British American Tobacco unlikely to meet 2025 targets for sales of ‘new categories’ of smoking alternatives

British American Tobacco has warned it is unlikely to meet key sales targets for “new categories”.

The owner of Dunhill and Lucky Strike has invested billions in recent years into developing e-cigarettes, heated tobacco brands and modern oral products, as demand for healthier alternatives to smoking grows.

The aim is to generate £5 billion from such products by 2025 and ensure that 50 million people use these non-combustible goods by 2030.

However, the London-based company’s CEO, Tadeu Marroco, said sales of new categories next year will “probably” fall short of that target.

He said this was due to the “lack of enforcement” by US authorities against illegal disposable vaping products and recent sales from companies in Russia and Belarus.

While BAT acknowledges that many US states are taking a tougher stance on illegal disposable vapes, the organization believes they make up half of the US vaping market.

In the six months to June, BAT saw adjusted revenue from new categories rise 3.1 per cent to £1.7bn, helped by strong demand from US customers for its Velo nicotine pouches.

Total adjusted revenue fell 3.7 percent to £12.3 billion, while reported revenue fell 8.2 percent due to unfavorable exchange rates.

Revenue was also negatively impacted by fuel volumes affected by supply chain disruptions in Sudan, economic pressure in the US and the group’s withdrawal from many African markets.

BAT posted a pre-tax loss of £17.1bn last year after writing down £27.3bn on the value of a number of US fuel brands due to falling smoke levels and a weak economic climate.

By comparison, the group’s pre-tax profit rose by almost £300m to £5.6bn in the first half of 2024, partly due to lower financing costs.

However, BAT’s operating profit fell 28.3 percent to £4.3 billion as the company began winding down its US wholesale inventory and faced £1.4 billion in write-downs and impairment charges.

Marroco said: “While there is still much work to be done, we are making good progress. I am pleased to see the launch of our new categories and our investments in the first half of the year to strengthen our U.S. fuel portfolio continue to gain momentum.

‘Combined with the expected decline in inventory movements at US wholesalers, I am confident that this will lead to an acceleration of our performance in the second half of the year.’

BAT has maintained its annual guidance following its first-half results, which showed low-single-digit organic growth in constant currency revenue and adjusted operating profit.

British American Tobacco Shares were up 4.8 percent to 2,700p early on Thursday afternoon, but have barely risen in the past year.