U.K. Tobacco Company Eyes U.S. Market

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U.K. Tobacco Company Eyes U.S. Market

Imperial Tobacco Group Plc, maker of West and Davidoff cigarettes, is considering jumping the pond to the U.S. market as legal risks decline and the homeland's consumption slows, according to the company's chief executive officer Gareth Davis.

Imperial is exploring strategies to break into the market, but has already ruled out acquisitions to avoid association with potential lawsuits, Davis said. Since the company forecast that the number of duty-paid cigarettes sold in its biggest market, the United Kingdom, will decrease 3 to 4 percent this fiscal year, it has begun to consider expanding into new markets.

"(The U.S.) is a highly attractive market with highly attractive margins," he told Bloomberg News. U.S. smokers consume 7 percent of the world's cigarettes and account for 30 percent of the industry's profit, said Davis. Problems in the states have become "significantly less" than recent years, he continued.

This reduction in problems may be the result of two of the biggest lawsuits in the American tobacco industry, Bloomberg News reported. Courts reversed a $10.1 billion damage suit against Philip Morris in December and the Florida Supreme Court reversed the $145 billion in damages against American cigarette makers in June.

"It all points to a more settled landscape in the United States," Davis said.

With Imperial's entrance into the market, American tobacco will face the first major competitor in years, Bloomberg said. Currently, Imperial only sells Rizla rolling papers in the U.S.

According to Hoover's Handbook, Imperial Tobacco was founded in 1902 when a number of U.K. tobacco companies banded together against American tobacco's entry into their market. Eventually, Imperial and American tobacco agreed to stay out of each other's way. Imperial sells cigarettes, cigar, roll-your-own tobacco and snuff in more than 130 countries.