By Timothy S. Donahue

Top Takeaways:

• Pouch push: BAT expects nicotine pouch industry revenue to triple by 2030, with the category driving its New Categories growth.
• Growth target: BAT expects New Categories revenue to grow at a mid-teens rate through 2030.
• Profitability: New Categories contribution margin is expected to reach at least 30% by 2030.

BAT sees plenty of growth left in nicotine, just less of it in cigarettes.

British American Tobacco expects nicotine pouches to become its primary growth driver through the end of the decade, as the company targets mid-teens annual revenue growth for its New Categories business through 2030.

The maker of Velo, Vuse and glo laid out its Horizon 2030 strategy Tuesday at a Capital Markets Day in Winston-Salem, N.C., outlining a business increasingly reliant on smokeless products for growth.

BAT expects overall nicotine industry revenue to grow by about 4% between 2025 and 2030, driven by smokeless alternatives. The company expects nicotine pouch revenue to triple during that period.

That makes oral nicotine particularly important to BAT’s ambitions.

Velo has already become one of the strongest components of the company’s New Categories portfolio. BAT reported Modern Oral revenue of £1.17 billion in 2025, up 47.4%, largely driven by the U.S. rollout of Velo Plus. The company described Modern Oral as its fastest-growing New Category.

Velo Plus also helped push the brand into the No. 2 position in U.S. nicotine pouches by both volume and value share, according to BAT, and reached category contribution profitability within a year of launch.

The company now expects momentum to continue. BAT said New Categories revenue should grow at a mid-teens rate through 2030, extending the growth rate it had already targeted for 2026.

The company also expects substantially higher profits from those products.

BAT aims for a New Categories contribution margin of at least 30% by 2030. The company said the improvement will be driven by premiumization, a better product mix, increased scale, and more targeted allocation of resources.

That would mark a significant change from the first half of 2026, when the contribution margin was 13.3%.

BAT’s increased emphasis on pouches follows several years of uneven performance across its three major smokeless categories. Velo has accelerated, particularly following the introduction of Velo Plus in the United States, while the company’s vapor and heated tobacco businesses have faced distinct challenges.

Vuse has been pressured by the proliferation of illicit vapor products in the United States and Canada. BAT said earlier that U.S. legal-industry vapor volumes were declining as unauthorized products continued to capture substantial market share.

Its glo heated tobacco business has faced intense competition in markets including Japan, while BAT has been rolling out its newer glo Hilo platform. Pouches have been moving in the opposite direction.

BAT said Velo drove strong growth across all regions in 2025, helping New Categories revenue return to double-digit growth in the second half of the year.

The company has also continued to develop the portfolio. Velo Shift, launched in 2025, introduced a new pouch shape and a hexagonal can as BAT looks beyond markets with established oral nicotine use.

The strategy reflects what BAT sees as a broader shift in the nicotine market rather than a simple increase in a single brand.

Its Horizon 2030 assumptions project nicotine industry revenue to continue expanding even as combustible volumes decline, with smokeless products taking an increasingly large share of the business.

Cigarettes aren’t being removed from the strategy.

BAT expects global tobacco industry volumes to decline by about 2.5% between 2025 and 2030 and plans to focus combustible investment on 20 markets that it says account for approximately 80% of industry revenue.

The company’s cigarette portfolio includes Dunhill, Lucky Strike, Newport, and Camel across various markets. Combustibles also remain critical to funding BAT’s transition. The company has previously said that continued cigarette revenue and profitability provide the cash needed to invest in New Categories.

BAT is simultaneously seeking greater efficiency across the business, including increased use of artificial intelligence in product development, marketing, and manufacturing. In the near term, the company left its 2026 outlook unchanged.

BAT expects to finish the year toward the lower end of its 3% to 5% revenue-growth range and 4% to 6% adjusted profit-from-operations growth range, both at constant currency. Adjusted diluted earnings-per-share growth is expected to be toward the middle of its 5% to 8% range.