British American Tobacco's strategy: Building a 'smokeless world' while cigarette sales fall

It may seem counter-intuitive that JSE and London listed British American Tobacco (BAT), a manufacturer of cigarettes, has "Building a Smokeless World" as its strategy.

But it has, over the past few years, refined its strategy to reduce the health risks of its business by offering adult consumers a greater choice of reduced risk products, compared with cigarettes.

According to the annual report released Friday the company still sold over 465 billion cigarette sticks in 2025, and over 12 billion other tobacco products, in 36 factories in 35 markets. The number of cigarette sticks sold however declined 8% compared to the 2024 financial year.

The group is the second biggest international tobacco company behind the China National Tobacco Corporation. Over one billion people still smoke cigarettes across the world.

By region, the US accounted for £11.51 billion of its revenue in 2025, the Americas and European (AME) market accounted for £9.30bn of its revenue, while Asia, Pacific, Middle East and Africa (APMEA) accounted for £4.77bn of the group's revenue.

Chairman Jac Lobin said in the report that 2025 was shaped by subdued growth, trade realignment and continued geopolitical and macro-economic shifts, alongside a changing labour market and the acceleration of AI.

In the tobacco industry, competitive and regulatory complexity, coupled with evolving consumer preferences, continued to shape the landscape.

"We returned to growth in the US, continued to develop new products and launched three innovations across our Smokeless portfolio. At the same time, we've been thoughtfully extracting value from our combustible businesses, all while staying closely attuned to adult consumer preferences and industry trends," he said.

About the new financial year, he said there was a solid foundation and momentum behind their strategy, and "we believe we are well positioned for the future. We expect 2026 to be another year of strategic progress and delivery for investors."

One product that the group hopes to enable smokers to switch to less risky ways of ingesting nicotine, is through its Modern Oral products, or nicotine pouches that are placed behind the lip.BAT CEO Tadeu Marocco said that with the progressive regulation of Modern Oral products now in 24 countries, the regulatory outlook for the category is encouraging.

The number of the group's smokeless product consumers increased 16% to 34.1 million in 2025, compared with 29.4 million the year before. The group's Vapour products are sold in 57 countries, Modern Oral products are sold in 49 countries, while Heated products are sold in 29 countries.

The target is to have 50 million consumers of the group's smokeless products by 2030.

The group also supports a massive farming sector, with its own vertically integrated operations contracted to over 91 000 farmers, while the remainder of tobacco is sourced from third parties who are contracted to further 134 000 farmers.

The group's medium term financial targets include growing revenue between 3% and 5%, adjusted diluted earnings per share by between 5% and 8% annually on a constant currency basis, to continue deleveraging the balance sheet, and maintaining the dividend payout ratio to 65%.

Since 2024, BAT returned over £1.8bn to investors through share buybacks. And the plan was to buy back another £1.3bn in 2026.

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