British American Tobacco’s Kenyan unit plans to increase local tobacco sourcing to at least 70 percent in 2026 as the company seeks to cut production costs and support domestic farmers amid mounting pressure from illicit cigarette trade.
BAT Kenya aims to raise the share of tobacco leaves purchased locally from 60 percent in 2025 and 55 percent in 2024, Chief Financial Officer Philemon Kipkemoi told the Business Daily newspaper.
The strategy is expected to help reduce manufacturing costs by limiting reliance on imported tobacco while strengthening the company’s supply chain within the country.
“A significant portion of our raw material consists of tobacco leaves. For each kilogram purchased locally, we save about £2 [US$2.68],” Kipkemoi said.
The cost-saving measure comes as the company faces declining revenues partly driven by the expansion of illicit cigarette trade in the Kenyan market.
BAT Kenya reported a 12.5 percent year-on-year decline in revenue to 35.9 billion Kenyan shillings (US$277.8 million) for the financial year ending December 31, 2025.
In regulatory filings, the company said illegal cigarette imports are increasingly affecting domestic sales.
“Domestic market performance continues to be negatively affected by illicit trade. Illicit cigarettes now represent 45 percent of the domestic market, up from 37 percent in 2024,” the company said.
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Industry analysts say smuggling particularly across the border with Uganda has intensified competition for legal tobacco companies operating in Kenya.
Illicit products typically avoid taxes and regulatory compliance, allowing them to be sold at significantly lower prices than legally manufactured cigarettes.
The rise in smuggling has therefore put pressure on established manufacturers such as BAT Kenya, forcing them to pursue cost-cutting strategies and strengthen supply chains.
Increasing domestic sourcing is also expected to benefit Kenya’s tobacco farming sector by creating stronger demand for locally grown leaf.
By purchasing more tobacco from local producers, BAT Kenya could help boost farmer incomes and stimulate agricultural activity in tobacco-growing regions.
According to data from the Food and Agriculture Organization (FAO), Kenya’s tobacco leaf production has grown steadily in recent years.
National output rose from 10,533 tonnes in 2020 to 12,446 tonnes in 2024 an increase of about 18 percent over five years.
Despite this growth, Kenya’s tobacco production remains relatively modest compared with other major producers in East Africa.
Countries such as Malawi, Tanzania and Mozambique each produce more than 100,000 tonnes of tobacco annually, making them among the largest suppliers in the region.
Kenya’s smaller output means that expanding domestic production could provide new opportunities for farmers if demand from local manufacturers increases.
BAT Kenya has long been a dominant player in the country’s tobacco industry, operating manufacturing facilities and sourcing tobacco from local growers through contract farming arrangements.
The company says its new sourcing strategy will not only help control costs but also strengthen the resilience of its supply chain.
However, industry observers note that the company’s long-term outlook will also depend on how effectively authorities combat the growing illicit cigarette market.
Government agencies have stepped up enforcement efforts in recent years, but smuggling remains a major challenge in several East African markets.
For BAT Kenya, increasing domestic sourcing is one way to improve efficiency while supporting the local agricultural sector as it navigates a changing and increasingly competitive market environment.
