British American Tobacco (BAT) is to shed nearly a fifth of its global workforce – 5,500 roles cut and 3,500 outsourced – as the cigarette maker pushes into artificial intelligence and next-generation products. The FTSE 100 company, which owns Lucky Strike and Dunhill, said the restructuring would save about £600m a year by 2028 and leave it “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,” said chief executive Tadeu Marroco. The job cuts, which have already begun, are set to be completed by the end of this year.
“British American Tobacco will cut 5,500 jobs and outsource 3,500 more as it pivots to AI and next-generation products.”
No jobs will go in the US, where BAT operates through its subsidiary Reynolds American. Elsewhere, some roles in the UK, Poland, Romania, Costa Rica, Mexico, Singapore and Malaysia have already been absorbed by technology consultancy Accenture under a partnership announced last year, which Marroco said would give the tobacco giant access to “advanced AI solutions”.
The overhaul comes as traditional cigarette sales shrink worldwide – BAT predicts global industry volumes will fall about 2.5% this year – while smokers switch to vapes and nicotine pouches. The company is betting on its Vuse vapes and Velo nicotine pouches to drive growth, but sales and profit margins have been sluggish.
“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.”
In the US, BAT’s biggest market, sales have been hit by the cost of living as smokers trade down to cheaper brands. American regulators have taken a tough stance on approving licences for new vaping products, delaying launches – a delay that BAT says has fuelled an influx of illegal Chinese products, weighing on its sales and market share.
Higher duties and stricter regulations in some markets have also squeezed the company. In January, BAT announced it would close its eighth largest factory, in South Africa, because of competition from illicit trade.
The cuts are part of a “transformation programme” that BAT earlier this year said would make it “more digital and AI-focused”. Whether the shift is enough to revive sluggish growth remains to be seen.