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

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.