British American Tobacco refines its strategy to go smokeless

A promoter shows British American Tobacco's new tobacco heating system device 'glo' versus Kent tobacco. File photo: Reuters

A promoter shows British American Tobacco's new tobacco heating system device 'glo' versus Kent tobacco. File photo: Reuters

Published Feb 13, 2024


British American Tobacco, which sold 555 billion cigarettes last year, is now working towards a society where smokers migrate from cigarettes to smokeless alternatives.

Apart from cigarettes, the group with 46 000 employees around the world also sells vapour products, heated products, modern oral products (pouches held between the gum and lip stuffed with nicotine and other products), and traditional oral products such as snus and snuff.

Chairperson Luc Jobin said in the annual report released yesterday that that extensive discussions were held in 2023 on their strategy and purpose, and the result was to provide greater clarity on what the group meant by “Building a Better Tomorrow” and that this meant “Building a Smokeless World”.

“The refined strategy is a natural extension of the foundation that we laid in 2020 and provides clarity on what BAT intends to focus on in years to come,” he said.

He said the change of adult smokers towards smokeless alternatives was a long-term sectoral trend, and there were many jurisdictions where, in the right regulatory approach, smoking rates would decline faster with a greater acceptance of smokeless alternatives.

The group had built a portfolio of three smokeless product brands, Vuse, glo and Velo, which had delivered more than £3 billion (R72bn) in revenue in just a decade.

The aim was to have 50% of revenue from non-combustibles by 2035.

In the past financial year the group’s revenue fell 1.3%, but increased 16% in constant currency terms, in spite of the sale of the Russia and Belarus businesses from September 2023.

CEO Tadeu Marroco said they currently had 24 million consumers of the group’s non-combustible products and revenue from this made up 16.5% of group revenue.

He said they had made a £27.3bn impairment in the past year due to the difficult trading environment in the US, the impact of the potential ban on menthol – menthol cigarettes are the best-selling cigarettes in the US – and the continued drag on the Vapour business by “illicit single use products”.

During 2023 an acceleration in the decline rate in cigarette volumes was seen in the US following a period of instability due to the Covid-19 pandemic.

The US brands Newport, Camel, Natural American Spirit and Pall Mall were now considered to have a useful economic life of not more than 30 years, rather than into perpetuity.

The group profit from operations declined 250% to a loss of £15.751 million last year compared with a profit of £10.5bn profit the year before, due mainly to the impairment charges.

The liquidity profile, however, remained strong and the 2% increase in dividend to 235.52 pence in 2023 marked the 25th year consecutive year of dividend increases.

Strong cash flow generation and deleveraging would ensure the group continued to increase its dividend payouts, the directors said.

Merger and acquisition opportunities would be sought, and share buybacks may be made during the new financial year, they said.