Need a light? It’s okay, I’ll just plug it in

Louise Hodgetts has struggled to overcome her 30-a-day habit.  A smoker for two decades, she worries about her family’s history of cancer, but nicotine patches and gum failed to free her from the addiction.

Now, the 34-year-old is trying something new- an electronic E-cigarette.

So far, so good.  With the help of the 3in-long piece of plastic she hasn’t smoked the real thing for a month, feels better for it, and has bought a television with the money saved.

“Its working- and I’ve recommended it to my brother,” said Hodgetts, from Bracknell, Berkshire.

Substitute cigarettes are not new, but the market is beginning to boom.  And tobacco companies are ready to plough substantial sums into finding the next gadget to supply smokers with a guilt-free kick.

With the market for tobacco in relentless decline in the West, cashing in on those who want to quit is the obvious source of growth.

Imperial Tobacco, maker of brands such as Davidoff and Lambert & Butler, has recently done a secret deal to invest in one business that believes it may have the magic formula.

In April, Lorillard, the American company behind Newport cigarettes, bought Blu e-cigarettes for $135m ( £87m).  Japan Tobacco International, owner of Benson & Hedges, has a minority stake in Ploom, another manufacturer, and is working on plans to commercialise the devices globally.

Philip Morris International, the world’s biggest listed tobacco company, is working on a next- generation version of the technology, while British American Tobacco has set up a subsidiary to target the market.

There is good reason for the rush of activity.  “The growth of e-cigarettes has been unbelievable, particularly in the past 12 months,” said Damien Scott of Skycig, an e-cigarette brand owned by Gibraltar-based Zeus Ventures.  “I don’t think it will stop any time soon.”

Sales of e-cigarettes in America, where there are more than 100 brands, are likely to double this year to $500m, according to analysts at UBS, the investment bank. That is tiny compared with the tobacco market-Americans spent $88 billion on cigarettes last year-yet the growth prospects are enough to lure investors into “non-tobacco nicotine delivery devices”.

Britain is expected to follow the same pattern as America.

An estimated 21% of adults smoke, of whom three-quarters have tried to quit. Businesses and investors backing the new technology hope that it will appeal to those millions-and provide a new source of revenue.  Critics claim the devices simply replace one addiction with another, albeit less harmful without the tar and other damaging substances.

Strikingly, the growth of e-cigarettes does not appear to have hit sales of nicotine patches and gum.  Glaxo Smith Kline, maker of Nicorette, saw worldwide sales of its range grow 3% in the first quarter of this year.  But, with smokers forced out of public places onto the streets for a puff, the new aids are catching on fast.

Most of the market is based on the battery-powered cigarette developed by a Chinese pharmacist in 2003.  These rechargeable devices heat up a cartridge of nicotine in water, releasing vapour to be inhaled.  To date, they have not been hampered by the strict controls placed on medical devices and real cigarettes, but many in the industry expect this to change.

Venture capital firms have also been vying for a piece of the burgeoning market.  In January, Britain's Advent Life Sciences led a £2m fundraising for CN Creative, which is developing a new type of “smoking cessation device”.

Across the Atlantic, Catterton Partners,which has backed businesses such as Kettle crisps, has invested $20m in Njoy, an American e-cigarette manufacturer.

Two young British entrepreneurs are among those aiming to produce the next generation of cigarette substitutes.

Alex Hearne is the founder of Kind Consumer, which has received investment from business figures such as Sir Terry Leahy, former boss of Tesco, Jon Moulton, the venture capitalist, and Sir Peter Davis, previously head of Prudential.

An asthma sufferer as a child, with parents who smoked, Hearn had good reason to develop a device to help reduce tobacco consumption.

After spending a decade on research, producing more than 700 prototypes, Kind Consumer hopes to apply for approval from the Medicines and Health-care Products Regulatory Agency within 12 months.

“We strongly believe that these devices should be regulated.  The public should know what they are buying,” said Hearn, 29.

His design is not electronic but a kind of cigarette-shaped aerosol that delivers a burst of nicotine through a breath-operated valve.  A battery is not needed.

The device, as yet unnamed, will be sold like cigarettes in a pack, with each one thrown away when the nicotine has been exhausted.

With the battery-powered e-cigarettes, users by one device and then replacement nicotine cartridges as needed.  Hearn said, “No substitute is going to be exactly the same [as a cigarette], but we wanted to try to make our device as close as possible to the experience of smoking.”

His company has received backing from British American Tobacco, the second biggest cigarette maker outside china.  Its Nicoventures subsidiary is funding development and will be the distributor.

Another Briton hoping to crack the market is David Newns, 27, who co-founded CN Creative in 2008.  The company already sells an electronic cigarette, the Intellicig, but is also working towards producing an inhaler under the name Nicadex.  It, too, hopes to receive approval from Health Watchdogs in Britain, Europe and America and will begin the application process towards the end of the year.

That will be one more smoke-free competitor for the tobacco companies, many of which are reluctant to reveal much about there plans to enter the new market.

Bristol –based Imperial Tobacco is the latest of the giants to become involved.  The company admitted it had made “a very small investment” in an e-cigarette business, but refuse to disclose the details beyond saying that the investment did not involve taking an equity stake.

Imperial said the arrangement was designed simply to “build knowledge and expertise in the area”.

The importance of the involvement of the big names should not be underestimated, though. Newns said: “In the past they have said that cigarettes are their business.  For the first time, they are opening their eyes to other innovations, Its very encouraging.”

Cashing in on those who want to stop is the obvious source of growth.

For more information on CN Creative please visit their website here

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