Top tobacco company to cut thousands of jobs

• The cost-cutting program is expected to deliver $793 million in annualized savings by 2028, with most savings targeted by 2027
• BAT's traditional tobacco sales face a 2.5% industry-wide decline in 2024, prompting a strategic shift toward alternatives like Vuse vapes and Velo nicotine pouches where it trails rival Philip Morris International
• The company has struggled with regulatory approval delays for new products, an influx of illegal Chinese vapes impacting market share, and consumers switching to cheaper tobacco alternatives amid high living costs

Summary

British American Tobacco (BAT) announced plans to eliminate approximately 5,500 jobs (20% of its workforce) and outsource 3,500 roles to third-party firms including Accenture, impacting roughly 9,000 employees total (excluding U.S. operations). The restructuring, announced Monday, aims to implement AI technology to reduce costs and improve profitability.

Key Financial Targets:

• Expected annual savings: $793 million by 2028 (mostly by 2027)
• Revenue growth target: 3-5% annually over the medium term
• Industry tobacco sales decline: 2.5% projected for 2024

Strategic Context:

BAT's traditional tobacco brands (Lucky Strike, Dunhill) face long-term decline as the company shifts focus toward alternatives including Vuse vapes and Velo nicotine pouches. However, BAT trails competitor Philip Morris International in these segments. CEO Tadeu Marroco emphasized the changes would make the company "more agile" and "cost-disciplined."

Market Challenges:

• Slow sales and profit growth in recent years, frequently missing analyst expectations
• U.S. regulatory hurdles delaying new product approvals, enabling influx of illegal Chinese vape products
• Consumer shifts to cheaper tobacco alternatives amid high living costs
• Rising import taxes, tighter regulations, and illicit trade in markets like Australia and Bangladesh
• Previously announced factory closure in South Africa

Geographic Impact:

Job changes affect Global Service Hubs in Costa Rica, Mexico, Romania, Malaysia, Pakistan, and Poland. Specific locations for cuts were not disclosed.