BAT Kenya explores new export markets as local sales dip

KENYA – Cigarette manufacturer British American Tobacco (BAT) Kenya is eying new export markets, seeking to compensate for a dip in Kenyan sales.

The Nairobi Securities Exchange-listed firm targets South Sudan, Madagascar, and Djibouti with cut rag tobacco, cigarettes, and tobacco-free oral nicotine pouches, Lyft.

Kenyan market sales dropped 13.8% to KSh11.6 billion (US$106.2 million) in 2020 on reduced consumption of cigarettes in the wake of regulatory curbs and rising prices following additional taxes.

The Kenyan government had raised excise duty on cigarettes by 20% in 2019, followed by a further 4.94% raise in October 2020 in line with the average inflation rate for the year ended June 2020.

On the other hand, BAT Kenya export revenues hit KSh13.7 billion (US$125.5 in 2020, representing 54.2% of KSh25.3 billion (US$231.7 million) total revenues, especially due to growth in volumes to Egypt and Sudan.

As reported by Business Daily,  the revenues as a percentage of total earnings increased to 54.2% last year from 44.3% in 2015, while Kenyan sales dropped to 48.8% from 55.7% over the period.

Listed on the Nairobi Securities Exchange, BAT Kenya is part of the British American Tobacco Group (BAT Group) that manufactures and sells cigarettes, tobacco and other nicotine products.

BAT Kenya supplies 15 countries with cigarettes and cut rag tobacco from its Kenyan plant.

In April 2021, BAT announced the completion of the first phase of its new Ksh.2.5 billion (US$23 million) Nairobi-based factory.

The hub is centered on the production of free oral nicotine pouches for the African market and the globe is expected to support up to 80 new skilled jobs once complete.

The factory is a central pillar in BAT’s diversification away from just the manufacture and marketing of cigarettes.

BAT Kenya supplies 15 countries with cigarettes and cut rag tobacco from its Kenyan plant”

Progress on the multi-billion facility nevertheless came against an ongoing tug of war between the firm and Kenya’s Ministry of Health over the regulation of its oral nicotine pouches marketed under the Lyft brand name.

BAT lamented plans by the country’s Ministry of Health (MOH) to classify the products as tobacco products which would sink the product under provisions of the Tobacco Control Act.

The classification of the pouches under the legislation would see its products targeted with a similar tax rate and marketing restrictions as traditional cigarettes.

Anti-tobacco lobby groups such as the Kenya Tobacco Control Alliance (Ketca) for instance want the product banned arguing its ease of access to minors.

BAT which remains in talks with the government to clear the production and marketing of the product meanwhile sees Lyft as a substitute for cigarettes for addicted smokers.

In the near future, BAT aims to reduce the harmful effects cigarette sales have on their consumers by “offering alternative innovative products, including tobacco-free nicotine pouches.” The company has invested KSh2.5 billion in the new factory in Nairobi to produce tobacco-free nicotine pouches as part of its contribution to the Big 4 Agenda.

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