June 29 (Reuters) – British American Tobacco plans to cut about 20% of its workforce as it pursues an AI-driven overhaul to lower costs and lift profits amid regulatory challenges and delayed launches.
The company said on Monday it would cut about 5,500 jobs and move roughly 3,500 roles to third-party firms, including Accenture, affecting around 9,000 employees in total. The restructuring excludes the U.S., its biggest market.
BAT said the programme was expected to deliver £600 million ($793 million) in additional annualised savings by 2028, with £500 million targeted by 2027.
Still, its shares were down 1.6% to £46.73 at 0940 GMT, underperforming the FTSE 100, which was down 0.3%.
SCALE OF REDUCTIONS
“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 said the overhaul would make the company more agile, cost-disciplined and technology-enabled.
BAT had flagged in February that its new productivity drive could lead to job cuts, but the scale of the reductions may surprise investors, Barclays analyst Pallav Mittal said in a note.
The Lucky Strike and Dunhill cigarette maker’s sales and profit growth have been sluggish in recent years, often missing or only just meeting company targets, disappointing some investors.
STRATEGY SHIFTS
BAT’s main profit engine, traditional tobacco, is in terminal decline, with the company predicting a 2.5% drop in industry sales volumes this year.
It is shifting towards smoking alternatives such as Vuse vapes and Velo nicotine pouches, but it has faced setbacks and trails key rival Philip Morris International.
U.S. regulators have taken a tough stance on approving licences for new products such as vapes, delaying launches. BAT says this has fuelled an influx of illegal Chinese products, weighing on its sales and market share.
U.S. tobacco sales have also been hit as smokers swap to cheaper brands amid high living costs, while BAT also faces rising duties, tighter regulations and illicit trade in markets including Australia and Bangladesh.
BAT said most role changes had been confirmed with employees, with remaining consultations under way in line with local requirements.
($1 = £0.7569)
(Reporting by Yamini Kalia in Bengaluru and Emma Rumney in London. Editing by Thomas Derpinghaus and Mark Potter)
