NEW YORK/LONDON British American Tobacco Plc's proposed takeover of Reynolds American Inc could speed up Big Tobacco's dominance of the quickly changing e-cigarette market, putting more pressure on early innovators already getting squeezed out.BAT offered last week to buy its U.S.peer for $47 billion (38.54 billion pounds) in a deal that would combine Lucky Strike and Newport cigarettes, and Vuse and Vype e-cigarettes.Reynolds has yet to respond to the unsolicited approach.A combination would create a company with significant share of two of the biggest e-cigarette markets - the United States and United Kingdom - and pit it more directly against the efforts of rival Philip Morris International Inc, and U.S.partner Altria Group Inc, to devise a successful alternative to traditional cigarettes.The deal is expected to spark further consolidation, such as a reunification of Philip Morris with Altria, analysts said.It would also put further pressure on smaller players Imperial Brands Plc and Japan Tobacco International to do deals of their own.

Electronic cigarettes and other alternatives to smoking are seen as the future of a tobacco industry whose sales are shrinking in Western markets as more people give up the deadly habit.BAT and Reynolds already have a technology-sharing and licensing deal for their e-cigarettes, which produce vapor from liquid nicotine instead of tobacco smoke, but a full takeover is expected to speed and simplify innovation.This is critical as Philip Morris and Altria work to launch a promising, new technology called iQOS - using tobacco instead of liquid - in the United States, the biggest market for "vaping" products."Leveraging that R&D more seamlessly across the enterprise is one of the big benefits" of the potential BAT deal for Reynolds, said Morningstar analyst Adam Fleck.IQOS and similar devices heat tobacco enough to create a vapor that its makers say is less harmful than the smoke derived from burning it.They could be more successful than e-cigarettes for smokers who find e-cigarettes unsatisfying.

Reynolds' Vuse e-cigarette is the top selling vapor product in U.S.chain stores tracked by Nielsen.Its "heat-not-burn" product Eclipse is only available in limited distribution and not separately reported by the company.BAT, which sells e-cigarettes under the Vype brand, also has a medicinal nicotine inhaler called Voke and a tobacco-heating product called glo iFuse that it launched in Romania.It has about 35 percent of the UK mainstream market for e-cigarettes, according to Nielsen.The data does not include vape shops, which often sell smaller brands.CHANGING LANDSCAPE Use of e-cigarettes has grown quickly in the last decade, with U.S.sales expected to reach $4.1 billion in 2016, according to Wells Fargo Securities.While it is unclear how the market will evolve over time, the success of the tobacco-based vapor category would favor global businesses already based on tobacco.Philip Morris, maker of Marlboro, has spent more than $3 billion in recent years on research, development and production of cigarette alternatives.

BAT has spent about 500 million pounds ($606.8 million).Philip Morris sells its iQOS product in 10 test markets.It plans to be in 20 by year end.Philip Morris said in September that iQOS was luring smokers away from traditional cigarettes, citing conversion rates of 60 to 70 percent over a period of up to two months.e cigarette mackayBy contrast, users often try e-cigarettes but drop them over time.Altria, which has an exclusive U.S.e cigarette ontario californialicence for iQOS, is eager get the U.S.e zigarette ohrenFood and Drug Administration to approve it as a "modified risk tobacco product," which if approved would carry a different warning than traditional cigarettes.e cigarette saint louis

Philip Morris hopes to begin that process by the end of the year.Regulation is also favoring big tobacco companies.After years of delay, the FDA in August implemented new rules that require companies to submit e-cigarettes for government approval before marketing them.e cigarette serbiaThe lengthy, expensive process is difficult for small startups without experience navigating government bureaucracy.e cigarette pipe mod malaysiaNJOY - one of the first big U.S.e-cigarette makers - filed for Chapter 11 bankruptcy protection in September, citing poor sales and high costs associated with the new rules."We're going to have a huge contraction of the vaping market with most of the market share going to the tobacco companies," said Dr. Michael Siegel, a professor at the Boston University School of Public Health, who has advocated vaping as a way to wean smokers off conventional cigarettes.

(Additional reporting by Pamela Barbaglia in London; Editing by Joseph White, Michele Gershberg and Lisa Shumaker)A growing market with huge potential Alongside our traditional tobacco business, we are at the forefront of developing products that offer consumers potentially less risky alternatives to regular cigarettes.We are passionate about our tobacco business and pride ourselves on offering consumers a choice of high-quality products that meet their needs.But we are also devoting significant time, funds and resources to extending that choice to include alternative tobacco and nicotine products which provide consumers with potentially less risky alternatives to smoking regular cigarettes.We call them Next Generation Products (NGPs) and they include Vapour Products like e-cigarettes and Tobacco Heating Products.We have invested more than US$1 billion over five years in developing a world-leading portfolio of products in the NGP category – not just because they are an exciting new opportunity for us, but also because there are clear benefits for society in potentially helping reduce smoking-related disease.

We place great strategic importance on our work in this area and we want to lead these new product categories.The strength of our commitment can be demonstrated through the progress we have already made.In 2013, we were the first international tobacco company to launch a Vapour Product (e-cigarette) – Vype – in the UK.Since then, we have used our experience and insights to develop the range with new devices, such as the Vype ePen, eTank and eBox.By the end of 2016, our Vype range was available across other markets including, France, Germany, Italy, Poland, Colombia, Guatemala, Kuwait, Bahrain and the Philippines.In December 2016 we opened our first Vype-branded store – in Milan, Italy – at the same time as launching a new type of Vapour Product, Vype Pebble.With our 2015 acquisition of the CHIC Group, a leading Vapour Product business in Poland, we gained access to Europe’s largest Vapour Product retailing network, as well as important new manufacturing and R&D capabilities.Our commitment to the category was further demonstrated in April 2016 when we acquired Ten Motives, a UK based e-cigarette business.

In 2015, we launched our first Tobacco Heating Product, iFuse, in Romania.This electronic device heats a nicotine-containing liquid into an inhalable vapour, which then passes through a tobacco section, delivering tobacco flavour to the consumer.In November 2016, we announced the launch of glo in Japan.Similar to a cigarette, but with reduced risk potential, glo heats rather than burns tobacco, producing around 90% less toxicants* than a conventional cigarette.At British American Tobacco, we understand all the different elements of what smokers like about the experience they get from cigarettes.This means we can better meet the needs of smokers who are seeking potentially less risky alternatives to cigarettes.We’re best placed to deliver such products – we understand what consumers want, we have world-class research and development capabilities, we have robust product and quality standards, we have global reach and we market our products responsibly.If we are successful in developing and bringing to market a range of products that meet the needs of adult smokers seeking potentially less risky alternatives to cigarettes, this will help to meet the objectives of a number of leading public health professionals.