Could the next great health and wellness brand come from Big Tobacco?
As it works to wean itself off of the combustible tobacco products that made it a multi-billion dollar behemoth, British American Tobacco (BAT), the 123-year-old multinational nicotine producer, has been placing bets on the better-for-you, functional food and beverage sector.
Through its BTomorrow Ventures investment wing, and more recently through the brand-developing subsidiary The Water Street Collective, BAT is working to diversify its portfolio to include better-for-you brands that can potentially win in a more health-conscious consumer landscape.
Now, the first brand developed by Water Street – a functional shot line called Ryde: – is hitting shelves in the U.S., after prior launches in Australia and Canada. But Ryde: is just the first of what could eventually be a broad portfolio of food and drink brands being developed by Water Street, according to the company’s CEO, Richard Schmidt.
“Our goal, really, is to provide British American Tobacco with an opportunity to fulfill its vision of eventually reducing the scale of its business within combustible tobacco products,” Schmidt said in a call this week.
Based out of London with an additional American headquarters in Dallas, Texas, Water Street formed in 2022 and its operations are run independently from BAT, with its own internal R&D, marketing and commercial teams. It also owns a “Science Center” for product development in Southampton, England. The company has a team of around 100 people, half of which are located in the U.K.
BAT, which this week raised its financial outlook for 2025 after beating revenue expectations in the first half of the year, has aimed to have 50% of its revenue come from “smokeless” products by 2030. It’s not hard to see why they would want to make that change: since the mid-1960s adult tobacco use has steadily declined and, according to the American Lung Association, just 11.6% of American adults smoked tobacco as of 2022 – down from 18.1% in 2012 and 22.5% in 2002.
While vaping and pouch products have led to a resurgence in nicotine use, especially with Gen Z users, cigarettes and other combustible tobacco products show no signs of a comeback.
So, conglomerates like BAT seem to have little choice but to kick the old habit and embrace new products, and choosing products that can be better, or even good, for consumers’ health is a part of that process.
Ryding with Humility
At Water Street, the company is staffed by people with expertise in food and beverage, Schmidt said. While it doesn’t “interface with BAT that often,” the company is still able to “leverage the best bits” of what the parent company has to offer on the back end.
“What’s important to us is we approach this category with humility,” Schmidt said. “For a lot of the people who work in the Water Street Collective, the category is not so new, but as a whole we’re cognizant of the fact this is completely new for a company like BAT.”
Those benefits not only include BAT’s operational resources, but a relationship with BTomorrow Ventures as well. BTomorrow has invested in a number of better-for-you functional food and drink brands including Moment, HOP WTR, TRU, More Labs and Unrooted, among others, and Schmidt said Water Street has worked with the firm on investments within the category and has minority shares in Moment and TRU.
“We use those as a way of going beyond what we’re doing on shots and providing a potential pipeline for businesses that we may want to own in the future,” he said.
Ryde: (the name is stylized with the colon) is the first product to come from Water Street, and while Schmidt said the business intends to take its time and focus on building the brand up before biting off more, the long term plan is for many more brands to follow, with a functional snack product under development.
Ryde: itself is a line of shots with specialized functions in Energize, Focus and Relax varieties, which are now available in the U.S. on Amazon and in around 1,000 brick-and-mortar locations with more to come online in the near future. The brand has also partnered with celebrity influencer Heidi Montag on its rollout marketing campaign.
The brand is also reflective of functional attributes like mental clarity and benefits that have been building across CPG for years. And as BAT moves away from the old go-to method of selling consumers a mental relief tool in cigarettes, functional food and drink can still fill that need.
“I’m a firm believer that the underlying human need never really changes, it’s just the level of sophistication of the consumer changes,” Schmidt said. “What we’re seeing is, over time consumers have moved from purely needing things to help them relax or help them get energized, to being more precise in exactly what they’re looking for, both in terms of the benefit area, but also in the ingredients.”
While Ryde: might appear in direct competition with some of the brands in BTomorrow’s portfolio, such as mental benefit brands like Moment, TRU and More Labs (maker of Morning Recovery), Schmidt said there is strong communication between the groups with information regularly shared to benefit all of the companies involved.
“We’ve learned a lot from [BTomorrow] in terms of the way they do things,” he added. “Sometimes it’s the way they shouldn’t do things – we’ve learned from that – and [they] taught us a lot about how to manage a tight budget.”
“Mostly it’s a dynamic of sharing and advisory.”