British American Tobacco Cuts Jobs to Boost AI Cost Savings

Key Moments

AI-Driven Restructuring and Workforce Changes

British American Tobacco (BAT) announced a sweeping restructuring plan on June 29, aiming to streamline operations and boost profitability through an artificial intelligence-focused transformation. As part of this initiative, the group intends to reduce its global workforce by about 20%, excluding the United States, which remains its largest market.

The company said that approximately 5,500 jobs will be eliminated, while around 3,500 positions will be moved to third-party service providers, including Accenture. In total, the changes will affect roughly 9,000 employees.

Financial Targets and Market Reaction

BAT stated that the program is projected to deliver £600 million in additional annualized cost savings by 2028. Of that figure, £500 million is targeted to be achieved by 2027.

Despite the anticipated savings, the market response was negative at the time of the announcement. BAT shares were down 1.6% at £46.73 as of 0940 GMT, lagging the FTSE 100 index, which was down 0.3%.

Management Commentary and Investor Perspective

Chief Executive Tadeu Marroco acknowledged the human impact of the restructuring, stating: “These changes affect many of our colleagues and we are focused on supporting them through this transition with care and respect.” He added that the revamp should help make BAT more agile, disciplined on costs and better equipped with technology.

BAT had previously signaled in February that a renewed focus on productivity might result in job reductions. However, Barclays analyst Pallav Mittal noted in a research note that the magnitude of the planned cuts could come as a surprise to some investors.

The group, known for cigarette brands such as Lucky Strike and Dunhill, has delivered muted sales and profit growth in recent years, at times missing or only narrowly reaching its own performance targets, which has frustrated parts of its shareholder base.

Shift Away From Traditional Tobacco

BAT’s core traditional tobacco business continues to contract. The company expects industry cigarette volumes to decline by 2.5% this year, reinforcing the “terminal decline” of its main profit driver.

In response, BAT is reallocating focus toward non-combustible nicotine products, including Vuse-branded vapes and Velo nicotine pouches. Progress in this area has been uneven, and the company acknowledges it lags a key competitor, Philip Morris International.

Regulatory Headwinds and Market Pressures

Regulatory developments, particularly in the United States, have complicated BAT’s push into newer products. The company highlighted that U.S. authorities have adopted a strict approach to authorizing new products such as vapes, leading to delays in bringing them to market. BAT says such delays have opened the door for a surge of unauthorized products from China, putting pressure on its sales and market share.

In addition, U.S. tobacco sales have come under strain as consumers trade down to lower-priced brands amid elevated living costs. BAT is also navigating higher excise duties, tighter regulatory frameworks, and illicit trade in several markets, including Australia and Bangladesh.

Implementation Status of Role Changes

According to BAT, most of the role changes in the restructuring have already been communicated to affected employees. The company added that remaining consultations are ongoing and are being carried out in accordance with local regulations and requirements.