Lucky Strike maker BAT to axe 5,500 jobs worldwide in €695m cost drive
Lucky Strike Maker BAT to Axe 5,500 Jobs Worldwide in €695m Cost Drive
Lucky Strike maker BAT to axe 5 - British American Tobacco (BAT), the multinational corporation behind iconic brands like Lucky Strike and Dunhill, has unveiled plans to streamline its operations by eliminating 5,500 positions globally. This move is part of a broader initiative to reduce costs and enhance efficiency, with an estimated annual savings target of £600 million (€695m) by 2028. The restructuring will also involve outsourcing approximately 3,500 roles to external partners, resulting in a combined reduction of nearly 9,000 jobs—roughly 20% of BAT’s total workforce of 47,000 employees.
A Global Restructuring Strategy
While the job cuts will affect operations across multiple regions, the United States remains an exception. BAT’s largest market, managed by its subsidiary Reynolds American, will not see immediate layoffs. This decision underscores the strategic importance of the U.S., where the company continues to focus on its traditional cigarette business. However, the shift toward smokeless alternatives is already underway, and BAT has positioned itself to capitalize on this trend. The company’s future now hinges on its newer product lines, including the Vuse vaping brand, glo heated-tobacco devices, and Velo nicotine pouches, with a goal of generating half its revenue from these innovations by 2035.
Despite this ambitious target, the transition has faced hurdles. In the U.S., regulatory approval for new nicotine products has been slow, limiting their market penetration. This delay has forced BAT to balance its traditional operations with the development of emerging offerings, a challenge common among tobacco companies navigating a rapidly changing industry landscape. The company is also leveraging technology to drive efficiency, aiming to create a more agile and cost-effective business model.
Cost-Cutting Measures and Outsourcing
As part of the restructuring, BAT has already set aside £500 million (€580m) in cost reductions for 2027, with the current €695m target building on that foundation. Some of the outsourced roles will be assigned to consulting firm Accenture, a move that highlights the company’s reliance on external expertise to manage its evolving operations. BAT’s CEO, Tadeu Marroco, emphasized that these cuts are essential for fostering a “more agile, cost-disciplined and technology-enabled company,” which he described as a necessary evolution in response to shifting consumer habits.
“This transformation is about building a company that is better positioned to adapt to the future of the tobacco industry,” Marroco stated. “By embracing technology and rethinking our operational structure, we can deliver sustainable growth while remaining competitive in an increasingly dynamic market.”
The decision has sparked a mixed reaction from investors, with BAT’s shares dropping around 2.5% during London trading on Monday. Analysts at Barclays noted that while cost-cutting initiatives had been hinted at earlier in the year, the magnitude of the layoffs has caught the market by surprise. The scale of the reductions, they argued, reflects a broader industry trend toward efficiency, driven by declining demand for traditional cigarettes and rising production costs.
Industry Challenges and Strategic Priorities
The decline in smoking rates, fueled by health concerns and stricter regulations, has pressured BAT and its competitors to pivot toward alternative products. In its established markets, such as the UK and Europe, the company has seen a steady erosion of cigarette sales, prompting a reevaluation of its business strategy. By focusing on smokeless products, BAT hopes to tap into a growing segment of consumers seeking reduced harm options. However, the path to success is not without obstacles, as regulatory frameworks in key markets like the U.S. have slowed the adoption of these innovations.
BAT’s commitment to technological advancement is evident in its efforts to modernize manufacturing processes and reduce overhead. The CEO highlighted that this transition would enable the company to respond more swiftly to market demands and consumer preferences. Yet, the process has required significant investment, with the cost-cutting measures aiming to offset these expenses. The integration of third-party services, such as Accenture, is expected to streamline operations and reduce dependency on in-house teams.
Broader Implications for the Jobs Market
Russ Mould, an investment director at AJ Bell, warned that BAT’s aggressive approach signals a larger shift in corporate strategy. “This isn’t just about saving money—it’s a sign of the times,” he said. “Companies are leaning harder on technology to run their operations and launch products faster, which means fewer jobs in traditional sectors and more in digital and automated roles.” Mould’s comments highlight the potential impact of such moves on the broader jobs market, particularly in industries facing long-term disruption.
While BAT’s restructuring may seem daunting, it is part of a global trend as tobacco firms adapt to the rise of vaping and heated tobacco products. The company’s focus on innovation and efficiency is a response to the challenge of maintaining profitability in a market where smoking is increasingly viewed as a habit rather than a necessity. As BAT continues to roll out its smokeless offerings, the success of this strategy will depend on navigating regulatory landscapes and consumer acceptance, both of which remain critical hurdles.
For now, the company is prioritizing cost reduction and operational agility, with the hope that these changes will position it for long-term growth. The job cuts and outsourcing plan represent a bold step in an industry undergoing rapid transformation. As the 2028 savings target looms, BAT’s ability to balance cost efficiency with product innovation will be key to its future resilience. Investors and analysts alike will be watching closely to see how these measures affect the company’s market position and the overall health of the tobacco sector.