British American Tobacco (BAT), the maker of Lucky Strike and Dunhill cigarettes, is undertaking a significant restructuring that involves cutting 9,000 jobs, or approximately 20% of its global workforce, by 2027. This includes approximately 5,500 direct layoffs and the outsourcing of around 3,500 roles to third-party firms like Accenture, ITC Infotech, and Systems. The move is part of the company's "Fit2Win" transformation program, which is expected to generate $793 million in annualized savings by 2028, with the majority of these savings targeted by 2027. CEO Tadeu Marroco stated the overhaul aims to make the company more agile, cost-disciplined, and technology-enabled.
The job cuts are primarily driven by declining sales in traditional tobacco products, which are projected to decrease by 2.5% this year. BAT is pivoting its focus towards alternative nicotine products such as Vuse vapes and Velo nicotine pouches, though it currently lags behind rival Philip Morris International in this segment. The company has faced challenges, including a tough regulatory environment in the U.S. that has delayed new product approvals and contributed to an influx of illegal Chinese vape products, impacting sales and market share. Additionally, increased living costs, rising import taxes, and stricter regulations in markets like Australia and Bangladesh have put pressure on tobacco sales.
The restructuring will not impact BAT's U.S. business, Reynolds American, which remains its largest market. The roles being outsourced include positions in 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. The company has already begun streamlining manufacturing, including the closure of a factory in South Africa. Affected employees are being supported through the transition, and most role changes have been confirmed, with remaining consultations underway.
