Key Points
- New Category Growth: British American Tobacco’s New Category revenue rose 18% at constant rates in the first half of 2026, but performance diverged sharply across categories.
- Nicotine-Pouch Expansion: U.S. Modern Oral revenue rose 220% and volume increased 188%, driven mainly by Velo Plus and Grizzly.
- Vuse U.S. Recovery: U.S. Vuse revenue increased 19.8%, supported by stronger enforcement, competitive changes, and improved volume and price/mix.
- Heated-Tobacco Pressure: Heated-tobacco revenue fell 11.7%; premium platform Hilo gained early share but has not reversed glo’s broader decline.
- Strategic Complexity: Cigarettes remain the main source of profit and cash. Compared with PMI and JT, BAT has more routes to growth—but also greater capital-allocation and execution risk.
2Firsts
July 30, 2026
British American Tobacco released its first-half results at 7:00 a.m. British Summer Time on July 30, reporting higher revenue and adjusted profit as rapid growth in nicotine pouches and a recovery in its U.S. e-vapor business offset continued weakness in heated tobacco.
Reported revenue rose 1.4% to £12.24 billion ($16.25 billion), while revenue at constant exchange rates increased 2.9%. Adjusted profit from operations, at constant rates and adjusted for BAT’s Canadian business, rose 3.5% to £5.42 billion ($7.20 billion).
（Dollar figures are approximate and converted at £1 to $1.3283, based on the GBP/USD rate quoted on July 30. ）
Revenue from BAT’s New Categories business — Modern Oral, e-vapor and heated products — increased 18% at constant rates to £1.95 billion ($2.59 billion). Category contribution, BAT’s measure of earnings after directly attributable category costs, rose 55% to £269 million ($357 million), lifting its margin to 13.8%.
Reported operating profit fell 15.8% to £4.27 billion ($5.67 billion), partly because the prior-year period included a larger credit related to the Canadian tobacco litigation settlement and because BAT recorded £370 million ($491 million) in Fit2Win restructuring charges.
BAT maintained its forecast for full-year revenue and adjusted operating-profit growth at the lower end of its medium-term ranges, while raising its adjusted earnings-per-share expectation towards the middle of its 5% to 8% range.
The results showed the strength of BAT’s broad portfolio, but also the difficulty of managing businesses moving in different directions. Modern Oral is expanding rapidly, Vuse is recovering where enforcement against illicit products has strengthened, and glo remains under pressure despite early progress from its premium Hilo platform.
Cigarettes Still Finance the Portfolio
BAT’s cigarette volume fell 4.6% to 218 billion sticks. Combustibles revenue nevertheless increased 2.1% at constant rates to £9.72 billion ($12.91 billion), as a 6.8% price-and-mix contribution outweighed lower shipments.
Combustibles generated £5.64 billion ($7.49 billion) in category contribution, compared with £269 million from New Categories. The comparison uses the same constant-currency, non-IFRS measure and shows how heavily BAT’s investment capacity still depends on cigarettes.
The pattern was clearest in the United States. Combustibles revenue increased 5% at constant rates even as volume fell 5.2%, compared with BAT’s estimate of a 4% decline in the wider market. Price and mix added 10.2%, including an excise-duty drawback, while short-term inventory movements also supported revenue.
BAT’s U.S. cigarette volume share fell 80 basis points, driven by Newport and Lucky Strike and by growth in the deep-discount segment, where the company is under-represented. BAT increased promotional activity and expanded Doral in selected states, saying its share had begun to stabilise during the half.
Cigarettes remain BAT’s principal source of profit and cash, but maintaining that role increasingly depends on pricing, mix, cost control and selective investment rather than volume growth.
Three Categories, Three Competitive Tests
Velo Widens the Nicotine-Pouch Contest
BAT’s Modern Oral business, led by nicotine pouches, was its strongest New Category. Revenue rose 65.9% at constant rates and volume increased 57.5%, making it BAT’s largest New Category by revenue, narrowly ahead of e-vapor.
BAT’s volume share across its main Modern Oral markets reached 39.2%, up 8.4 percentage points from the end of 2025. In the United States, volume rose 188% and revenue increased 220% at constant rates, driven by Velo Plus and Grizzly Modern Oral. Its U.S. category volume share reached 29.8%, an increase of 11.6 percentage points.
BAT plans to begin a national rollout of Velo Max in the second half, further expanding a portfolio that has moved the company from a relatively weak U.S. position to a significant challenger.
Philip Morris International’s results showed growing pressure on the category leader. U.S. ZYN shipments rose 1.8% to 2.9 billion pouches in the second quarter, while consumer purchases were broadly flat to slightly higher. PMI is responding with moist and higher-strength ZYN ULTRA products, new flavours, additional nicotine strengths and higher spending on distribution, marketing and production.
ZYN retains advantages in scale, brand positioning and regulation. On June 30, the U.S. Food and Drug Administration issued modified risk granted orders for 20 ZYN products, allowing them to carry a specific risk-reduction claim. Those products had already received marketing authorisation through the PMTA pathway.
Velo is therefore challenging a larger and more established franchise rather than replacing it. The U.S. market is moving from expansion led by one dominant brand towards broader competition across moisture, strength, flavour, format, pricing and retail execution.
Vuse Shows How Enforcement Reshapes E-Vapor
BAT’s global e-vapor revenue increased 5.3% at constant rates, ending two years of decline. The recovery was driven by the United States.
U.S. Vuse revenue rose 19.8%, supported by 14.9% volume growth and a 4.9% contribution from price and mix. Its value share of closed-system consumables in tracked channels reached 55.9%, up 4.1 percentage points.
BAT attributed the improvement to stronger state-level enforcement against illicit disposable products, changes in the competitive landscape following a rival’s exit in 2025, and improvements in volume and price mix. The company estimated that the legal U.S. e-vapor market grew 1.6% by retail volume during the half.
Vuse’s recovery shows how enforcement can alter the economics of the legal market. Illicit operators can compete without the regulatory, application and compliance costs borne by established manufacturers. More effective enforcement redirects part of that demand towards suppliers with regulatory filings, large-scale manufacturing and national distribution.
Outside the United States, the picture was weaker. E-vapor revenue across Europe and the rest of the Americas fell 13.9% at constant rates, largely because of regulatory changes in Poland. Canada was affected by higher illicit volume, while BAT exited lower-revenue e-vapor markets in Indonesia and South Korea.
FDA guidance issued in May described circumstances in which the agency would not prioritise enforcement against certain unauthorised e-vapor and nicotine-pouch products with pending applications. The agency said inclusion under the policy had no bearing on whether a product would ultimately receive marketing authorisation.
BAT plans a phased second-half rollout of selected adult-focused Vuse flavours in the United States. Their performance will test both BAT’s product execution and the commercial effect of the new enforcement framework.
PMI’s VEEV business is following a different path. VEEV shipments rose 72% in the first half, led by European closed-pod markets. PMI did not disclose VEEV revenue, but the two businesses illustrate different growth models: legal-market recovery in the United States and product-led expansion in Europe.
Hilo Has Not Yet Reversed glo’s Decline
Heated tobacco remains BAT’s most difficult New Category.
Revenue fell 11.7% at constant rates, while volume share across BAT’s main markets declined 1.2 percentage points. Japan was affected by distributor inventory movements and stronger competition in the value segment. BAT also increased spending behind glo in Italy, Poland and Romania.
The company is rebuilding the portfolio at both ends of the market. Hilo is intended to strengthen glo’s premium position, while Hyper Pro+ upgrades its value-focused platform.
By May, Hilo had launched in nine markets covering about 70% of the addressable heated-products industry, according to BAT. The product held a 4.9% volume share in Poland and 1.8% in Japan, with premium-segment shares of 9.2% and 3.7%, respectively. BAT said about half of Hilo users in Japan, Poland and Italy had not previously used glo.
Hilo has strengthened BAT’s premium proposition, but its progress has not yet translated into a recovery for the wider glo business.
The competitive context remains difficult. PMI said IQOS held about 68% of Japan’s heated-tobacco market at the end of the second quarter. Japan Tobacco’s Ploom volume rose 43.5% in the first half, while its average Japanese heated-products share reached 16.8% and climbed to 18.3% in June.
PMI is defending a scaled platform, JT is gaining share, and BAT is rebuilding its product position.
Japan also shows how heated-tobacco competition is changing. JT estimated that reduced-risk products represented 48.7% of Japanese industry shipments in the first half. Category growth continues, but pricing tiers, tax changes, brand switching and consumer retention are becoming as important as converting additional cigarette smokers.
Source: BAT H1 2026 Results Presentation
Markets Move in Different Directions
The United States is BAT’s strongest case for portfolio breadth. Revenue increased 8.5% at constant rates and adjusted operating profit rose 10.1%. Cigarettes generated higher revenue, Modern Oral expanded rapidly and Vuse returned to double-digit growth.
PMI is increasing investment behind ZYN while preparing for a future U.S. launch of IQOS ILUMA, subject to regulatory action. JT’s immediate U.S. growth remains more concentrated in cigarettes, where LD helped it gain share in a contracting market.
Japan presents a more mature competitive structure. IQOS retains a large lead, Ploom is gaining share and BAT is trying to rebuild glo across premium and value price tiers. The market is no longer primarily a test of whether consumers will adopt heated tobacco; it is increasingly a contest over segmentation, pricing and retention.
Europe presents a different challenge. Regulatory changes in Poland hurt BAT’s e-vapor business, while heated-tobacco flavour restrictions disrupted PMI in Poland and Hungary. PMI is using IQOS, DELIA, LEVIA, VEEV and ZYN to broaden its response, BAT is operating across Velo, Vuse and glo, and JT is expanding Ploom.
A broad portfolio can reduce dependence on one regulatory pathway. It also requires more products, applications, manufacturing systems, supply chains and routes to market.
Other countries are dividing between markets where cigarettes still grow and markets where illicit trade is eroding legal sales. BAT estimated that illicit cigarettes accounted for about 80% of Australian industry volume and that duty-paid volume fell by more than half in the first six months of 2026. Bangladesh was also hit by taxation, regulation and illicit competition, while Türkiye and Pakistan continued to support cigarette growth through volume, pricing or both.
More Ways to Win—and Lose
PMI, JT and BAT are solving different strategic problems.
PMI has built scaled leadership platforms around IQOS and ZYN, with VEEV expanding from a smaller base. Its task is to defend those positions, close product gaps and preserve profitability while continuing to invest.
JT remains more concentrated. Cigarettes account for about 97% of its tobacco volume, while Ploom is being developed as a second growth and profit platform. Its challenge is to turn rapid gains in Japan into wider international scale and sustainable margins.
BAT has substantial businesses in nicotine pouches, e-vapor and heated tobacco, alongside cigarettes and traditional oral tobacco. That provides more flexibility across markets, but exposes the company to more technologies, regulatory systems and competitors.
BAT has more ways to win than PMI or JT—but also more ways to lose.
Velo and Vuse partly offset glo’s decline in the first half, showing the value of diversification. The same breadth can fragment investment, management attention and product-development resources, while strong growth in one business can obscure prolonged weakness in another.
Fit2Win Targets the Cost of Complexity
Fit2Win is BAT’s attempt to reduce the organisational burden of its multi-category strategy.
BAT raised its target for annualised efficiencies and cash-flow improvements to about £700 million ($930 million) by the end of 2028, from £600 million ($797 million). Expected implementation costs increased to about £950 million ($1.26 billion), while realised savings had reached £105 million ($139 million) by June. The company said the savings would be reinvested to support growth.
BAT said the programme was expected to reduce about 5,500 roles globally by the end of 2026, excluding the United States, while around 3,500 additional roles had moved to strategic partners. The restructuring includes fewer management layers, outsourcing, manufacturing changes, automation and revised working practices.
BAT now has to deliver those savings without weakening the regulatory, product-development and commercial capabilities required to support three smoke-free platforms. It must also decide how long to fund products and markets that remain below scale.
The first-half results showed that portfolio breadth can offset weakness in individual categories. Turning that breadth into durable margins will depend on BAT’s ability to concentrate investment and withdraw from businesses that cannot generate sufficient returns.
For further coverage of international tobacco companies and developments across the global tobacco and nicotine industry, continue to follow 2Firsts.
Cover image generated by AI.
Disclaimer
This article is provided solely for professional research, industry discussion, and informational purposes. Any references to brands, companies, products, technologies, or policies are made for factual reporting and analytical purposes only, and do not constitute endorsement, recommendation, promotion, or advertising by 2Firsts.
Nicotine-containing products, including but not limited to cigarettes, e-cigarettes, heated tobacco products, and nicotine pouches, carry significant health risks. Readers are responsible for complying with all applicable laws and regulations in their respective jurisdictions, including age restrictions and access limitations.
The information contained in this article should not be regarded as investment, legal, medical, regulatory, or commercial advice. While 2Firsts strives to ensure the accuracy and reliability of its content, it does not assume liability for any direct or indirect loss arising from errors, omissions, inaccuracies, or reliance on the information contained herein.
This article is not intended for individuals below the legal age for accessing tobacco or nicotine-related information in their jurisdiction.
Copyright Notice
This article is either original content produced by 2Firsts or content reproduced, translated, summarized, or adapted from third-party sources with attribution where applicable. The intellectual property rights of the original content remain with 2Firsts or the respective original rights holders.
No individual or organization may copy, reproduce, distribute, republish, modify, translate, or otherwise use this content without prior authorization. Any unauthorized use may result in legal action.
For copyright-related inquiries, corrections, or removal requests, please contact: info@2firsts.com.
AI-Assisted Translation and Editing Notice
Portions of this article may have been translated, edited, or reviewed with the assistance of artificial intelligence tools to improve efficiency and readability. Due to the limitations of AI-assisted translation and editing, discrepancies, omissions, or inaccuracies may exist when compared with the original source.
Where applicable, readers are advised to refer to the original source for the most complete and accurate information. If you identify any errors or believe that any content infringes upon your rights, please contact us at info@2firsts.com, and we will review and address the matter promptly.
