Lyft ban puts at risk Sh2.5bn BAT plant

BAT Kenya #ticker:BAT says the government’s ban on its nicotine pouches risks the viability of its Sh2.5 billion factory in Nairobi whose construction has been ongoing.

The new local BAT factory is eyeing to produce cigarette alternative products such as nicotine pouches under the Lyft brand to sell to Kenya and the African region.

This comes at a time the multinational has in recent years been diversifying from cigarettes in response to flagging sales across the world as it eyes new customers.

As part of the global strategy, Kenya was chosen to host a plant for the production of non-combustible nicotine pouches targeting the African market at an estimated cost of Sh2.5 billion.

“A sustainable fiscal and regulatory environment for these new category products in Kenya and across the continent is key for the continued viability of our factory investment,” said BAT in its latest annual report.

The ban on nicotine pouches was made last February.

Kenya wanted to classify BAT’s nicotine pouches as tobacco products that are under the tobacco control law, Health Cabinet Secretary Mutahi Kagwe said last February after the product was declared illegal by his ministry.

The move would place on the nicotine pouches similar marketing restrictions that are imposed on cigarettes and other tobacco products by the Tobacco Control Act, which include promotions and advertising, usage in public areas, and use by minors.

The nicotine pouches are placed under the lip so that the nicotine can be absorbed by the body, but they do not contain tobacco.

BAT’s London-based parent company said earlier its local subsidiary has beefed up talks with the government to address a regulatory dispute that has halted the sale of the nicotine pouches which traded locally under the Lyft brand.

“In Kenya, we continue to engage with the relevant authorities on the regulatory and fiscal framework to support a commercially sustainable reentry into the modern oral category,” BAT Plc said in its latest annual report.

BAT Kenya recorded an 18 percent rise in net profit to Sh6.5 billion for the year ended December, on higher revenues and lower costs.

Treasury recently changed the way of calculating taxes on liquid nicotine products which is expected to see the cost of electronic cigarettes and vapers rise.

Treasury CS Ukur Yatani proposed to change the taxation regime for liquid nicotine to Sh70 per milliliter.

The regulation is meant to constrain access and consumption of the new form of tobacco which is popular among young people.

Source: Business Daily Africa