British American Tobacco (BAT), the London-headquartered FTSE 100 company behind brands like Dunhill and Peter Stuyvesant, has announced plans to reduce its global workforce by approximately 9,000 positions. This significant restructure, which represents about a fifth of its 47,000-strong workforce, involves cutting 5,500 jobs directly and outsourcing an additional 3,500 roles. The firm stated these measures are designed to reduce costs and foster a more 'technology enabled' operational model.
The job reductions are a core component of a wider 'transformation programme' that BAT anticipates will generate annual cost savings of £600 million by the end of 2028. Tadeu Marroco, BAT's chief executive, commented on the changes, stating the company is 'building a future-ready organisation that is more agile, cost disciplined and technology enabled.' He acknowledged the impact on employees, emphasising the company's focus on supporting them through this transition. Geographically, BAT has confirmed that its US business, operating under Reynolds American, will not be affected by these job cuts.
This strategic pivot comes as BAT grapples with a persistent decline in global demand for traditional cigarettes, with the group forecasting a 2.5% fall in industry volumes this year. In response, BAT has been increasingly investing in 'new categories' of smoke-free products, such as Vuse vapes and Velo nicotine pouches. The company recently informed investors that revenue growth in these alternative products is accelerating, with mid-teen percentage growth expected for the current year, indicating a significant shift in its business focus.
The move also underscores a growing trend towards integrating advanced technology, including Artificial Intelligence (AI), into corporate operations. BAT's partnership with technology consultancy Accenture last year, which gives the company access to 'advanced AI solutions,' has already led to some roles in countries including the UK, Poland, and Singapore being absorbed by Accenture. Earlier this year, BAT's interim finance chief, Javed Iqbal, highlighted plans to simplify the company, making it 'more digital and AI-focused.'
In early trading on Monday, shares in BAT experienced a slight dip of approximately 1.4% following the announcement, although they remain up by around 11.8% year-to-date. Shares of rival Imperial Brands also saw a modest decline of 1%. This market reaction reflects investor scrutiny of major corporate restructuring, even as the company signals a strategic shift towards future growth areas.
Beyond workforce reductions, BAT has also been streamlining its traditional manufacturing footprint. In January, it announced the closure of its eighth-largest factory, located in South Africa, citing intense competition from illicit trade as a primary factor. These combined efforts illustrate a comprehensive strategy to adapt to evolving market dynamics and position the company for long-term sustainability in a changing global tobacco landscape.
Source: The Guardian