BAT Kenya has moved to aggressively market its oral nicotine product Velo, signaling that the company and the government have found a common ground on regulation of the commodity that is seen as an alternative to cigarettes.
The Nairobi Securities Exchange-listed firm had introduced the product, then branded Lyft, in 2019 as it sought to diversify from the mainstay cigarettes which have faced increasingly stringent regulation and heavy taxation around the world.
The company stopped marketing the product in 2020 after the government said it should be regulated as a tobacco product, even as BAT built a factory to produce it in Kenya.
The company says it reintroduced the commodity –rebranded to Velo— in 2022 on a trial basis. It has now moved to market Velo countrywide amid statements from government officials that regulations are being worked on to accommodate the new product and similar offerings from other players.
“Velo continues to deliver strong growth in Pakistan driven by increased consumer numbers and with average daily consumption now close to 5 pouches per day. In addition, we have accelerated our national roll-out in Kenya after a successful pilot test,” its parent firm, London-based BAT Plc, said in a recent trading update.
In response to our queries, BAT Kenya said it plans to eventually produce the tobacco-free nicotine pouches in the country, utilising the Sh2.5 billion factory that has been idle amid the regulatory uncertainty.
“While construction of the factory was completed in 2021, the factory is yet to begin operations as we await regulatory approvals,” the company said.
“As BAT accelerates the next phase of its transformation, it is committing to building a smokeless world. Local manufacture of these alternative nicotine products enhances access by smokers and has the potential to help reduce the projected health burden associated with smoking-related diseases in Kenya.”
The firm called on the State to recognise the science behind modern oral nicotine pouches, terming it different to that of tobacco and have regulations reflecting the difference.
The nicotine pouches are popular among young people and have drawn criticism from public health campaigners as well the Kenyan Parliament.
BAT says products such as Velo should be allowed to thrive as they are less harmful than cigarettes.
“No tobacco or nicotine product is 100 percent safe and anyone wanting to be totally risk-free shouldn’t use them,” it says on its website.
“However, the principle of harm reduction is that, compared with continuing to smoke conventional cigarettes, it is better to switch to products that are considered to have potentially reduced risk.”
BAT currently draws most of its revenue from cigarettes and semi-processes tobacco, selling the products locally and in export markets.
The company made a net profit of Sh2.8 billion in the half year ended June, down marginally from Sh2.9 billion the year before. Net sales declined over the period to Sh13.1 billion from Sh14 billion.
