(BAT) is set to reduce its global workforce of around 47,000 employees by nearly 20% as part of a broader restructuring aimed at cutting costs and streamlining operations, as reported by Bloomberg.
According to an internal notice reviewed by Bloomberg News, the Dunhill cigarette maker plans to eliminate 5,500 positions and outsource another 3,500 jobs by the end of the year. The figures do not include BAT’s US operations, which are managed separately through its subsidiary, Reynolds American Inc, the report stated.
Most other countries BAT operates in are affected by its ongoing restructuring program and the company detailed the extent of job cuts on Monday. It has pledged to make £600 million ($793 million) of annual cost savings by the end of 2028.
Shares of BAT fell as much as 1.9% in London, trimming year-to-date gains. The stock was up nearly 13% since the start of the year through Friday’s close.
“Whilst the market has been aware of this savings programme, we think the scale of this workforce reduction is unexpected and could some as a surprise to investors,” Barclays analyst Pallav Mittal wrote in a note.
BAT is contending with falling demand for traditional cigarettes in many markets and a need to invest in and develop more sustainable nicotine alternatives, which have soared in popularity as people look for ways to quit smoking. Like its rival Philip Morris International Inc., BAT wants to generate more than half of its revenue from “” nicotine products such as Vuse vapes and Velo nicotine pouches.
Part of BAT’s restructuring has involved closing traditional cigarette factories. The company has previously said it’s in the process of shutting its eighth largest cigarette factory, located in South Africa, due to competition from illicit trade.
Interim Chief Financial Officer Javed Iqbal also said in February that the use of artificial intelligence and data analytic tools would also affect staffing levels. Most of BAT’s planned cost savings, about £500 million, will be delivered by 2027, he said.
BAT has partnered with Accenture to outsource a number of functions, including service centers, which typically employ large proportions of companies’ overall workforces. Certain roles in the UK, Singapore, Costa Rica, Mexico, Poland, Romania and Malaysia have since moved to Accenture, said BAT in its latest notice. Meanwhile, some roles in Pakistan have been outsourced to Systems Ltd., a Pakistani technology and business firm, it 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,” Chief Executive Officer Tadeu Marroco said in a statement.
Earlier this year, BAT said it was on track to meet its full-year targets even as global cigarette industry volumes decline, helped by a strong performance in the US where it is making gains on rival PMI with its Velo Plus pouches.
Other tobacco companies are also focusing on cost reduction strategies to enhance productivity and redirect resources toward growth segments such as nicotine alternatives. Imperial Brands Plc, a UK-based company, stated in May that it is on course to achieve annual cost savings of £320 million by 2030.
Similarly, Philip Morris International (PMI), which revised its outlook in June following a write-down of its investment in its Canadian subsidiary, has already completed more than half of its target plan to generate $2 billion in cost savings by 2026.
(With inputs from Bloomberg)