BAT Overhaul: 5,500 Jobs Cut, 3,500 Outsourced as Tobacco Giant Shifts to Smoke-Free Growth

British American Tobacco Plc (BAT) is set to take out 5,500 positions and outsource 3,500 jobs by the end of the year, reducing its global workforce of around 47,000 by nearly 20%, as it accelerates a sweeping restructuring aimed at cutting costs and pivoting toward smoke-free alternatives, Bloomberg reported, citing an internal notice.

The figures exclude BAT’s US operations, which are managed separately through its subsidiary Reynolds American Inc. The company confirmed the full scale of the cuts on Monday and has pledged to deliver £600 million ($793 million) in annual cost savings by the end of 2028.

In February, Interim CFO Javed Iqbal said that artificial intelligence and data analytics tools would also affect staffing levels as the programme progresses, contributing to around £500 million in annual cost savings by 2027.

The shares fell as much as 1.9% in London, trimming a year-to-date gain that still stands at nearly 13% since the start of the year through Friday’s close. Analysts at Barclays said the scale of the workforce reduction could surprise investors, even though the market was already aware of the company’s cost-saving programme.

Tobacco Industry Shift

The restructuring marks a major structural shift for BAT as the tobacco industry continues to face declining demand for traditional cigarettes in several markets. The company is increasing its focus on nicotine alternatives that have grown in popularity as consumers look for ways to quit smoking.

BAT, like rival Philip Morris International Inc., is targeting more than half of its revenue from smoke-free products such as Vuse vapes and Velo nicotine pouches.

As part of this transition, the company is also shutting down traditional cigarette manufacturing facilities, including its eighth-largest factory in South Africa. These closures have been linked to increasing competition from illicit tobacco trade.

Outsourcing Strategy

To support the workforce reduction, BAT has entered into a partnership with Accenture to outsource several business functions, including service centres across multiple regions such as the UK, Singapore, Costa Rica, Mexico, Poland, Romania and Malaysia.

In addition, some roles in Pakistan have been transferred to Systems Ltd., a local technology and business services firm.

“These changes affect many of our colleagues, and we are focused on supporting them through this transition with care and respect, as we position the business for the future,” Chief Executive Tadeu Marroco said.

Industry-Wide Pressure

According to reports, BAT’s move comes amid broader cost-cutting efforts across the global tobacco sector. Companies are under pressure due to falling cigarette volumes and rising investment requirements in next-generation nicotine products.

Imperial Brands said in May that it is on track to deliver £320 million in annual cost savings by 2030. Meanwhile, Philip Morris International has already completed more than half of its $2 billion cost-saving target set for 2026 following a revised outlook.

Earlier this year, BAT said it remains on track to meet its full-year targets despite declining cigarette volumes, supported by strong performance in the US market, where its Velo Plus nicotine pouches are gaining traction against rival PMI.