the number of UK vapers continuing to rise, Nigel believes the market has plenty of headroom left: “There’s still huge potential for growth in the PRRP market as we continue to focus on meeting the needs of adult smokers looking for a Potentially Reduced Risk Product. In the multiple retail sector, we’re seeing a huge swing towards Pod Mod products, which are simple, convenient, high performing devices, such as the Vype ePen 3.” BAT have enjoyed a partnership with the symbol retailers, NISA and the Coops for many years, and are working with them on category management initiatives for Vype and their other PRRP products:

“Using our shopper insights, we’ve identified the importance of category visibility and ensuring the ease of navigation of these products. One-onone education and advice at the point of purchase is important for converting shoppers to the category.”

Vype is now a well-established brand, but BAT have more innovation to come on the PRRP front, says Nigel: “We’re currently in the middle of launching Lyft, our oral nicotine brand, and actively developing the category here in the UK. We have also introduced a new and exciting technology, Puretech, an ultra-slim, microengineered stainless-steel blade which replaces the e-cigarette coil and wick, and we’ll continue to bring more innovative products to the Vype range in 2019.”

Nigel is equally optimistic about the future for Potentially Risk Reduce Products overall and the need for retailers to support them:

“Potentially Reduced Risk Products is currently a billion-pound category, and our projections see it doubling in the next two or three years, so it’s important for retailers to allocate space to a selective range of products and innovative strong brands. The bottom line is, there are seven million smokers in the UK, many of whom are looking for an alternative product. This category is exciting and growing, and retailers need to invest in it now.”