Top Takeaways:
- BAT reports that U.S. enforcement efforts against illegal disposable vapes are now clearly helping legal vapor sales.
- The crackdown is primarily aiding BAT’s Vuse brand after years of illegal market pressure.
- Despite early gains, BAT maintained its full-year outlook unchanged due to regulatory and economic uncertainty.
British American Tobacco (BAT) stated that recent U.S. regulatory and enforcement actions against illicit vaping products are helping its authorized vape and nicotine pouch brands expand their market presence, even as it lowered its short-term revenue outlook.
CEO Tadeu Marroco said early benefits from U.S. regulators taking more decisive action against unauthorized vapes led him to expect that its U.S. vape business would not negatively impact its broader portfolio of smoking alternatives next year, which includes the fast-growing nicotine pouch brand Velo.
BAT has long voiced its concern that illicit, unregulated, and unauthorized disposable vapes—many from overseas manufacturers—have undercut legal brands such as BAT’s Vuse vaping products. In 2024 alone, sales of unauthorized flavored disposable vapes in the United States are estimated to have reached US$2.4 billion, making up roughly 35% of convenience-store and supermarket e-cigarette sales tracked by market research data.
The renewed enforcement — including seizures, import restrictions, and tighter shipping controls by carriers such as the United States Postal Service (USPS) — has disrupted key supply chains for unauthorized products. Analysts say that this has created a window of opportunity for compliant firms like BAT to boost market share.
“The vapor category remains impacted by the proliferation of illicit vapor products in the U.S.,” BAT stated in a 2025 earnings update that its “New Categories” business — including vapes and pouches — still faces pressure but expects recovery as enforcement intensifies.
Morocco also outlined other challenges for the upcoming year, including the effects of stricter tobacco regulations in Australia. He said that investments in developing next-generation product categories would also challenge profit growth.
The Washington Examiner reports that Chinese export data showed that in April, the month President Donald Trump’s pick for Food and Drug Administration commissioner took over the agency, China exported about 7.8 million kilograms of vapes and e-cigarettes to the U.S. By May, that number dropped to 4.7 million kilograms, and in June, it fell further to just 2.2 million kilograms.
However, U.S. trade authorities documented a recent surge in exports to the U.S. In July, China reported exporting 5.9 million kilograms of vapes to the U.S. That number continued to increase month by month until October, the most recent data available, when it reached one of its highest levels at 14.8 million kilograms in vape exports to America.
Still, BAT remains cautiously optimistic. The company projects 2026 revenue and adjusted profit growth at the lower end of its mid-term targets, citing ongoing competitive and regulatory challenges.
BAT expects its 2026 revenue to be at the lower end of its stated mid-term target of 3% to 5%, with growth in adjusted profit from operations between 4% and 6%. The company anticipates about 2% growth in revenue and adjusted profit from operations this year.
The company continues to expand its premium heated product Glo Hilo and the premium vape platform Vuse Ultra in key markets.
BAT expects its operating cash flow conversion to exceed 95% in FY25, with capital expenditures around $650 million. The company reaffirmed its commitment to gradually increasing dividends, sustainable share buybacks, and lowering leverage to between 2.0–2.5x adjusted net debt/EBITDA by the end of 2026.
As the unauthorized vaping product supply declines, manufacturers with authorized brands may have their best chance in years to grow market share — but only if regulatory compliance and enforcement keep up and consumers are willing to switch to authorized products.
