BAT Kenya – A New Future for Tobacco

BAT Kenya, the largest manufacturer of tobacco products in East Africa, is changing direction to meet evolving consumer preferences.

With the growing focus on healthy living, the tobacco market is moving towards new categories of nicotine products.

The novel nicotine categories include vapour and tobacco heating devices as well as oral nicotine pouches. They are typically either smoke or tobacco-free, and there is growing consensus amongst public health institutes around the world, such as the US FDA, that they can offer lower risks than traditional cigarettes.

This is also the direction British American Tobacco Kenya plc (BAT Kenya), part of the British American Tobacco Group (BAT Group), a leading multi-category consumer goods business, is now taking.

“BAT has a long history and rich heritage in Kenya,” said Ms Beverley Spencer-Obatoyinbo, BAT Kenya’s out-going Managing Director, “The company’s roots go back to 1907 and BAT has been listed on the Nairobi Securities Exchange since 1969. Over the years, the company  has evolved into one of East Africa’s leading consumer goods companies. We are amongst the large multi-national manufacturers in East Africa that have played a long-standing part in Kenya’s economic growth.”

Traditionally, the company’s core business has been the production of a range of high-quality, traditional tobacco products, including cigarettes (combustible products) and cut–rag tobacco (semi-processed tobacco). These have been made for the local market as well as export markets across eastern, central and southern Africa.

New direction

However, the tobacco world is changing. An unprecedented confluence of technology, societal change and public health awareness has created a unique opportunity to provide consumers with new categories of potentially reduced-risk products.

“The BAT group recognised a long time ago that significant research was needed into developing potentially reduced risk products to lead the business away from combustible tobacco products. To this end, we have invested some GBP 2.5 billion to come up with new categories of nicotine products that have the potential to pose significantly lower risks than combustible cigarettes for smokers who switch to using them exclusively,” said Beverley Spencer-Obatoyinbo.

These efforts have resulted in a significant landmark, a new state-of-the-art factory in Nairobi worth $ 25 million for the production of a new product called LYFT, BAT’s tobacco-free modern oral nicotine pouch, which the company believes is likely to be the lowest risk product in the BAT Group’s portfolio – a portfolio that already contain e-cigarettes, which Public Health England considers to be at least  95% less harmful than traditional cigarettes.

“We set our sights on growing our existing contribution to His Excellency, the President’s Big 4 Agenda for Kenya, even further. The new facility was set up within 14 months and completed in 2020, the year of COVID-19. The factory was set up completely digitally, with no technicians and experts coming in, to the highest standards. Given the circumstances, it was a remarkable achievement – a testament to the quality of our talent and what is possible if you embrace technology,” said Ms Spencer-Obatoyinbo.

“The factory will increase our manufacturing and export footprint, create more jobs, and meet the needs of Kenyan consumers for greater choice, more innovation and potentially less risk.

Ms Spencer-Obatoyinbo points to the increasing number of endorsements from public health authorities around the globe as being vital for encouraging smokers to make the switch from cigarettes. In the UK, for example, incidences of adult and youth smoking are now at record lows. A recent paper, funded by the NGO, Cancer Research UK and published in a scientific journal, credited the availability of e-cigarettes in the UK for an additional 50,000 – 70,000 smokers successfully quitting each year.

“This, together with the tobacco harm reduction success stories from other countries like Sweden, is why we believe so firmly that oral nicotine pouches have the potential to contribute to a reduction in the projected health burden associated with smoking in Kenya, when supported by the right regulatory and fiscal environment.

“As the shape of the tobacco industry changes, it is critical that regulators develop appropriate regulatory frameworks and product standards that maximise, not eliminate the Tobacco Harm Reduction potential of this new category.”

Business Transformation

Ms Beverley Spencer-Obatoyinbo, who has been with BAT for many years and has worked various countries, came to Kenya four years ago with a clear vision. Under her management, the business has undergone significant transformation, focusing on what BAT has to offer to its Kenyan and East African stakeholders going forwards, as opposed to its long-established history in these markets. This has been reflected in a new strategy redefining the company’s approach to the east African markets, and pre-empting the BAT Group’s newly evolved corporate purpose that it announced in the middle of last year: to deliver a “Better Tomorrow” for the Group’s stakeholders.

The talent and sustainability agendas were also top priorities. It was critical to make sure that employees, the backbone of the business, were able to cope with the accelerated changes, and to build new capabilities in the digital space, attracting people from slightly different sectors to support the new products. The company also worked hard to change the mix of people in the business, promoting gender and age diversity.

Sustainability is not a topic which is new to the company – BAT Kenya operates a sustainable business and invests in various initiatives to reduce the impacts of its business and to contribute to the development and protection of the communities and ecosystems in which it operates. The company drives various programmes in sustainable agriculture and environmental conservation, including afforestation activities, through which it has recorded over 50 million surviving trees planted since 1978.

From a manufacturing sustainability perspective, BAT is also considered to be one of the best sites in Kenya with industry leading energy and water consumption savings, and a zero landfill policy which has been in place for several years.

Kenya’s manufacturing industry is an emotive topic for Ms Spencer-Obatoyinbo. Since being appointed to the Board of the Kenyan Association of Manufacturers (KAM) , she has become more vocal than ever in her support for manufacturing, championing the fight against regulatory complexity and overreach, which she feels continue to hold the industry back from fulfilling its potential.

Developing the potential

Beverley Spencer-Obatoyinbo is now stepping down from her role, but the results of her 4-years at the helm of BAT Kenya and the wider East African business are impressive. “I am happy with what we have achieved in BAT Kenya, but of course progress does not stop here.”

She is mindful that several challenges remain, such as the need to shape the regulatory framework for the new product categories, and to address the increase in the volume of tax-evaded cigarettes coming into Kenya across the Ugandan border. “Increased tobacco excise is no longer translating into increased government revenues in Kenya. Instead, it is increasing the incentive for smugglers to bring in duty-evaded product from neighbouring countries.”

Speaking about the next 18 months, she confirmed that the company will continue with the strategy that was reframed in 2020, focusing on helping to get the regulatory framework to support novel nicotine categories in Kenya, which will impact the developments in this area in the whole of East Africa. Then the potential of the new plant can be fully utilised.

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