British American Tobacco (BAT) has announced a significant restructuring plan that will see approximately 20% of its workforce affected as the company implements artificial intelligence (AI) to optimize operations and reduce costs. The tobacco giant, known for brands such as Lucky Strike and Dunhill, revealed on Monday that it intends to eliminate around 5,500 jobs while outsourcing an additional 3,500 roles to external firms, including Accenture. This restructuring is projected to impact an estimated 9,000 employees, though it will not include positions in the United States.
As traditional tobacco products face a long-term decline due to the increasing popularity of smoking alternatives, BAT has not disclosed specific locations for the job cuts. The company anticipates that its cost-cutting initiative will yield $793 million in annual savings by 2028, with a substantial portion of these savings targeted for achievement by 2027.
CEO Tadeu Marroco underscored the need for the company to become “more agile, cost-disciplined, and technology-enabled.” He acknowledged the difficult nature of these changes, emphasizing the company’s commitment to navigating the transition with care and respect for affected employees.
Historically, BAT’s sales and profit growth have slowed, often falling short of internal and investor expectations. The company aims for revenue growth between 3% and 5% per year in the medium term.
The company also indicated that it has been actively streamlining its manufacturing process over the past 18 to 24 months, which includes the closure of one factory in South Africa. The broader tobacco industry is expected to see a 2.5% decline in traditional product sales this year, prompting BAT to pivot towards alternatives like Vuse vapes and Velo nicotine pouches. However, the company is still trailing behind its competitor, Philip Morris International, in this segment.
Regulatory hurdles in the U.S. regarding new product approvals for vaping products have led to delays in launching new offerings. BAT has pointed out that these regulatory challenges have contributed to an influx of illegal products from China, negatively affecting its market share and sales. Compounding this issue, tobacco sales in the U.S. have also suffered as consumers gravitate towards cheaper options amid rising living costs, alongside increased import taxes and tighter regulations in regions like Australia and Bangladesh.
The company stated that it has begun informing employees about job changes and is complying with local consultation requirements. The positions that will be outsourced include roles in Global Service Hubs located in Costa Rica, Mexico, Romania, and Malaysia, along with specific roles in Pakistan and digital and technology positions in Poland and Romania.
