British American Tobacco (BAT) is eliminating approximately 9,000 roles as part of a strategic restructuring to integrate artificial intelligence and reduce operational costs. According to company statements, the plan includes 5,500 job cuts and the outsourcing of 3,500 positions to third-party firms. The move aims to achieve $793 million in annualized savings by 2028, as the company pivots toward smoke-free alternatives amid a long-term decline in traditional cigarette sales.
How is BAT restructuring its global workforce?
The restructuring effort, which excludes the U.S. market, involves a significant shift in how the company manages its Global Service Hubs. BAT confirmed that 3,500 roles are being transferred to third-party firms, including Accenture. These positions include roles in its Global Service Hubs in Costa Rica, Mexico, Romania and Malaysia, as well as certain roles in Pakistan, and some digital and technology roles in Poland and Romania. CEO Tadeu Marroco stated the overhaul is designed to make the company more “agile, cost-disciplined and technology-enabled.” Most of the role changes have already been confirmed with employees, while the company maintains that remaining consultations are proceeding in compliance with local requirements.
BAT has been streamlining its manufacturing over the last 18 to 24 months, a process which included the previously announced closure of a factory in South Africa.
Why is BAT shifting its focus to AI and nicotine alternatives?
The company faces a challenging market landscape as traditional tobacco sales continue to shrink. BAT projects a 2.5% industry-wide decline in traditional tobacco product sales this year. To counter this, the firm is shifting its focus to alternatives like Vuse vapes and Velo nicotine pouches. However, the company faces stiff competition, notably trailing behind Philip Morris International in the smoke-free sector. Financial performance has also been a concern; the company has frequently missed or narrowly met its own growth targets, leading to investor disappointment. The current goal is to achieve annual revenue growth of 3% to 5% in the medium term.
What hurdles impact the transition to smoke-free products?
Regulatory and economic pressures are complicating the company’s transition. In the United States, the Food and Drug Administration (FDA) has maintained a rigorous approach to licensing new products, which has delayed BAT’s product launches. The company reports that these regulatory delays have inadvertently created a vacuum filled by an influx of illegal Chinese vaping products, which has pressured BAT’s market share. Beyond regulation, rising living costs have driven consumers toward cheaper tobacco brands, while BAT also contends with increased import taxes and illicit trade in markets such as Australia and Bangladesh.
Investors often look at how legacy firms manage the “crossover” period between traditional revenue streams and new technology-driven products to gauge long-term stability.
Frequently Asked Questions
Will the job cuts affect BAT employees in the United States?
No. According to the company’s announcement, the restructuring program specifically excludes the U.S. market.
How much money does BAT expect to save?
BAT projects the cost-cutting program will deliver $793 million in annualized savings by 2028, with much of that total targeted by 2027.
What roles are being outsourced?
The 3,500 outsourced roles include positions in Global Service Hubs in Costa Rica, Mexico, Romania and Malaysia, as well as certain roles in Pakistan, and some digital and technology roles in Poland and Romania.
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