BAT says share of new category business rises

British American Tobacco (BAT) said performance of its new category business, which includes Vuse, glo and Velo brands, is increasingly contributing to the group performance.

Giving a trading update on Thursday, chief executive Jack Bowles said the company is confident in delivering its £5bn new category revenue and profitability targets by 2025.

“We are proud that BAT’s transformation continues at pace, with strong revenue and volume growth in all three New Categories driving share gains across our key markets. We are leveraging the strength and increasing scale of our three global drive brands, and are continuing to reduce new category losses,” he said.

He said the first half performance is expected to include further growth in the non-combustible product consumer base which reached 19.4m in Q1, strong new category revenue and volume growth and marked improvement in new category losses.

With over £1bn invested in the first half, Bowles said the company will continue new category investment, building strong global brands and capitalising on the momentum.

Following the launch of Vuse Go, its new Vuse disposable product, in the UK in May, the company said it plans further market roll outs in the second half of the year.

BAT stood by its full year guidance – 2-4 per cent revenue growth and mid-single figure adjusted diluted EPS growth – despite the challenges in transferring its Russian business.

The company said in March that it would leave Russia following Moscow’s invasion of Ukraine and cut its 2022 forecast as a result.

“This conflict is increasing global uncertainty and disruption, further exacerbating inflationary pressures on supply chains, impacting consumer consumption and resulting in increased finance costs,” Bowles said. “While we are not immune to these pressures, we are confident in delivering on our current financial targets, irrespective of the timing of the transfer of our Russian business.”

The company confirmed that its options for leaving Russia, where it controls almost a quarter of the market, include transferring the business to its local partner.

The British company’s distributor in Russia, SNS Group of Companies, said in March that the two firms were in advanced talks after Moscow suggested it could nationalise assets of foreign firms that left the country.

Chief marketing officer Kingsley Wheaton said transferring the business to SNS, which has been working with BAT since 1993, was still one option the company was considering.

Even in normal circumstances, the process of transferring a subsidiary of that size would already be a complicated and complex concept, Wheaton said.

“It will take some time to deliver when you start thinking about the implications for supply chain, banking … and this has got a level of complexity to it in an unprecedented environment,” he told Reuters.