British American Tobacco (BATS.L) is under growing pressure to demonstrate real progress on its transition away from traditional cigarettes toward smokeless alternatives.
The FTSE 100-listed company will publish its half-year financial results on Tuesday, bringing the challenges facing the wider tobacco industry into sharp focus.
BAT has spent several years shifting its Business toward newer products including vapes and nicotine pouches, moving away from its traditional cigarette lines.
The company has set a target of becoming a “predominately smokeless” business by 2035, a goal that analysts and investors are watching closely.
Despite that ambition, smokeless products accounted for only around 18% of the group’s total revenues last year, with cigarettes still generating the bulk of income.
Cigarette sales totalled £20.2 billion for the year, with brands including Lucky Strike, Pall Mall and Dunhill remaining the company’s dominant revenue source.
New category products, which include vape brand Vuse and nicotine pouch Velo, contributed £3.6 billion to revenues during the same period.
BAT has said it is adding millions of new customers each year to its smokeless brands, pointing to the growing appetite for alternatives to cigarettes.
The company entered 2026 forecasting total revenue growth of between 3% and 5%, with double-digit growth expected from new category products specifically.
Investors will be watching closely on Tuesday for any updates to that guidance, alongside broader signals about the pace of the smokeless transition.
Richard Hunter, head of markets for Interactive Investor, highlighted the growing number of obstacles facing the business as it attempts to reinvent itself.
Hunter said: “BAT is continuing to position itself to reflect the changing landscape of smokeless products, while navigating an ever-growing number of hurdles.”
He pointed to shifting consumer habits and tightening regulation as twin forces squeezing the traditional tobacco side of the business over a sustained period.
Hunter said: “The pressure on traditional tobacco products has been in evidence for some considerable time, driven both by changing lifestyle habits as well as increasing regulation.”
Governments around the world have been toughening their stance on tobacco sales, particularly restrictions aimed at preventing sales to younger consumers.
Hunter said: “There have been several instances of governments toughening their stance on tobacco sales, especially to youngsters, which adds to the burden of regulatory censure which has plagued the sector over recent years.”
Beyond regulation, ethical concerns among a section of the investment community continue to weigh on sentiment toward tobacco stocks, complicating the path forward.
Hunter said: “There is a reluctance among some investors to invest in the sector at all on ethical grounds,” adding further complexity to BAT’s investor relations challenge.
Hunter concluded that all of these pressures are in “sharp focus” for investors who will be seeking clear evidence of meaningful progress in Tuesday’s results.