British American Tobacco Plans Significant Job Cuts
British American Tobacco (BAT) has announced plans to reduce its workforce by around 20% as part of a restructuring effort aimed at utilizing artificial intelligence (AI) to enhance efficiency and profitability.
On Monday, the company, well-known for brands like Lucky Strike and Dunhill, revealed that it intends to eliminate about 5,500 jobs and outsource approximately 3,500 positions to third-party firms, including Accenture. This reorganization is set to impact nearly 9,000 employees worldwide, excluding its operations in the United States.
While BAT did not specify the locations of these job reductions, it’s clear that the company is responding to the long-term decline of traditional cigarette sales amidst the rise of alternative smoking options.
Through this cost-cutting initiative, BAT expects to save around $793 million annually by 2028, with a substantial portion of the savings anticipated by 2027.
CEO Tadeu Marco commented that this overhaul will make the company more agile, allowing it to manage costs more effectively and harness technology better. “These changes will impact many of our colleagues, and our focus is to carefully and respectfully support them through this transition,” he stated.
In recent years, BAT’s sales and profit growth have been sluggish, often failing to meet company targets—this has frustrated some investors. The company aims to achieve a revenue growth of 3% to 5% annually in the medium term.
BAT has been working on streamlining its manufacturing processes over the past 18 to 24 months, which has included the earlier-announced closure of its plant in South Africa. The company foresees a 2.5% decrease in conventional tobacco product sales across the industry this year and has shifted focus towards alternatives like Vuse e-cigarettes and Velo nicotine pouches. However, it has fallen behind competitors like Philip Morris International in this area.
U.S. regulatory bodies have taken a strict stance on the approval of new products such as e-cigarettes, which has hindered BAT’s new product launches. The company also mentioned that these licensing challenges have contributed to a surge of illegal imports from China, negatively affecting its sales and market position.
Amidst rising living costs, tobacco sales in the U.S. are also seeing a decline as consumers gravitate towards more affordable brands. Additionally, BAT is dealing with increased import taxes and stringent regulations, particularly in markets like Australia and Bangladesh.
Currently, most of the changes to roles have been communicated to employees, although consultations are still ongoing per local laws. The positions being outsourced will include roles in global service hubs in countries such as Costa Rica, Mexico, Romania, and Malaysia, along with some digital and tech positions in Poland and Romania.
