British American Tobacco is set to lay off 9,000 employees as part of a cost-cutting initiative aimed at enhancing its digital and AI capabilities amidst declining cigarette sales.
British American Tobacco (BAT), known for its brands such as Lucky Strike and Dunhill, is implementing a significant workforce reduction that will affect 9,000 employees. This decision includes the elimination of 5,500 roles and the outsourcing of an additional 3,500 positions as part of a broader cost-cutting strategy. The company has clarified that these layoffs will not impact its U.S. operations.
The move comes as BAT seeks to adapt to changing market dynamics, particularly the decline in traditional cigarette sales as consumers increasingly turn to alternatives like vapes and nicotine pouches. Earlier this year, BAT announced plans to streamline operations and enhance its focus on digital and AI technologies.
As part of its transformation program, BAT aims to achieve annual cost savings of £600 million (approximately $810 million) by the end of 2028. Tadeu Marroco, the company’s chief executive, emphasized the goal of building a “future-ready organization” that is more agile, cost-efficient, and technologically advanced.
“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,” Marroco stated.
In a strategic move to bolster its technological capabilities, BAT has partnered with the consultancy firm Accenture to outsource certain functions. This partnership has already resulted in job transfers in various countries, including the UK, Poland, Romania, Costa Rica, Mexico, Singapore, and Malaysia.
Marroco noted that this collaboration would provide BAT with access to advanced AI solutions, which are expected to play a crucial role in the company’s digital transformation. In February, interim finance chief Javed Iqbal mentioned to the Financial Times that simplifying the company’s structure would enhance its digital and AI focus.
Currently, BAT employs approximately 47,000 individuals worldwide. The cost-cutting measures are projected to save the company around $795 million annually by 2028. However, BAT’s sales in the U.S., its largest market, have been adversely affected by rising living costs, increased duties, and stricter regulations in various regions.
Dan Coatsworth, head of markets at AJ Bell, commented on the challenges facing the tobacco industry, stating, “The tobacco industry has found the transition from cigarettes to next-generation products to be a slow one.” He noted that while vaping has become widespread, manufacturers are contending with difficult market conditions, including the presence of illegal products.
The job cuts, which have already commenced, are expected to be finalized by the end of this year. Marroco reiterated the company’s commitment to supporting affected employees during this transition period.
According to The American Bazaar, the ongoing shifts within BAT reflect broader trends in the tobacco industry as companies navigate the complexities of evolving consumer preferences and regulatory landscapes.