British American Tobacco (BAT) is shedding nearly a fifth of its global workforce — 5,500 roles cut and 3,500 outsourced — in a sweeping cost-cutting drive that the company says will make it “more digital and AI-focused”.
The tobacco giant, which makes Lucky Strike and Dunhill cigarettes, said the job reductions have already begun and are set to be completed by the end of this year. The US business, operated through subsidiary Reynolds American, is not affected.
“BAT cuts 5,500 jobs and outsources 3,500 more as part of a cost-cutting drive to become more AI-focused.”
The cuts come as traditional cigarette sales shrink, with smokers increasingly switching to vapes and nicotine pouches. BAT is pivoting to alternatives such as Vuse vapes and Velo pouches, but sales and profit margins have been sluggish. The company has also been hit by the cost of living in its biggest market, the US, where smokers are trading down to cheaper brands, and by rising duties and stricter regulations.
American regulators, BAT said, have taken a tough stance on approving licences for new products, delaying launches and fuelling an influx of illegal Chinese products that weigh on sales and market share.
“The tobacco industry has found the transition from cigarettes to next-generation products to be a slow one,” said Dan Coatsworth, head of markets at AJ Bell. “Vaping is now commonplace, yet product manufacturers are battling challenging market conditions caused by a proliferation of illegal products.”
The restructuring is expected to save about £600m a year by 2028. Chief executive Tadeu Marroco said the changes would make the company “more agile, cost disciplined and technology enabled”. He added: “These changes affect many of our colleagues, and we are focused on supporting them through this transition with care and respect, as we position the business for the future.”
BAT has already been outsourcing work through a partnership with technology consultancy Accenture, which absorbed some jobs in the UK, Poland, Romania, Costa Rica, Mexico, Singapore and Malaysia. The company has also been closing traditional cigarette factories, announcing in January that it would shut its eighth largest plant in South Africa because of competition from illicit trade.
The group predicts that global cigarette industry volumes will fall by about 2.5% this year as the slow but steady shift away from smoking continues.