According to a recent report by Business Daily, British American Tobacco Kenya (BAT Kenya) has decided to sell the equipment from its nicotine pouch factory located in Nairobi, the capital of Kenya. The factory has been idle since it was installed nearly five years ago, as the government has not approved the commercialization permit for the new product.
The company announced this decision in its six-month financial report ending on June 30, 2024. The report revealed that the company's net profit decreased by 24.3% to 2.14 billion shillings (16.33 million US dollars) due to a decrease in sales and an increase in financial costs.
BAT announced that the company has accepted a proposal to sell the equipment of its nicotine pouch factory, marking the end of its efforts to obtain a license since 2019.
BAT stated in a press release that...
Due to ongoing regulatory uncertainty, our nicotine pouch factory's commercialization has been hindered. In order to protect shareholder value, the company has accepted an offer to sell the equipment of the nicotine pouch factory.
Abandoning the nicotine pouch business means that BAT will continue to rely on its tobacco business, while facing challenges such as decreasing contract tobacco farmers, increasing taxes, and expanding illegal markets.
According to BAT,
Total revenue decreased by 6%, primarily due to a decrease in export sales, a shift in consumer preferences in the domestic market, and the temporary suspension of sales of nicotine pouches.
In 2019, BAT launched Lyft nicotine pouches, but stopped selling them in 2020 due to government regulations classifying them as tobacco products. The company reintroduced the product as Velo in 2022, but sales were halted due to regulatory uncertainties. BAT hopes the government will acknowledge the scientific basis for modern nicotine pouches as a "scientifically validated reduced-risk alternative to traditional tobacco cigarettes.
British American Tobacco (BAT) stated that due to regulatory uncertainty, the company is unable to commercialize the nicotine pouch factory, resulting in idle capital in the factory and causing investment losses.
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