(Reuters) – British American Tobacco (BATS.L), opens new tab said on Monday it plans to reduce its workforce by about 20%, as it pushes ahead with an AI-driven transformation program to cut costs and bolster profits amid regulatory challenges and delayed launches.
The tobacco giant said it would cut 5,500 jobs and move a further 3,500 roles to third-party firms, including Accenture (ACN.N), opens new tab, impacting a total of 9,000 employees. The restructuring does not include the U.S., its biggest market.
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The cost-saving programme is expected to add £600 million ($793 million) worth of annualised incremental savings by 2028, with £500 million already targeted by 2027.
“These changes affect many of our colleagues and we are focused on supporting them through this transition with care and respect,” CEO Tadeu Marroco said in a statement. He added that the move would make the company more agile, cost-disciplined and technology-enabled.
The Lucky Strike and Dunhill cigarette maker’s sales and profit growth have been sluggish in recent years, falling short of or just reaching its own targets, disappointing some investors.
The company’s main profit driver – traditional tobacco – is in terminal decline, with BAT predicting a global, industry-wide decline of 2.5% this year. BAT is shifting its focus to smoking alternatives like its Vuse vapes and Velo nicotine pouches to drive growth, but it has faced problems and fallen behind key rival Philip Morris International (PM.N), opens new tab.
Sales in the critical U.S. market have been constrained by regulatory requirements that have delayed launches and helped rivals from China – often selling without the required permission from U.S. regulators – to take its market share.
Its U.S. tobacco sales have also been hit as smokers swap to cheaper brands amid soaring costs of living, while BAT is also battling rising duties, stricter regulations and illicit trade in places like Australia and Bangladesh.
The company previously signalled in February that its new productivity programme could lead to job cuts and in June, it kept its group-wide guidance unchanged.
Even so, the scale of the “broad-based” reductions could surprise investors, said Pallav Mittal, an analyst at Barclays, in a note. The company’s shares were recently down 1.3%.
BAT on Monday said that most of the role changes had now been confirmed with employees, with remaining consultations being carried out in compliance with local requirements.
Reporting by Yamini Kalia in Bengaluru and Emma Rumney in London; Editing by Nivedita Bhattacharjee and Thomas Derpinghaus
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