BAT reverses ban to relaunch nicotine pouches in Kenya

In less than 24 months, nicotine pouches are back on the Kenyan market after British American Tobacco (BAT), the biggest manufacturer in Kenya, lobbied government authorities for their reintroduction. Meanwhile, the tobacco manufacturer continues to push for the opening of its $2.5m nicotine manufacturing plant in Nairobi.

Confidential documents seen by The Africa Report show that BAT Kenya Plc imported ten tonnes of Velo – the new name for the nicotine pouches in Kenya, and the name given to the product in other countries – from South Africa in July 2022, and has already ordered additional supplies, which are expected to arrive in the country by the end of August. An initial ban on the nicotine pouches, previously called Lyft, was established in October 2020.

Insiders tell The Africa Report, on condition of anonymity, that about seven tonnes out of the ten imported have been repackaged and dispatched for sales, which is part of “market testing” before full re-introduction.

“[BAT] are closely watching the market and reactions. The next import was delayed due to the elections, but could be more than July supply,” says a source at BAT, who fears possible dismissal by the company.

The product carries genuine stamps from both the Kenya Bureau of Standards (KEBS) and the Kenya Revenue Authority (KRA), implying that government officials and regulators are aware of the ongoing nicotine sales. Its importation is being permitted even as health advocates decry rife non-compliance. The product will be available in more rural regions, including Siaya, Kisumu, Migori, and parts of Kenya’s western region.

Extensive tactics
Part of BAT’s tactic to get the product back in the market was to maintain the change of classification of the nicotine pouches, and then register a ‘new’ product under the Tobacco Control Act.

BAT Kenya threatened to relocate the factory to an alternative location if the higher tax rates take hold.

The nicotine pouches were initially registered by Kenya’s Pharmacy and Poisons Board (PPB) in 2020 as an alternative medicine to help cigarette smokers quit. It was therefore subject to lower taxes and avoided other health regulatory frameworks stipulated under the Tobacco Control Act, thanks to KRA’s aggressive hunt for more tax revenues through the sale of excisable goods like nicotine.

For example, while health requirements under the Tobacco Control Act demand, among other things, the inclusion of graphic warnings on the packages, which other tobacco products like cigarettes are fully compliant with, Velo nicotine pouches do not carry the same warnings.

When Kenya’s National Treasury had, in the Finance Act 2022, exercised an excise duty rate of KSh2500/kg on the nicotine pouches – much higher than the KSh1200/kg rate previously proposed in the Finance Act 2021 – BAT Kenya threatened to “relocate the factory to an alternative location” if the higher tax rates take hold, further warning that the move could see the government lose KSh4bn yearly in revenues.

Medical warnings
Health experts continued to warn that the product could instead worsen nicotine intake, addiction and attract new entrants, especially for underage users. Kenya Tobacco Control Alliance (KETCA), the umbrella organisation for bodies involved in tobacco control and health promotion in the country, is specifically blaming Health Cabinet Secretary Mutahi Kagwe for being too lenient with the manufacturers.

“The cabinet secretary [health] is acting alone in consultation with the tobacco companies, something that is illegal,” Kenya Tobacco Control Alliance (KETCA) chairman Joel Gitali tells The Africa Report.

Velo, a brand of flavoured nicotine pouches made by British American Tobacco (BAT), have been accused of using social influencers to sell tobacco products to young people.
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— Mouth Cancer Action (@mouthcancerorg) November 8, 2021

Kagwe has had numerous talks with the tobacco manufacturers to an extent that the Tobacco Control Board (TCB) is now saying the highly addictive nicotine pouches are “sort of impotent”, according to Gitali.

The ministry of health, through its tobacco control division, declined to respond to queries regarding the alleged engagement with tobacco manufacturers and steps it will take on non-compliant BAT.

However, in the recent letter dated 7 September 2021 to Kagwe, BAT’s managing director requested lifting a ban on Nicotine products and allowing them to bear a small warning covering ten per cent of the packet.

Fully compliant?
BAT insists that Velo is fully compliant with the tobacco control health guidelines despite the products available in the market showing the contrary. The manufacturer, listed on the Nairobi Stock Exchange (NSE), maintains that the non-combustible nicotine pouches are healthy for smokers.

“BAT Kenya operates its business in compliance with all applicable laws and regulations. The company received the required regulatory approvals for the sale of its tobacco-free oral nicotine product – Velo, in Kenya. Velo offers adult smokers an alternative way to consume nicotine and is part of BAT’s purpose to build A Better Tomorrow by reducing the health impact of its business,” BAT tells The Africa Report in a response.

BAT is targeting the Central and East African markets with its Kenya subsidiary that is awaiting government nod before commencing production.

The challenge now rests on the Kenyan market where most restricted products, such as alcohol and tobacco, are easily accessible at corner shops where things like proof of age are hardly monitored.

This implies that Velo, just like other restricted products, is likely to be used by both smokers and non-smokers in Kenya – and non-smokers could switch to smoking in the event they do not regularly get nicotine pouches, say some health experts.

Kenya could however find itself in the bad books of the WHO if the ministry of health cedes to pressures from the tobacco manufacturers to have nicotine sold without following the tobacco guidelines.

Kenya is a signatory to WHO’s Framework Convention on Tobacco Control (WHO-FCTC) which calls for reduction measures concerning tobacco dependence and cessation.

The WHO convention, which Kenya ratified and domesticated through the Tobacco Control Act in 2007, further forbade tobacco players from engaging in corporate social responsibility activities.

International ambitions
Tobacco manufacturers have been diversifying into alternative tobacco and nicotine products to grow their profits in Africa, and compensate for the rapidly shrinking cigarette market, especially in the European countries.

In the half year ending June 2022, BAT Kenya recorded a 7.4% rise in net profit to KSh2.9bn ($24m), attributed to greater export volumes and higher tobacco prices in the domestic market despite tax hikes in Kenya.

In a previous investors’ presentation, BAT said it is targeting 50 million more consumers by 2030 that could earn it more than KSh650bn in revenues by the end of 2025, signalling its intended push to overcome regulatory bottlenecks.

BAT is targeting the Central and East African markets with its Kenya subsidiary which is awaiting government nod before commencing production.