British American Tobacco strategic shift to smokeless

British American Tobacco (BAT) is undergoing a strategic transition toward smokeless products, including vaping and nicotine pouches. Analysts suggest that investments in next-generation products could drive approximately half of the group’s revenue growth in the medium term, with the brand Velo potentially becoming a market leader in the US by 2030.

While the company faces declining volumes in traditional combustible cigarettes and challenges from the illicit trade in markets like South Africa, it is forecasting annual revenue growth in the mid-teens for smoking alternatives through 2030. BAT aims to increase the contribution margin of these products to at least 30% by the end of the decade, up from 13.3% as of June 2026. Although the company is pivoting toward these alternatives to offset long-term declines in traditional smoking, it does not plan to exit the combustible market entirely, opting instead to concentrate investments on 20 key markets.

In the United Kingdom, the company is actively lobbying against proposed government regulations regarding neutral packaging and product visibility. BAT’s head of corporate affairs, Kingsley Whitton, has warned that such restrictions could make it difficult for adult smokers to identify legal alternatives and may inadvertently increase the sale of illegal products.