British American Tobacco Stock Moves Up As Firm Unveils Velo Plus

British American Tobacco's stock price (NYSE: BTI) has gained 1.3% in trading today, bringing the YTD increase to 20% as a new product is set to hit the market next year.

The firm unveiled its plans to introduce a new line of its Velo nicotine pouches, dubbed Velo Plus, in the highly competitive United States market. This innovative version will be distinct from its predecessors by employing synthetic nicotine, a laboratory-created alternative to the traditional nicotine derived from the tobacco plant. The rollout of Velo Plus is targeted for 2025, with the promise of offering consumers a range of nicotine strengths.

The announcement was made by David Waterfield, the president of the company’s U.S. subsidiary Reynolds American. In his statement, Waterfield highlighted the chemical similarity between nicotine sourced from tobacco and synthetic nicotine, asserting that both are identical from a chemical perspective.

This move by British American Tobacco underscores the increasing utilisation of synthetic nicotine in the U.S., which has risen to popularity among manufacturers as a way to circumvent the Food and Drug Administration's (FDA) extensive application process for new nicotine products. However, it’s important to note that the FDA has recently broadened its regulatory powers to encompass products containing synthetic nicotine.

The economic implications of synthetic nicotine products are significant. British American Tobacco projects that the entire U.S. vape market could see revenue growth from its current 9 billion pounds to a potential 14 billion pounds by 2030. Similarly, the U.S. nicotine pouch market could expand from its current revenue of 1.7 billion pounds to nearly 7 billion pounds in the same timeframe. Waterfield further added that while BAT anticipates a decline in U.S. combustible tobacco revenue by about 9%, they expect this to stabilise and potentially see a growth return of around 1% for the remainder of the decade.

Velo Plus represents a strategic move by British American Tobacco to adapt to the evolving landscape of nicotine consumption. The introduction of products like Velo Plus is indicative of a broader shift towards alternative nicotine delivery systems that may align with public health objectives of reducing the harm associated with combustible tobacco products.

The market's response to these synthetic nicotine products will likely be telling of future trends and regulatory measures in the industry. As 2025 approaches, consumers and investors alike will be watching closely to see how Velo Plus is received in the U.S. landscape and what impact it will have on British American Tobacco's market share and growth trajectory.