British American Tobacco p.l.c. Stock

British American Tobacco p.l.c. (BAT) is a consumer-focused business operating internationally.

The company’s multi-category approach means the company is well placed to provide adult consumers with products designed for every mood and moment. The company’s portfolio reflects its commitment to meeting the evolving and varied needs of adult consumers.

The company’s business is divided into three complementary regions, with a balanced presence in both high-growth emerging markets and highly profitable developed markets.

Vapour

Vapour products are battery-powered devices that heat e-liquids to produce an inhalable aerosol, commonly known as vapour. Although e-liquids usually contain nicotine, there is no tobacco in Vapour products.

Heated Products

Heated Products (HPs) comprise two main functional parts; an electronic handheld device that contains a lithium-ion battery that powers a heating chamber: and a specially designed consumable that is inserted into the device. Everything has been designed so that nicotine and flavour are released through precision heating.

HPs use heat to generate a nicotine-containing aerosol, which the user inhales. This category includes Tobacco Heated Products (THP) and Herbal Products for Heating (HPH). Within HP, because the tobacco or herbal substrate is heated instead of burned, the resulting aerosol comprises mainly water, glycerol, nicotine and flavours – different to cigarette smoke.

Modern Oral

Modern Oral products are pouches which contain high purity nicotine, water, and other high-quality ingredients. Consumers place the disposable pouch between their gum and upper lip, typically for around 30 minutes, during which time nicotine and flavours are released and the nicotine is absorbed through the tissues lining the mouth.

The company’s Modern Oral products are white in colour and contain high-purity nicotine, water and other high-quality food-grade ingredients, including plant-based fibres, flavouring and sweeteners.

The company’s Velo product range spans across both mint and fruit flavours and are sold in various nicotine strengths, from 4mg to 17mg of nicotine per pouch.

The company is also delivering a step change in Modern Oral manufacturing. Truly living the company’s ethos, its Modern Oral factory in Pecs, Hungary, put together a bold plan to implement food industry standards for Modern Oral manufacturing.

Traditional Oral

Traditional Oral products include snus and snuff. Snus is a moist form of oral tobacco originating from Sweden. It is available in loose form or as pouches. The tobacco is typically mixed with water, salt and aromas.

The most common products in Traditional Oral are largely moist oral tobacco popular in the U.S., with the main brands being Grizzly and Kodiak. These products are less finely ground than another Traditional Oral product referred to as Swedishstyle snus. Both of these Traditional Oral products are available in loose form, as well as in pre-packed pouches.

The company also sells a range of Traditional Oral products, including Swedish-style snus and American moist snuff, available in loose tobacco form or as pre-packed pouches. The company has long sold snus in Sweden and Norway through the company’s Fiedler & Lundgren business, whose brands include Granit and Mocca. In the U.S., the company markets snus under the Camel brand. The company’s American moist snuff products include the company’s flagship Grizzly brand, as well as the premium moist snuff brand Kodiak.

Combustibles

The company sold 555 billion cigarette sticks and 15 billion OTP (stick equivalents) in 2023. The company operates internationally, with 38 fully integrated cigarette manufacturing facilities in 36 markets.

The company is focused on driving value from its strategic brands of Dunhill, Kent, Lucky Strike, Pall Mall, Rothmans, Newport (U.S.), Natural American Spirit (U.S.) and Camel (U.S.), which account for 66% of the company’s combustible volume.

The company’s combustibles business is founded on understanding and meeting the preferences of adult smokers in all parts of the world.

Acquisitions

During 2023, the company acquired a further 1.31% in Hrvatski Duhani d.d.

In March 2021, the company announced a strategic collaboration agreement with Organigram Inc., a wholly owned subsidiary of publicly traded Organigram Holdings Inc. (collectively, Organigram). Under the terms of the transaction, the company’s subsidiary acquired a 19.9% equity stake in Organigram Holdings Inc. to become its largest shareholder. In November 2023, the company announced the signing of an agreement for a further investment in Organigram.

In April 2023, the company announced a strategic joint venture agreement between the company’s subsidiary, AJNA BioSciences PBC, and Charlotte’s Web. Under the terms of the transaction, the company’s subsidiary acquired a 20% stake in the new entity, DeFloria LLC.

In September 2022, the company announced an investment in exchange for 16% of Sanity Group GmbH (Sanity Group), a German based cannabis company, which has a well established product portfolio of CBD consumer brands and medical cannabis brands and is actively engaged in the research, development, and marketing of cannabis products.

In November 2022, the company had invested in Charlotte’s Web Holdings, Inc. (Charlotte’s Web). Charlotte's Web is based in Colorado, the U.S.A., listed on the Toronto Stock Exchange, and holds a prominent position in innovative hemp extract wellness products across major retail channels, including food/drug/mass retail, and natural grocery and vitamin retailers. Their product formats include tinctures, capsules, chews and topicals.

During 2022, the company increased its ownership of a wholesale producer and distributor operating in the agriculture sector based in Uzbekistan, FE 'Samfruit' JSC by 2.8% to 45.4%.

In addition, during 2022, the company made a non-controlling investment in Steady State LLC (trading as Open Book Extracts), a U.S. based cGMP certified manufacturer and distributor of cannabinoid ingredients, food products and nutraceuticals.

Dispositions

In March 2022, the company announced the intention to transfer its Russian business in full compliance with international and local laws. At that time, the company had two subsidiaries in Russia (BAT Russia), being JSC British American Tobacco-SPb and JSC International Tobacco Marketing Services. In September 2023, the company formally entered into an agreement to sell the company’s Russian and Belarusian businesses to a consortium led by then members of BAT Russia’s Management team, in compliance with local and international laws. As previously announced, due to operational dependencies between BAT Russia and the company’s subsidiary in Belarus (International Tobacco Marketing Services BY) (BAT Belarus), the Belarusian business was included in the sale. The transaction was completed on September 2023.

Customers

The company’s customers include retailers, global and local key accounts, distributors and wholesalers that are essential for driving growth and embedding responsible marketing practices.

Seasonality

The company’s business segments are not significantly affected by seasonality although in certain markets cigarette consumption trends rise during summer months due to longer daylight time and tourism.

Strategy

The company’s growth strategy includes a combination of organic growth, as well as mergers, acquisitions, joint ventures and investments.

Research and Development

The company’s total research and development costs were £408 million in 2023.

History

British American Tobacco p.l.c. was founded in 1902. The company was incorporated in 1997 under the laws of England and Wales.