British American Tobacco (BAT) Kenya is unable to meet the growing demand for its newly launched nicotine pouch product as a lack of regulatory approval delays the operation of its Sh2.5 billion plant meant for manufacturing the new product for the African market.
The Kenyan arm of the UK-based firm said in its annual report that their nicotine pouches have been performing well in the local market, but supply was disrupted towards the end of last year as the plant is yet to be opened.
“In 2023, we set out to accelerate our tobacco harm reduction ambition following the relaunch of our modern oral nicotine pouches into the Kenya market in 2022,” said BAT Kenya in the report.
“However, towards the end of the year, supply of our pouches in the Kenya market was disrupted due to regulatory uncertainty. This has also impacted the commercialisation of our modern oral nicotine product manufacturing plant.”
Last year, BAT’s revenue from the sale of nicotine pouches more than tripled to Sh307 million from the Sh92 million recorded in 2022, making it the only product to record an improvement in revenue among the company’s three main product lines in the Kenyan market.
Both cigarettes and cut rags posted a decline in the period, with their earnings falling 2.7 percent and 47 percent to Sh23.7 billion and Sh1.5 billion respectively, indicating a sharp contrast from the nicotine pouches.
BAT launched the construction of the Sh2.5 billion nicotine pouch plant in 2020, to produce the new product considered a safer alternative to tobacco cigarettes for its entire African market.
However, the plant is yet to operate as it has not received the required regulatory approvals from the government, even as several anti-tobacco lobbies continue to fight for their ban in the country.
“While the factory was ready for commercialisation in 2023, we await regulatory approval to facilitate this,” said BAT in the report.
The cigarette maker first introduced the pouches in the Kenyan market in 2019, under the brand name Lyft, before they were banned for being registered as a pharmaceutical product instead of a tobacco product.
The ban was lifted in 2022 after it was agreed that they should be regulated by the Tobacco Control Board, which regulates other tobacco products. BAT reintroduced the products in 2023 under the new brand Velo.
Last year, BAT recorded an 18 percent drop in profit before tax to Sh8 billion, largely attributed to a drop in sales, higher excise taxes, and a higher input price due to increased duties. It cut its dividend payout to Sh50 per share, down from Sh57 per share in the 2022 financial year, following the profit drop.
