With a global portfolio of brands, a successful strategy and talented people, BAT’s purpose is to create A Better Tomorrow by Building a Smokeless World.
The company’s strategic aim is to migrate smokers from cigarettes to smokeless alternatives and become a predominantly smokeless business by 2035.
Susanna De Iesu, Commercial Director UK&I tells Grocery Trader what are the current trends in the vape market and how BAT is striving to be responsible in its marketing to avoid appealing to youths.
Can you tell us a bit about the evolution of the vape market and current consumer trends?
The UK is a big and very dynamic market. I’ve been here for over one year now, and it’s fascinating how fast the market is evolving. Based on Kantar study findings, there are around 13 million adult nicotine consumers in the UK. And, especially in the last few years, these consumers have been moving fast towards reduced risk products. At this point in 2024, already half of those 13 million adult nicotine consumers have transitioned to vapour and other smokeless, reduced risk alternatives.
What we’re seeing in the UK is a really significant transition, especially when you compare it to other big markets. The size of the smokeless portion of the market in the UK is already the fourth largest in the world, after only Japan, the US and Italy.
What are BAT’s ambitions in the UK?
Our ambition for the UK is in perfect harmony with our global mission: to build A Better Tomorrow.
What does this mean? It means reducing the health impact of our business. How do we do that? By providing adult smokers with a wide set of reduced risk options that can help them to transition away from traditional cigarettes.
Now, in a big and fast evolving market like the UK, we of course want to be in the vanguard of that transition, we want to be at the forefront of offering reduced risk alternatives to adult smokers. More and more people are going to look for reduced risk products. With our brilliant portfolio, we are excellently positioned to be the best at offering alternatives to smokers.
However, there’s still a lot of work to be done in the sense that wider society needs to have more confidence about the reduced risk nature of these products, and also about the fact that they are not being misused, miscommunicated, or that they can cause harm.
Can you tell us about how BAT’s product portfolio is responding to current and future trends, including new launches and nicotine pouches?
Our portfolio is very solid. We have been present in vapour since around 2016. VUSE, our brand in vapour, has a very big portfolio which spans across different types of systems. For example, we have the VUSE Go disposable device, which we have just upgraded to up to 1000 puffs. But the main area for us is what we call a closed system, which is rechargeable. We have a VUSE Pro, which is the leading closed system in the market. According to Nielsen data to date, we have 30% share. So it’s a very strong, well established proposition. And now we’re very excited to be launching another device in the family, the VUSE Go Reload 1000 which is modern and contemporary, and has a long-lasting battery. Both VUSE Pro and the VUSE Go Reload can be used with the same pods. For people who want more flavour, we recommend they use Reload with its more intense flavour pods, which give a fantastic sensorial experience.
We’re very proud of our vapour portfolio. Our liquids are made in the US, so there is a lot to be proud about.
Nicotine pouches are also growing massively. They are the fastest growing category in the UK market over the last year or so. Our brand there, VELO, is the leading brand in the UK. We are in the process of further reinforcing the VELO portfolio. For example, we’re introducing new flavours, which also come in different nicotine strengths.
We’re rightly proud of being a leader in new evolving categories. But I think this also comes with a certain level of responsibility. Half of adult smokers don’t even know about nicotine pouches. So, we really need to make sure that we collaborate proactively with our partners, retailers, wholesalers, to make sure that the right assortment and the right education is there, because we want new categories to grow sustainably in the market. So there is still work to be done there.
What are you doing about ensuring product quality and stewardship?
Product quality and stewardship is something that BAT takes very seriously. Not only do we invest over £300 million in research and development every year, but we also make a very significant human investment. We have over 1,500 experts across the world working in our research and development department. Their job is to make sure every day that the ingredients, the quality of our products is certified, qualified and verified.
It is a big effort, but this is what it means to lead the reduced risk category in a sustainable and responsible way. We want to make sure that the value stays in the market for everybody involved, for the whole chain.
From a regulatory perspective, with the Tobacco and Vapes bill, and particularly regulation of the vapour category, how are you getting that across your customers?
I appreciate the fact that customers might be worried about any potential disruption to the market. Nonetheless, we were quite vocal at the end of last year and beginning of this year in terms of our support for better regulation, because it is the right thing to do and it is the only way to ensure a sustainable, responsible market in the long term.
What we support is balanced and comprehensive regulation which, on the one hand, prevents underage people from accessing nicotine, but at the same time, ensures that adult smokers still have choices and have a variety of options to make sure that they can transition from cigarettes to new categories.
Of course, we have regular dialogue with retailers. For example, in May we had an event with retailers where we had a big section on regulation and what new legislation might mean for the market. And also to reassure them that by behaving responsibly we will make sure that this market is here to stay for a long term, and the value is here to stay for the long term. And of course, we also have regular conversations with bigger customers, e.g. supermarkets.
We’ve just gone through a big restructuring internally. We have strong departments on insights and category management to offer all the necessary support to our partners on how to transition through any potential short-term turbulence towards what we are quite sure will be a stable, reliable and sustainable market.
What proportion of your sales are from tobacco and how much are from smokeless alternative products?
I’m not going to give you the exact figure, but I am very proud to say that in the UK, specifically in the UK, half of our net revenues come from reduced risk alternatives. We are basically aligned with the UK market’s evolution to new categories, so we are at the forefront of that journey of transformation. The UK is one of the highest in BAT globally in terms of percentage of revenues on reduced risk products. So, it’s a great place to be, and of course we’re not standing still.
How are BAT striving to be responsible in its marketing to avoid appealing to youths?
Well, I think everybody can only agree that underage people should never have access to nicotine. At BAT, together with product stewardship and quality, we take this responsibility very seriously indeed. And it’s a 360 type of thing, it informs everything we do.
If you start from the portfolio and the packaging, we make sure that our offers only include flavours that do not appeal to underage people.
The second part of our commitment to restrict access to underage people is our marketing practices. In BAT, we have what we call responsible marketing standards, and we adhere very strictly to them. Basically the main foundation is that we do not sell and we do not market any of our products to underage people.
And last but not least is the way you sell products and how you engage with your customers and with your partners and retailers in the market. To this end, we launched a very robust underage access prevention product programme. It is called Verify Plus, and this programme includes staff and retailers. It provides education about ID checks, signposts in the store which say Verified 18 Plus. And we offer support and educational material. Because we also sell online, we do also have very strict age verification processes for the purchase and delivery of our products.
Taken altogether, we have a lot of measures to make sure that we reach only the right, which is to say adult, consumer.
Do you have a target for how much of your revenue you want to be from smokeless, alternative products in the future? 100%?
Our vision is clear. We are committed to building a smokeless world, a world where smoking has become a thing of the past. It’s such an exciting and vital project, and we are determined to be at the forefront of this momentous change.
We are starting from a very good position.
We have clear objectives, half of our revenues are already there, and we have a very exciting portfolio and innovation pipeline coming into the market. In the next few years, we want to have a more predominant portion of our sales coming from smokeless products.
Do you have anything to add?
I know that your readers might be worried for the upcoming period. But they should know that we have a very strong sales force and account management team that are there to support them with anything they need. We can give them clear updates on the market and any changes to rules and regulations, for example what’s the right assortment, what’s the right nicotine level, what’s the product mix which is more sustainable versus less sustainable, responsible versus less responsible.
We have over 200 people out there, and their job is to make sure that customers and retailers are followed up. We can offer point of sale material to display the product and manage the space. We can offer brand ambassadors. We are really here to help.
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