Paul Adams prises open a small round tin, pulls out a tiny bag of tobacco and tucks it under his upper lip. “This is snus,” he says, now with a slight lisp. “It’s big in Sweden.”

The chief executive of British American Tobacco, the owner of the Dunhill, Kent and Lucky Strike brands, is wondering out loud whether snus — pronounced snoose, as in noose — could be his industry’s holy grail: a less harmful product than cigarettes that could tempt back today’s increasingly health-conscious consumer. “We are exploring whether we can market snus using our existing cigarette brands, like Lucky Strike,” Mr Adams says.

“The question is whether we can build a category of tobacco that is less harmful by persuading smokers to move to snus.”

The logic is straightforward enough. Snus is a form of tobacco that is not smoked or chewed but sucked through the gum membrane, therefore, in theory, all but eliminating the risk of contracting lung cancer through inhalation. According to the World Health Organisation, Swedish men have the lowest rate of lung cancer in Europe, partly because of low levels of smoking in Sweden.

But, as ever with tobacco, it is not an open-and-shut case. Apart from in Sweden, where it has been used for centuries, the sale of snus is banned throughout the EU, despite evidence that it is probably less harmful than cigarettes. It is an obvious handicap for BAT if it is looking to make the Swedish habit a money-spinner.

Mr Adams, who from his office overlooking the Thames oversees one of Britain’s biggest companies, with 97,000 employees worldwide and a market value of just under £31.3 billion, has good reason to be pondering such questions. In developed countries, cigarette sales have been sliding steadily for years, amid rising health fears and increasingly punitive taxation.

These days, BAT, the world’s second-largest tobacco company, producing 676 billion cigarettes in 2005, can sustain growth only by cutting costs, selling more cigarettes in poorer countries where overall populations and the popularity of smoking are still climbing, or boosting its share of mature markets by launching new brands and products, such as snus.

“Even in a shrinking market, you can achieve growth by gaining market share,” Mr Adams says, although he notes that the overall total of smokers worldwide will be higher in 20 years’ time than today because of rising populations.

Results have been encouraging. BAT reported like-for-like operating profits up 8 per cent, to £2.1 billion, in the first nine months of 2006.

Nevertheless, the constant pressure to tease out further growth is driving what many believe to be the next big trend in the global business: mergers.

Last month, Japan Tobacco International (JTI), the world No 3 after Philip Morris International and BAT, launched a £7.5 billion bid approach for Gallaher, the No 5, which owns Silk Cut and Hamlet cigars. Other possible tie-ups, such as between Imperial Tobacco and Altadis, of Spain, could also be on the cards.

Mr Adams says: “Everyone’s been predicting that there’s going to be consolidation in the tobacco industry over the next few years and (the JTI- Gallaher bid) was an obvious rumoured liaison among many others. I don’t think the consolidation in the industry has finished.”

So would BAT consider a counter-bid? After all, with only six big players, Gallaher is one of only a limited number of options.

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