Automated factory floor with robotic arms and optimization displays
British American Tobacco (BAT), a global leader in tobacco products, is set to implement a significant workforce reduction, cutting approximately 5,500 jobs and outsourcing an additional 3,500 roles. This strategic move, impacting about 9,000 employees excluding those in the U.S., is driven by the company’s ambition to leverage artificial intelligence (AI) for operational efficiency and cost reduction.
The restructuring aims to achieve annualized savings of $793 million by 2028, with a substantial portion targeted by 2027. This initiative comes as BAT, the maker of well-known brands like Lucky Strike and Dunhill, faces a long-term decline in traditional tobacco sales, compelling a strategic shift towards smoking alternatives.
Tadeu Marroco, CEO of BAT, stated that the overhaul is designed to make the company more agile, cost-disciplined, and technology-enabled. “These changes affect many of our colleagues and we are focused on supporting them through this transition with care and respect,” Marroco said in a statement.
In recent years, BAT has experienced slow sales and profit growth, frequently missing or narrowly meeting its targets, which has disappointed some investors. The company aims to achieve medium-term revenue growth of 3% to 5% annually. To support this, BAT has been streamlining its manufacturing processes over the last 18 to 24 months, including the closure of a factory in South Africa.
While traditional tobacco product sales are expected to decline by 2.5% across the industry this year, BAT is increasingly focusing on alternatives such as Vuse vapes and Velo nicotine pouches. However, the company acknowledges it lags behind industry rival Philip Morris International in this segment.
The company also cited challenges in the U.S. market, including regulatory hurdles for new products like vapes, which have led to delays in product launches. This, coupled with an influx of illegal Chinese products, has negatively impacted BAT’s sales and market share. Additionally, rising living costs have pushed consumers toward cheaper brands, while import taxes, stricter regulations, and illicit trade in markets like Australia and Bangladesh further pressure sales.
The roles being transferred to third parties include positions within BAT’s Global Service Hubs in Costa Rica, Mexico, Romania, and Malaysia, as well as certain roles in Pakistan and specific digital and technology functions in Poland and Romania.
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