British American Tobacco pivots toward smokeless product growth

British American Tobacco (BAT) is seeing a strategic shift toward smokeless products, including its nicotine pouch brand, Velo, and Vuse vaping products. Jefferies has issued a “buy” rating for the company, suggesting that investments in next-generation products could drive approximately half of the group's revenue growth in the medium term. Analysts predict Velo could become a value share leader in the US pouch market by 2030, potentially unlocking £1.3 billion in additional annual profit.

In South Africa, BAT shareholders on the local branch register are set to receive a net dividend of approximately R10.64 per share following a 20% dividends tax. The company noted that traditional combustible cigarette volumes continue to decline, and in South Africa, the illicit cigarette trade has captured over 75% of the local market, leading to the closure of the Heidelberg manufacturing factory.

While the company faces risks from regulation and competition, Jefferies highlighted an improved balance sheet and the potential for larger share buybacks as the company's debt has fallen significantly since 2017.