How the FDA's Policy Shift Prompted BAT to Raise Its Smoking Alternatives Revenue Forecast

British American Tobacco (BAT) has raised its growth outlook for smoking alternatives, citing accelerating demand for its Velo oral nicotine pouches and Vuse vapes, alongside a significant—and controversial—U.S. regulatory shift. In a June 2, 2026 trading update, the London-based company announced it now expects "mid-teens" revenue growth from its New Categories division for both the first half and the full year 2026 . This marks a sharp acceleration from recent performance and arrives just weeks after the U.S. Food and Drug Administration (FDA) issued new enforcement guidance that could reshape the American vaping and oral nicotine market .

BAT's Upgraded Forecast: What Changed and Why

BAT's New Categories division—which includes Vuse vapes, Velo modern oral nicotine pouches, and glo heated tobacco products—is now projected to deliver mid-teens revenue growth in 2026. The upgrade was disclosed in the company's first-half pre-close trading update on June 2 .

The company previously guided for low double-digit growth in this segment, and in early 2026 had only reaffirmed its group-level mid-term algorithm of 3–5% revenue growth and 4–6% adjusted profit growth, expecting 2026 performance at the lower end of those ranges . The new mid-teens target represents a significant acceleration from the low-single-digit New Category revenue growth BAT reported in the first half of 2025 .

What Prompted the Upgrade

Three factors drove the revised outlook, according to BAT's statement:

1. Global momentum in Modern Oral and Vapour. The Velo brand continues to deliver "excellent" revenue and category contribution growth globally, while Vuse vapes have returned to growth . Velo Plus, in particular, lifted BAT's total modern oral volume share in the U.S. by 10.4 percentage points .
2. Strong U.S. performance across segments. The company cited robust delivery in combustibles, vapour, and modern oral in its largest market .
3. The FDA's enforcement policy shift. BAT said it is "actively preparing to launch new products" in the U.S. following the FDA's May 8 guidance, which opened the door for more products to reach the market while their premarket tobacco product applications (PMTAs) remain under review .

How It Compares to Overall Company Guidance

Despite the New Category upgrade, BAT kept its group-level full-year guidance unchanged. The company still expects 2026 performance at the lower end of its medium-term ranges: 3–5% revenue growth and 4–6% adjusted profit from operations growth, with a second-half weighting .

At the same time, BAT lowered its forecast for the global cigarette industry. The company now expects industry volumes to decline by approximately 2.5% in 2026, down from its previous estimate of a 2% drop . The downgrade reflects ongoing volume pressure in the combustible business, even as revenue from alternatives accelerates .

The FDA's Enforcement Policy Shift: What Happened

On May 8, 2026, the FDA issued final guidance titled "Enforcement Priorities for Certain New Tobacco Products Marketed Without Premarket Authorization" . The guidance, effective immediately, describes how the agency will prioritize enforcement against certain unauthorized electronic nicotine delivery systems (ENDS) and oral nicotine pouch products .

Key Changes

• Lower enforcement priority for products with pending applications. The FDA will no longer prioritize enforcement against unauthorized products already on the market, provided the manufacturer has submitted and maintained a premarket tobacco product application (PMTA) that remains under FDA review .
• Additional burden for flavoured products. Companies seeking to market flavored products must also demonstrate "compelling evidence" that the product provides a net public-health benefit .
• No safe harbor, no legalization. The guidance does not legalize unauthorized products or create a safe harbor based on a pending application. The FDA retains full enforcement discretion and continues to target products with no application at all, as well as those posing greater public-health risks .

Products Affected

The scale of impact is substantial. According to three current and former Trump administration officials, around 100 to 200 products could immediately benefit from the new policy . A source familiar with the FDA's process said approximately 1,000 applications are already at the scientific review stage, suggesting many more products could follow .

For context, as of May 2026, the FDA had formally authorized only 45 e-cigarettes and 20 nicotine pouch products since gaining regulatory authority over the category . Estimates indicate unauthorized products already account for roughly 80% of all ENDS sales in the U.S. .

Industry and Public-Health Reactions

Industry response: Major tobacco companies—including BAT, Philip Morris, and Altria—are seen as the primary winners, as they have the resources to file and maintain extensive PMTA submissions . Smaller competitors and illicit importers face a more mixed outcome: those with no application at all remain enforcement targets .

Internal FDA reaction: Senior officials inside the FDA's Center for Tobacco Products were reportedly blindsided by the decision. The guidance was posted days before former FDA Commissioner Marty Makary resigned .

Public-health concern: Advocacy groups have expressed alarm that the policy could flood the market with flavored vapes and nicotine pouches, potentially undermining youth vaping prevention efforts . The FDA's stated rationale is to support "an orderly shift" toward a compliant, regulated market—focusing resources on the most dangerous products rather than pursuing every unauthorized item .

The policy shift marks a significant pivot in U.S. tobacco regulation and, together with BAT's upgraded forecast, underscores a broader industry transformation away from traditional cigarettes toward a new generation of nicotine products.