The British American Tobacco offices in London, Britain. Picture: REUTERS/STEFAN WERMUTH
The British American Tobacco offices in London, Britain. Picture: REUTERS/STEFAN WERMUTH

Hong Kong/New York — British American Tobacco (BAT) is acquiring Dryft Sciences’s nicotine-pouch business as it seeks to compete in the fast-growing category of smokeless products that are catching on in the middle of a respiratory pandemic.

The deal, made by BAT’s US subsidiary Reynolds American, will boost its US portfolio of these products from four to 28, pitting it against Swedish Match’s snus and Altria’s On! brand. BAT declined to disclose the value of the Dryft acquisition.

The new generation of oral nicotine products are essentially modern versions of chewing tobacco that do not require spitting, and tobacco companies are positioning the Instagram-friendly offerings as a replacement for cigarettes. Known as dip, snuff, pouches or snus, they do not contain tobacco and come in cinnamon, spearmint and black cherry flavours.

The US Food and Drug Administration has allowed some of these products to be marketed as safer than cigarettes, a distinction it has not permitted for vaporisers and heat-not-burn devices.

The Dryft products will be sold under BAT’s existing brand Velo, the company said in a statement. Their combined US market share in tobacco leaf-free nicotine pouches will be about 10%.

The London-based company’s modern oral category saw revenue rise 273% last year to £129m ($167m), outpacing that of heated tobacco and vaping products.

Traditional smokes are a more than $700bn-a-year global business that for decades has been dogged by health concerns and changing social norms that have led to a slow, steady decline of users. Though cigarette companies have been trying to diversify, their efforts to push vaping as the main alternative to smoking hit a snag after a spate of mysterious lung illness linked to the practice raised concern over the prevalence of vaping among teenagers.

Smokeless oral nicotine products are gaining popularity. In 2020, global retail sales of the moist snuffs are estimated to reach $12.7bn, up 4.8% from 2019, according to Euromonitor International — even though snus is not sold in most of the EU. There is about $1bn in annual sales for chewing tobacco. Vaping products are expected to log $22.6bn in sales this year.

The new products do not require spitting because tobacco or other solids are enclosed inside single-serving pouches that are lodged between the gums and lips, sucked on discreetly, and easily discarded like chewing gum, making them more appealing to young or female consumers who have been averse to traditional snuff products.

Bloomberg

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