Why BAT won't just stop selling cigarettes

A first for a Pakistani platform

The episode opens with Muzamil framing the conversation as a first for his channel — the first time a Pakistani platform is hosting a sit-down with the Chief Operating Officer of one of the world’s leading consumer goods companies. BAT has presence in more than 150 countries, over 46,000 employees globally, a market capitalisation north of $80 billion as of February 2025, and revenues last year of over £25 billion. In Pakistan, the local subsidiary Pakistan Tobacco Company has invested over $40 million since 2020 to build a modern oral nicotine pouches factory in Jhelum, paid more than 600 billion rupees in taxes in just the last three years, and exported over $150 million worth of cigarettes and nicotine pouches to markets like Japan, Peru and France.

Johann van der Muilen, who introduces himself simply as “fine, thank you” when Muzamil asks how he is doing, has been with the company for more than thirty years. He started as a trainee. He is now COO and a board member. The arithmetic of his own career is the cleanest opening illustration of the company he is about to describe.

The transformation, in Johann’s own words

Muzamil asks Johann to scale-set the business. The answer is direct. “We have a turnover of £27 billion. We make close to £30 billion of profit. So it’s not a small company.” But the number Johann is more interested in is a date: 2035. By then, the company has publicly committed to having half of its business no longer come from selling cigarettes.

The motivation is something Johann is careful to state plainly. For most of his thirty years, the company did not have a satisfying answer to the question of what its products did to the people who used them. “In the last ten years, through innovation, through technological breakthroughs, and based on science, we have now found alternatives for consumers,” he says. “We can offer them alternatives which are much less risky and have a massive health benefit.” The framing he returns to repeatedly is one he attributes to the company’s mission: a “smokeless world.” Today, roughly half of the company’s consumers globally use products that are not combustible cigarettes. The target is to double that base in the next five years.

Why not just stop selling cigarettes

This is the question Muzamil presses hardest, and he frames it the way most viewers would. If the alternatives are real, why keep the cigarettes on shelf at all? Why not force the switch?

Johann’s answer is the longest single passage of the conversation, and it is built around two reasons. The first is illicit trade. “The moment that we leave the space, it’s not that the cigarette consumption will disappear,” he says. He uses South Africa during COVID as the case study. The government banned cigarette sales for six months. The market did not shrink — it flipped overnight to illicit. When the ban was lifted, the legal market reopened. But two to three years later, “still 75% of that market is illicit.” Illicit products carry no quality control, no regulation, no idea of what is actually inside them. Leaving the space, in his framing, is the opposite of harm reduction.

The second reason is economic and frankly stated. The revenues from combustible cigarettes are what fund the transformation. “We talk about billions of pounds just to make consumers aware that there are alternatives, how we build a brand, how we help them to switch.” Switching a smoker, he reminds Muzamil, is not only a product change. “You have to give up a ritual of smoking. So it’s almost like handholding the consumer through their journey.” Both reasons hold simultaneously, and neither is easily answered by a binary stop-or-don’t choice.

What “smokeless” actually means at the molecule level

Before moving on, Johann walks Muzamil through the technical case for harm reduction. The argument is not about nicotine, which he is careful to separate from the harm question. Nicotine is addictive but not carcinogenic — he notes that the FDA in the United States, Public Health England and France’s Cancer Institute have all said as much. The harm in smoking comes from the combustion of organic material at around 800 degrees, which releases the chemical compounds that cause cancer and disease.

BAT’s three less-risky platforms are designed to deliver nicotine without that combustion. Tobacco-heated products warm the leaf to around 300 degrees rather than burning it. Vaping has no tobacco at all — propylene glycol, glycerol, food-grade flavours and pharma-grade nicotine, inhaled but without burning. The third platform, modern oral pouches, removes inhalation entirely. The pouch goes against the mucosal membrane, delivers the nicotine to the brain, and skips the lungs altogether. “You still get the kick, but you don’t get the harm effects anymore.”

He notes that this work cannot be done by industry alone. Governments and the WHO, he argues, have a responsibility to tell smokers who cannot stop that there are alternatives. The current public-health posture, in his telling, often makes that harder than it should be.

The Swedish blueprint

When Muzamil asks for an example of a country that has regulated this well, Johann answers without hesitation: Sweden. Twenty years ago, Swedish smoking incidence was 20–25%. Today, it is 5–6%. But total nicotine incidence is still above 20%. That gap is where the harm reduction story lives — smokers did not quit nicotine, they switched to vaping, modern oral pouches, and snus (which is similar to a modern oral pouch but still contains tobacco; Velo, Johann notes, goes a step further and removes tobacco entirely).

The outcome he points to is the one that should matter most to a policymaker. Lung-cancer mortality in Sweden is less than half the rest-of-Europe average. “This is the most powerful evidence we can show in terms of how tobacco harm reduction can be beneficial for society, can be beneficial for the consumers.” He adds a request to regulators and to the public discourse generally — base the debate on scientific evidence rather than scaremongering, and let the data drive the rules.

Velo in Pakistan and what regulation could look like

Velo, BAT’s modern oral pouch brand, has been in Pakistan roughly three to four years and now has close to half a million consumers locally. Johann calls it a fantastic development and is clear about why pouches in particular suit emerging markets: there is no device to manufacture, no battery, no technology stack. The cost of switching from a cigarette to a pouch is low for both the company and the consumer, and the nicotine satisfaction profile is comparable.

What he wants from Pakistan’s regulators is a framework rather than a prohibition. Specifically: nicotine ceilings on pouches, agreed product and brand standards, and adult-only flavour profiles — tobacco, menthol, mint, fruit. Not, he is firm, bubblegum or Coca-Cola flavours, which he attributes to illegal imports targeting underage users. On vaping, where illegal Chinese product is already circulating in Pakistan, his ask is the same — clear rules on what is allowed in and what is not, plus excise rates set to reflect risk. “As vaping is much less risky than smoking, we would advocate to have a much lower excise rate than on cigarettes.” Done well, he estimates harm reduction policy in Pakistan could save more than a million lives over the next decade.

The 2023 excise shock and the illicit market

The hardest part of the conversation, and the one most consequential for Pakistan, is the discussion of excise. Johann lays out the arithmetic without softening it. BAT, through PTC, holds roughly 40% of the total Pakistani cigarette market — legal and illegal combined — but pays 85% of the cigarette industry’s tax. The Pakistani government currently collects around a billion dollars of cigarette tax a year. If the playing field were level — if the illicit half of the market paid what the legal half pays — that number could double.

The 2023 excise increase, which doubled the tax overnight, is in Johann’s reading the proximate cause of the current imbalance. “If the consumer is struggling, it’s not that he wants to buy an illegal product, but he can just not afford to basically pay for the legal product.” Gradual increases, he argues, keep the consumer inside the legitimate market. Shocks push them out, and once consumption habits move, they do not move back easily.

He calls the company “a very good and efficient tax collector” working for a fee of 15% — a wry phrasing of how he sees the relationship between excise-paying multinationals and the state. The example he offers for what can be done elsewhere is Uzbekistan, which prioritised enforcement against illicit trade and brought the problem back under control. The other tools he describes — tax officers stationed inside factories for full reconciliation, serious port and border controls, political will sustained over years — are not novel. They are just rarely applied at full strength.

PTC as a global talent factory

Muzamil shifts the conversation to people, and asks how a company with 46,000 employees globally manages to retain Pakistani staff for ten and fifteen-year stretches in a market where two-to-three-year tenures have become the default. Johann’s answer starts with a number: 85% of senior promotions inside the company come from within. “You do not join our company for a job. You join our company for a career.”

The proof point he keeps returning to is his own management board. Two members — Zafar Khan, the ops director, and Javed Iqbal, the chief information officer — came up through PTC. Johann first met them in 2018 when Zafar was running operations for the Asia region and Javed was GM of Pakistan, and he sponsored both into the global management board. Today, 40% of his direct team is Pakistani. He notes that Zafar and Javed are from Multan and Peshawar respectively — not from Karachi, Lahore or Islamabad — which he treats as evidence that the talent pipeline reaches beyond the obvious cities. 15,000 young Pakistanis apply to PTC every year.

He also flags the diversity inside the company, particularly the number of women building senior careers in PTC, as something he is personally proud of. The integrity floor is non-negotiable in his telling: selling to minors is the example he uses, and the consequence for crossing that line, he says, is dismissal the next morning.

Made in Pakistan, exported to the world

The export story is one Muzamil deliberately lingers on, because, as he tells Johann, it is hard for a Pakistani viewer to hear a multinational say it is using the country as an export base. Lack of exports has been a chronic structural problem for the economy. BAT’s posture is the opposite of the recent multinational drift out of Pakistan.

PTC employs roughly 1,400 people directly across two factories in Akora and Jhelum, the Lahore shared services centre and the Islamabad head office, with another 3,500 indirect and as many as a million families touched through the distribution chain. The Lahore Global Business Services hub added more than 400 jobs in the last two years and generates over $20 million a year in services exports — IT and global functions delivered out of Pakistan into the wider group. The Jhelum factory, which Johann describes as immediately carbon neutral with solar panels and a biomass boiler, produces Velo for export to Japan, Europe, the Middle East and Latin America alongside cigarettes shipped to Japan, Peru, France and elsewhere. Total hard-currency inflow from services exports and product exports together runs into the tens of millions of dollars a year.

The company has localised inputs aggressively — contracts with more than 10,000 farmers for tobacco leaf, locally sourced wrapping materials — both to insulate against currency devaluation and to create local employment. The exports then provide a natural hedge for the raw materials that still have to be imported.

Sustainability is not separate from the mission

When the conversation turns to climate and sustainability, Johann reframes the question slightly. The single largest sustainability contribution BAT can make, he argues, is achieving its smokeless mission — the health impact on consumers dwarfs the environmental footprint of the operation. But the environmental commitments are real and quantified. Global emissions are to be halved by 2030, with carbon neutrality by 2050. The Jhelum factory will hit carbon neutrality this year, on the back of what Johann describes as the largest solar installation among BAT’s factories globally, plus the biomass boiler and aggressive water recycling.

In Pakistan, PTC plants more than 2.5 million trees a year. On the farming side, the company is working on reducing pesticide use, helping farmers diversify crops, and — using drone surveillance — enforcing a zero-child-labour policy on its supplier farms. “Children have to be in school. They have to learn. They have to study for a better future for themselves,” he says. The framing is consistent with how he discusses the rest of the business. The metrics are real. The motivation is also commercial. He does not pretend otherwise.

The next eighty years

Muzamil closes by asking for the five-to-ten-year vision for PTC. Johann’s answer reaches further than that. PTC has been in Pakistan since 1947. He wants the next chapter to be another eighty years.

What he wants from the relationship with the Pakistani government is dialogue — regulation on vaping and modern oral built on scientific evidence, an enforcement regime against illicit trade, excise that is gradual rather than shock-driven, and product standards that keep responsible companies inside the rules and bad actors outside them. The brand ambition is for current consumers of Capstan and Pall Mall to migrate to Velo as the company’s next big brand in the country. The talent ambition is for Pakistan to continue feeding the global group with leaders. “Long may it continue,” he says, “to the benefit of Pakistan — for the country, for the people, for our consumers, and for BAT-PTC.”

By the end of the conversation, the picture Johann has drawn is not the one most Pakistanis would expect from a tobacco multinational. A company funding its own pivot away from its core product. A subsidiary deepening its commitment to a market most peers were leaving. A tax-and-export story that argues, with numbers, that the binding constraint on Pakistan’s revenue from this category is not the legal industry — it is the illicit one, and the policy shocks that keep feeding it.