The British American Tobacco Combined Annual and Sustainability Report for 2025 is out. While there is a lot of interesting data on BAT’s diverse product portfolio, this article will examine the report through the lens of nicotine pouches to look at what it suggests for the future of this market segment. 

Let’s take a look at the six most interesting points in the BAT annual report.

#1. Pouches are BAT’s fastest-growing category 

Nicotine pouches are a fast-growing global product with considerable adoption among smokers and vapers. Indeed, this fact is reflected in growth figures for several related products.  BAT pouch revenue in 2024 was £790m, but last year it was a whopping £1,165m, representing almost 50% annual growth. 

During the same period, heated product sales were flat, with vapour products declining by 10%. Perhaps the biggest reason for BAT's 11% growth in new categories was the success of VELO pouches in the US, which were up almost 300% year over year.

#2. Market share is growing

In terms of marketshare, 2025 was a big year for BAT. Their share of the modern oral category in its Top modern‑oral markets (U.S., Sweden, Denmark, Norway, Switzerland, UK, Poland) reached 33.4% in 2025, up 7.5 percentage points versus 2024.

Again, US success was the main driver; volume share rose by an impressive 11.6 percentage points to 18.0%.

#3. Pouches mean better margins

Pouches are cleaner, healthier products when compared to combustible cigarettes and traditional oral tobaccos like dip and chewing tobacco. They also incur lower excise duty, meaning pouches “generally have higher margins than Traditional Oral and are largely comparable to combustibles.” 

When combined with a lower manufacturing footprint than traditional products, it’s another reason why pouches are an attractive option for BAT executives.

#4. Better product innovation and packaging

VELO Shift was launched in 2025. It introduced a new, innovative pouch shape that comes in a hexagonal can. What’s interesting about the can is that 90% of the plastic involved is bio-based, as certified via the ISCC mass‑balance system.

The report frames the Shift cans as part of its eco‑design and circularity agenda. In Sweden, BAT has trialled the “Velo x Bower” scheme, which rewards consumers for scanning and correctly disposing of Velo cans. They report that over 227,000 Velo cans were recycled through that app as of 2025.

#5. Lab analysis demonstrated that pouches are clearly reduced-risk products

BAT has put in the hard yards in the lab, examined nine WHO‑priority harmful smoke constituents, and shown that Velo pouches produce less than 12% of the toxicants found in reference cigarette smoke. 

BAT also cites toxicology work suggesting modern oral pouches likely expose users to lower levels of toxic compounds than snus, even though snus itself is already recognised, in external literature, as less harmful than smoking.

Furthermore, their in‑vitro tests report reduced biological effects (e.g., on cell viability and inflammatory responses) for modern oral vs both cigarette smoke and snus extracts.

#6. Global regulations will determine growth in 2026 and beyond

BAT warns investors that growth in nicotine pouches in potential new markets hinges heavily on regulatory developments. While they say it’s encouraging that over 20 markets have bespoke regulations around pouches, other regions are still relying on governance intended for tobacco or traditional oral products.

The report cites markets such as the UK, Switzerland, Austria, Pakistan, Japan, and South Africa as potential growth markets IF governments can agree on sensible regulation. This admission highlights the importance of campaigns like 20 Is Plenty to help secure the safest way to consume nicotine.

Final thoughts

Nicotine pouches continue to grow globally and make up a larger portion of BAT’s portfolio. As the report shows, they are safer, cleaner, and more cost-effective than cigarettes. However, much depends on sensible regulations from governments worldwide.