Top tobacco company to cut thousands of jobs

British American Tobacco is planning to cut about 20% of its workforce as it moves forward with using artificial intelligence (AI) to reshape its operations with the goal of lowering costs and boosting profits.

The maker of Lucky Strike and Dunhill cigarettes said Monday it plans to cut around 5,500 jobs and outsource about 3,500 roles to third-party firms, including Accenture. The restructuring would impact about 9,000 employees total, while excluding the U.S.

BAT didn’t specify where the jobs would be cut as its main profit driver of traditional tobacco faces a long-term decline amid the rise of smoking alternatives.

The company said the cost-cutting program is expected to deliver $793 million in annualized savings by 2028, with much of that total targeted by 2027.

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BAT CEO Tadeu Marroco said the overhaul would make the company 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,” Marroco said in a statement.

The company’s sales and profit growth have been slow in recent years, often missing or narrowly meeting company targets and disappointing some investors. BAT is aiming to grow its revenue between 3% and 5% per year over the medium term.

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The company said it has begun streamlining its manufacturing over the last 18 to 24 months, a process which included the previously announced closure of a factory in South Africa.

BAT expects traditional tobacco product sales to decline 2.5% across the industry this year. Due to that trend, the company is shifting its focus to alternatives like Vuse vapes and Velo nicotine pouches, though it lags behind industry rival Philip Morris International.

U.S. regulators have adopted a tough approach to approving licenses for new products like vapes, which have delayed the launch of new products. BAT said the approval challenges have led to an influx of illegal Chinese products, which has weighed on its sales and market share.

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Tobacco sales in the U.S. have also been hit as smokers shift to cheaper brands amid high living costs, while BAT also faces rising import taxes, tighter regulations and illicit trade in markets like Australia and Bangladesh.

BAT said most of the role changes had been confirmed with employees, while remaining consultations were underway in compliance with local requirements.

The company also said that roles transferred to third parties include positions in its Global Service Hubs in Costa Rica, Mexico, Romania and Malaysia, as well as certain roles in Pakistan, and some digital and technology roles in Poland and Romania.

Reuters contributed to this report.