British American Tobacco to launch synthetic nicotine pouches

LONDON (Reuters) -British American Tobacco (BAT (LON:)) will launch a version of its Velo nicotine pouches using synthetic nicotine in the United States, David Waterfield, president of the company’s U.S. subsidiary Reynolds American (NYSE:), said on Wednesday.

Smoking alternatives like vapes from big tobacco companies, including BAT, usually contain naturally occurring nicotine derived from the tobacco plant, whereas synthetic nicotine is made in a lab from chemicals.

Waterfield said BAT’s new Velo product, Velo Plus, due to launch in 2025 and offering more nicotine strengths, contained synthetic nicotine – one of the first clear examples of synthetic nicotine use by a big tobacco company.

“Nicotine derived from tobacco and synthetic nicotine, from a chemical point of view, they are the same,” Waterfield told investors at a capital markets event.

He added that BAT would look at other opportunities in synthetic nicotine going forward.

Synthetic nicotine began being used more widely in the United States in recent years as a means to avoid a lengthy application process with the U.S. Food and Drug Administration (FDA), which manufacturers were required to undergo in order to market new nicotine products.

It has so far been used mostly by smaller manufacturers of vapes or nicotine pouches, which users insert under the lip to get a buzz.

Initially, the FDA only had authority over naturally occurring nicotine, so manufacturers of synthetic nicotine products did not have to follow the FDA’s application process. The law was changed in April 2022.

Waterfield said that Velo Plus was a product it acquired. An FDA application for the product was submitted by its previous owner before a May 2022 deadline, meaning it can stay on the market while its application is pending.

BAT estimates that the size of U.S. industry-wide vape revenues will grow from around 9 billion pounds ($11.7 billion) today to up to 14 billion pounds by 2030, Waterfield said. It expects U.S. nicotine pouch industry revenues to grow from 1.7 billion pounds to up to 7 billion pounds over the same period.

BAT sees current U.S. combustible tobacco revenue declines of around 9% as “abnormal”, Waterfield said, adding BAT expects U.S. industry revenue growth to settle at around 1% for the rest of the decade.

($1 = 0.7682 pounds)