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British-American cigarettes expect to return to profit growth in the US for the first time in three years by mid-2025, saying demand for nicotine pouches has boosted sales.
Lucky Strike and Dunhill cigarette makers have forecast strong sales in the “modern oral” category, including pouches, and increased their annual revenue growth target to 1-2 percent in the “modern oral” category, including pouches.
Chief Executive Tadeu Marroco said the company had a “very good response” to the flavorful bag of nicotine held behind the lips. “We see it in different parts of the US and we see different types of consumers in it.”
“We are extremely pleased to expect to return to both revenue and profit growth in the US over the six months and the full year,” he added.
In its full-year results in February, BAT said global revenue from modern oral products rose more than 200% in the US in 2024, with global revenue from categories reaching £790 million. Total revenue from “new category” cigarette replacements was £3.4 billion that year, compared to £21 billion of “combustible products” such as tobacco.
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BAT has been selling nicotine pouches in the US since 2018, but last year it launched a new, powerful product.
Citi analysts say the total margin of the nicotine pouch is about 75%, compared to 60% of cigarettes.
“Historically, cigarettes have been something people have relied on nicotine hits,” said Simon Hales, City analyst.
Bat and its rivals are trying to get away from their dependence on selling cigarettes as consumers switch to alternatives like steam and nicotine pouches and give up smoking together.
According to the World Health Organization, tobacco use has declined by more than 50% worldwide since 2000.
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BAT bought tobacco maker Reynolds American for $49 billion in 2017 and had to create a £6.2 billion clause this year to compensate smokers for Canadian lawsuits.
Philip Morris International, the world’s largest listed tobacco company, acquired 39% of its revenue from non-Tobacco products last year. For British American cigarettes, this category accounts for only 17.5% of revenue.
Tobacco manufacturers are also hit by the growing popularity of unregulated disposable steam. Although a disposable steam ban came into effect this week, illegal vaping products in the US and Canada are a concern for tobacco companies. BAT expects its vape sales to fall by nearly 10% in the first half of the year
“The legal aspect of vaping is declining. There is no legal vaping market in the US today. We hope that the new administration will bring some enforcement,” Maroco told analysts Tuesday.
