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ITC Makes a Healthy Start with E-cigarettes
The Economic times - 15 Aug 2014

E-cigarettes have been launched in Hyderabad and Kolkata, they will be rolled out pan-India in phases

The diversified ITC group has forayed into electronic cigarettes to offset shrinking sales of its conventional tobacco cigarettes due to recurrent price increases.

The Kolkata-headquartered cigarettesto-hotels group has launched two electronic-vaping devices, or electronic cigarettes, under the Eon brand.

The products have been designed inhouse but are being manufactured in Chi na. A spokesperson for ITC said the e-cigarettes have been launched in Hyderabad and Kolkata and will be rolled out pan-India in phases. They will also be sold online.

Unlike conventional tobacco cigarettes, e-cigarettes release vapour -and not smoke -when a nicotine-laced liquid is heated. The vapour does not contain tar, the main harmful component in conventional tobacco cigarettes.

Eon comes about 10 months after ITC forayed into the nicotine replacement therapy (NRT) market with `Kwiknic'.

Analysts said ITC's foray into e-cigarettes and NRT is to create newer consumption areas as growing health awareness, the government's drive against tobacco products and rising cost of combustible cigarettes force consumers to look for alternatives.

“ITC's strategy to foray into tobaccofree nicotine products is a long-term strategy to de-risk the cigarette business and also open doors to newer health-conscious consumers,“ said an analyst with a leading brokerage.

The analyst, who did not want to be named, said ITC's cigarette business sales will be down this year due to the 20% price hike effected in sev price hike effected in several popular brands.

Last fiscal, the contribution of ITC's cigarette business to the group's overall net sales was down to 41% due to rapid diversification into FMCG, hotels and agribusiness.

Being tobacco-free, Eon and Kwiknic are not sub jected to regulations under the Cigarettes and Other Tobacco Products Act and can be consumed, marketed and sold like any consumer product. E-cigarettes are more popular over seas with the US and Europe being the key markets. In India, the category is still at a nascent stage with lesser known imported brands selling online, the ITC spokesperson said. Last month, ITC chairman YC Deveshwar had said that an early entry into this segment would help ITC build a strong domestic brand, which will reduce royalty payment outflow when MNCs enter.

As per the US FDA website, e-cigarettes are battery-operated products designed to deliver nicotine, flavour and other chemicals. Safety of e-cigarettes, however, is yet to be fully established.

Big cigarette companies like Philip Morris, British American Tobacco and Reynolds American have already forayed into the segment.

According to Euromonitor International, the global market for e-cigarettes is estimated at $3 billion and poised to touch $18 billion by 2017.