British American Tobacco Announces Major Workforce Reduction Amid AI-Driven Restructuring

British American Tobacco (BAT) plans to reduce its workforce by approximately 20% as part of an operational transformation leveraging artificial intelligence to reduce costs and enhance profitability.

The company, known for brands such as Lucky Strike and Dunhill, announced on Monday that it will cut around 5,500 jobs and outsource roughly 3,500 roles to third-party firms, including Accenture. This restructuring affects approximately 9,000 employees globally, excluding the U.S. market.

BAT has not disclosed specific locations for the job reductions, as traditional tobacco sales—its primary revenue source—face long-term decline due to the growing popularity of smoking alternatives.

The cost-saving initiative is projected to generate $793 million in annualized savings by 2028, with a significant portion targeted by 2027.

British American Tobacco announced job cuts as it implements AI to cut costs. (BSIP/Universal Images Group via Getty Images)

CEO Tadeu Marroco emphasized that the restructuring aims to create a more agile, cost-efficient, and technology-driven organization. “These changes affect many of our colleagues, and we are focused on supporting them through this transition with care and respect,” he stated.

In recent years, BAT has struggled with sluggish sales and profit growth, often missing targets and disappointing investors. The company now targets 3-5% annual revenue growth over the medium term.

BAT has been streamlining operations over the past 18-24 months, including the closure of a South African facility. The firm anticipates a 2.5% decline in traditional tobacco sales across the industry this year. To adapt, it is prioritizing alternatives such as Vuse vapes and Velo nicotine pouches, though it trails competitors like Philip Morris International.

Vuse vapes are a growing focus for British American Tobacco amid shifting consumer habits. (Daniel Acker/Bloomberg via Getty Images)

U.S. regulatory hurdles for product approvals have delayed new vape launches, while illegal Chinese imports have eroded sales and market share. Additionally, tobacco sales in the U.S. face pressure from consumers opting for cheaper brands amid rising living costs, along with increasing import taxes and regulatory constraints in markets like Australia and Bangladesh.

BAT confirmed that most employee transitions have been communicated, with ongoing consultations adhering to local legal requirements. Roles outsourced to third parties include positions in Global Service Hubs across Costa Rica, Mexico, Romania, Malaysia, Pakistan, Poland, and Romania.

Source link