Nicotine pouches not approved for commercialization, British American Tobacco plans to sell idle equipment at Kenyan factory

Nicotine pouches not approved for commercialization, British American Tobacco plans to sell idle equipment at Kenyan factory

British American Tobacco Kenya (BAT Kenya) announced that it will sell its idle oral nicotine pouch factory equipment in Nairobi, as the company's net profit fell 24.3% due to the government's failure to approve the product commercialization license. BAT said that in order to protect shareholder value, it decided to sell the equipment and continue to rely on the traditional tobacco business.

According to Business Daily recently, British American Tobacco Kenya (BAT Kenya) has decided to sell the equipment of its oral nicotine pouch factory in Nairobi, the capital of Kenya, which has been idle since it was installed nearly five years ago because the government has not approved the commercialization license of the new product.

The company announced the decision in its financial report for the six months ending June 30, 2024, which showed that the company's net profit fell 24.3% to 2.14 billion shillings (16.33 million US dollars) due to lower sales and higher financial costs.

BAT said that the company has accepted the offer to sell the oral nicotine pouch factory equipment, marking the end of its efforts to obtain a license since 2019.

BAT said in a statement,

"Due to continued regulatory uncertainty, the commercialization of our oral nicotine pouch factory has been hampered. In order to protect shareholder value, the company has accepted an offer to sell the oral nicotine pouch factory equipment."

Abandoning the oral nicotine pouch business means BAT will continue to rely on the tobacco business, facing the challenges of a decline in the number of contracted tobacco farmers, increased taxes and an expanding illegal market.

BAT said,

"Total revenue decreased by 6%, mainly due to reduced export sales, consumer downgrades in the domestic market and the suspension of oral nicotine pouch sales."

In 2019, BAT launched Lyft nicotine pouches, but stopped selling them in 2020 due to government requirements to regulate them as tobacco products. The company re-launched the product as Velo in 2022, but sales were suspended due to regulatory uncertainty. BAT hopes that the government will recognize the scientific basis of modern oral nicotine pouches as a "scientifically validated reduced risk alternative" to tobacco cigarettes.

BAT said that due to regulatory uncertainty, the company was unable to commercialize the nicotine pouch factory, and capital was idle in the factory, resulting in investment losses.