British American Tobacco wants to increase sales vaping products in Europe and America this year and again in the next.

This comes after the world's second-largest tobacco company saw full-year sales volumes rise only slightly.

British American Tobacco and Philip Morris International, have been investing in electronic cigarette alternatives as a growing health consciousness reduces smoking rates, and economic instability curbs consumer spending.

British American Tobacco is preparing to buy its US peer Reynolds American for $49.4 billion.

The deal will create the world's biggest listed tobacco company and boost BAT's position in the small but growing market for e-cigarettes and other cigarette alternatives.

BAT said today it now has the biggest "vapour" business in the world outside of the US and is present in 10 markets, with almost 40% of the market in Britain and around 50% in Poland.

The company plans to double the number of markets where it offers cigarette alternatives this year, and again next year, its Head of Corporate Affairs Jerry Abelman said.

"In the future we expect to see a much bigger percentage coming from next generation products," he told Reuters, but declined to give any figures.

The maker of Dunhill and Lucky Strike cigarettes said cigarette volume grew 0.2% to 665 billion in 2016, adding that although it fell 0.8% on an organic basis as more people around the world cut back on smoking, it outperformed the industry which estimated a roughly 3% decline.

Revenue grew 12.6% to £14.751 billion, helped by the weakness of the British pound. Organic revenue was up 6.9%, driven by good pricing.

The company also said its adjusted profit from operations rose 9.8% to £5.480 billion.