Article by Vincent Yi; edited by Ellesmere Zhu - On March 17, British media betterRetailing published a “leaked” test report by British American Tobacco (BAT), which revealed that “nearly all” disposable e-cigarette brands in the UK had overfilled e-liquids. The report covered best-selling brands in the UK such as Lost Mary, Found Mary, IVG Bar, Klik Klak, SKE Crystal, Smok Mbar Pro, and Solo disposable vapes. On the same day, iMiracle (Shenzhen) Technology Co., Ltd. (hereinafter referred to as "iMiracle"), the parent company of ELFBAR, was interviewed by 2FIRSTS.
For the first time, iMiracle disclosed that BAT had initiated contact with iMiracle in August 2022 and proposed the acquisition of ELFBAR.
BAT is the world's second-largest tobacco company, with a sales revenue of £27.7 billion in 2022. It owns the e-cigarette brand VUSE and the heated tobacco product brand Glo.
ELFBAR is a leading company in the e-cigarette market in the UK, holding a large share of the disposable e-cigarette market.
According to the information provided by iMiracle, 2FIRSTS has organized the following timeline of the contact between the two parties:
• Starting from 12th August, 2022, BAT representatives held multiple meetings with iMiracle to study its production and market-related information.
• On 28th September, 2022, at 16:00, BAT invited iMiracle to a video conference, where BAT executives verbally expressed their acquisition intentions for ELFBAR. The two parties briefly communicated.
• After the 28th September meeting, BAT executives proposed to acquire the ELFBAR brand at an undisclosed price. Rumors then emerged in the UK market that ELFBAR was being acquired by BAT.
• Between November to 12th December, 2022, BAT and iMiracle have had multiple discussions about the acquisition details. Then BAT executives wanted clarification on whether ELFBAR was willing to sell a "partial stake" in the ELFBAR brand.
• On 12th December, 2022, ELFBAR replied in confirmation to BAT via email that iMiracle had no intention of selling the ELFBAR brand.
Overfilling Incident
On February 6, 2023, almost two months after iMiracle had rejected BAT's acquisition, ELFBAR was reported by the media Daily Post for overfilled e-liquids. The incident continued to escalate. On March 16, British media betterRetailing published an article claiming to have obtained BAT's test report on non-compliant disposable product brands in the UK. According to the media, BAT had sent this report to distributors, retailers, and law enforcement agencies, among others, to remind them of the importance of compliance awareness in the market.
2FIRSTS interviewed a lawyer and several industry experts on this matter.
Tang Shunliang, a lawyer from ZHONGLUN W&D LAW FIRM, stated that the current competitive strategy for large tobacco companies is to rapidly expand their market share in the next-generation product (NGP) market. When they cannot secure the market through patents, the most effective method is to acquire smaller businesses' distributors to reach the end-users. It is not rare for these companies to resort to unfriendly tactics to weaken their acquisition targets and seize the market when the desired acquisitions do not materialize.
BAT is known to use "moral weaponry." For example, during BAT's lawsuit against PMI's patent invalidity in the UK, it attacked PMI's patent application in an attempt to stop competitors of infringement. BAT won the case.
Tang believes that the primary reason for BAT's attempt to acquire ELFBAR lies in the market competition between BAT and PMI in the NGP field. BAT aims to expand its market share in the sector, and as a leading competitor in the disposable e-cigarette industry, it is reasonable for BAT to show interest in acquiring ELFBAR. However, he argues that BAT cannot act as the enforcer of e-cigarette regulations; as a competitor, purchasing and testing products and publicizing the results will inevitably raise suspicions about their motives and the independence of their testing.
This view is corroborated by John, chairman of the UK Vaping Industry Association (UKVIA), in his reply to 2FIRSTS. John told 2FIRSTS:
"BAT has conducted a number of tests on popular brands of disposables in the UK. They have sent their findings to various agencies and have made the association aware too. I am also aware of other companies that have conducted similar testing and the results conflict with those of BAT."
2FIRSTS received an email reply from Sam Millicheap, Head of External Affairs for BAT UK & Ireland on this matter. In his reply, Sam acknowledged that they "regularly tests the entire range of publicly available products in the electronic cigarette category through an independent certification laboratory". Both noted that the content of his response was consistent with the content of his response to media outlet betterRetailing.
Disclaimer: This article is for industrial research purposes only and does not represent any endorsement of brands or products. The brands listed in the article are for event description purposes only.
*This article is an original article of 2FIRSTS Technology Co., Ltd. The copyright and license rights belong to the company. Any entity or individual shall make link and credit 2FIRSTS when taking actions to copy, reprint or distribute the original article. The company retains the right to pursue its legal responsibility.
