British American Tobacco (BAT), the company behind Lucky Strike and Dunhill cigarettes, is cutting 5,500 roles and outsourcing 3,500 more as part of its cost-cutting drive. While it did not mention from where the cuts would come, the company said the U.S. was not affected.
Earlier this year, BAT said it was planning savings to make it “more digital and AI-focused.”
This comes amid shrinking cigarette sales, as smokers increasingly switch to vapes and nicotine pouches. BAT is also shifting its focus to smoking alternatives such as its Vuse vapes and Velo nicotine pouches to drive growth but sales and profit margins appear slow.
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BAT also said the cuts were part of a “transformation programme” expected to create £600 million ($810 million) of annual cost savings by the end of 2028. The BAT chief executive, Tadeu Marroco, said the company was “building a future-ready organization” that was “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, as we position the business for the future,” Marraco added.
Last year, BAT partnered with the technology consultancy Accenture to outsource some of its work. BAT said some jobs in the UK, Poland, Romania, Costa Rica, Mexico, Singapore and Malaysia have been absorbed by Accenture since the deal.
Marocco also said the partnership would give the tobacco company access to its “advanced AI solutions”. In February, the BAT interim finance chief, Javed Iqbal, told the Financial Times that plans to simplify the company would make it “more digital and AI-focused.”
BAT currently employs about 47,000 people globally. It says the cost cuts are expected to save about $795 million a year by 2028. Sales in the U.S. — its biggest market — has been hit by the higher cost of living. The company is also dealing with rising duties and stricter regulations in some markets.
“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.
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“Vaping is now commonplace, yet product manufacturers are battling challenging market conditions caused by a proliferation of illegal products.”
BAT said the job cuts, which have already started, are set to be completed by the end of this year. “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,” Marocco added.