Tobacco farmers face future loss of livelihood as cigarette maker British American Tobacco (BAT) Kenya is shifting its attention to nicotine pouches and similar products. This comes as regulations tighten noose on tobacco products.
BAT Kenya #ticker:BAT Managing Director Beverley Spencer-Obatoyinbo said as smoking is reducing globally, the firm is moving smokers to potentially safer categories of products.
“Over time BAT will switch to non-combustibles but it is not an immediate thing,” said Ms Spencer-Obatoyinbo during a webinar on the firm’s new identity and portfolio.
BAT introduced the new category into the market in quarter three last year and is set to begin local production of the oral nicotine pouches at the end of the year when it opens its Sh2.5 billion factory in Nairobi for the African market.
Nicotine pouches contain fibres from pine trees, eucalyptus, nicotine, and flavouring agents and are marketed as a safer alternative for smoking addicts who want to quit the habit.
“It is not a change that can happen overnight and we are using proceeds from the tobacco portfolio to invest in the new categories. When the time comes, we will help them (farmers) transition to sustainable crops,” said William Elliott, BAT Kenya head of legal and external affair during the webinar.
BAT is already exporting its cigarettes to 10 African countries.
According to BAT’s 2019 annual reports and financial statements, gross revenue increased by nine percent to Sh39.8 billion.
This was driven by excise-led pricing on cigarettes in Kenya, increased cut rag (semi-processed tobacco) sales volumes into Sudan and the introduction of new category revenue in Kenya following the launch of Lyft (modern oral nicotine).
The products retail at similar price point to cigarettes as they are an alternative for smokers wishing to switch for their daily dose of nicotine.
Ms Spencer-Obatoyinbo stated that the uptake has been positive and called on regulators to allow the manufacturer to communicate more information on the category.
Earnings of tobacco farmers are already impacted by counterfeit cigarettes in the market.
And with the cost of cigarette production increasing with new taxes imposed on tobacco products as well as new regulations, manufacturers are looking at alternative products.
In its full year 2019 annual report, BAT indicated it partnered with about 5,000 farmers in the country.
“Tobacco farmers yielded 8.9 million kilograms of tobacco, earning them net pay of Sh1.5 billion in 2019.” Said BAT.
Tobacco regulations in Kenya have been stricter over the years including the disputed regulations requiring cigarette manufacturers to include large graphic and text health warnings, mandatory disclosures of tobacco product ingredients and revenues, smoke-free environments in public places and adjacent streets, walkways and verandahs, as well as limit interactions between the tobacco industry and public officials.
The law also requires tobacco companies to pay damages for harm suffered known as solatium compensation contribution of two percent of the value of the products manufactured or imported to fund tobacco control research, cessation and rehabilitation programmes.
BAT had challenged the law and lost the appeal after the Supreme Court ruled that neither was there discrimination nor unconstitutionality when the disputed regulations were made as well as came into force.