BAT Kenya Profit Rises as Exports Cushion Illicit Trade Losses, But Illegal Cigarettes Tighten Grip on Market

Kenya, 24 July 2026 - British American Tobacco (BAT) Kenya has posted a modest increase in half-year earnings, but the results expose a deeper challenge confronting Kenya's tobacco industry: the rapid expansion of illicit cigarette trade, which the company says now accounts for nearly half of the domestic market and costs the government billions in lost tax revenue every year.

The Nairobi Securities Exchange-listed tobacco manufacturer reported a 2% increase in profit before tax to KSh4.4 billion for the six months ended June 30, 2026, compared to KSh4.3 billion during the same period last year. Net revenue grew by 5% to KSh12.3 billion, largely supported by a rebound in export sales and rising demand for BAT's modern oral nicotine pouches.

Despite the improved earnings, the company says its core domestic cigarette business continues to weaken as consumers increasingly turn to cheaper untaxed products amid rising living costs.

BAT Kenya Managing Director Sidney Wafula described the performance as resilient despite mounting industry headwinds.

"Despite a challenging operating environment marked by the continued rise in illicit cigarette trade, the company delivered resilient performance during this period. These results reflect the agility of our business in navigating an increasingly complex and dynamic environment," Wafula said.

The company's biggest concern remains the surge in illicit tobacco products entering the Kenyan market.

According to BAT, third-party research indicates that illegal cigarettes accounted for approximately 45% of the domestic market by the end of 2025, up sharply from previous years. The company estimates this deprives the Kenyan government of nearly KSh12 billion annually in tax revenue, while hurting legitimate manufacturers, distributors and farmers across the tobacco value chain.

The findings mirror concerns repeatedly raised by industry players and tax authorities that smuggled cigarettes, often sold without excise duty, health warnings or regulatory oversight, have become increasingly attractive to price-sensitive consumers.

While domestic cigarette sales weakened, BAT benefited from recovering export markets and growing acceptance of its smoke-free nicotine products.

Sales of modern oral nicotine pouches, introduced commercially in Kenya in mid-2025, continued gaining market traction during the reporting period, helping diversify revenue away from traditional combustible tobacco products. Export sales also recovered after a difficult 2025, cushioning the decline in local volumes.

However, these gains came at a cost.

Operating expenses rose 7% to KSh8 billion, driven by higher raw material costs, investments in the company's expanding multi-category portfolio and compliance with Kenya's enhanced graphic health warning regulations. Operating profit consequently increased by only 1% to KSh4.3 billion.