British American Tobacco (BAT) is set to eliminate around 9,000 jobs globally as part of a major restructuring plan aimed at reducing costs and accelerating its transition from traditional cigarettes to smoke-free nicotine products such as vapes and nicotine pouches.

According to a Bloomberg report citing an internal company notice, the workforce reduction represents nearly 20% of BAT's 47,000 employees outside its US business. The restructuring includes the elimination of 5,500 positions and the outsourcing of another 3,500 roles by the end of the year.

BAT Targets £600 Million in Annual Cost Savings

The job cuts are part of one of the biggest organizational overhauls in the company's history. BAT aims to achieve £600 million (approximately $793 million) in annual cost savings by the end of 2028 as it restructures operations and adapts to changing consumer preferences.

The company is expected to provide investors with further details about the restructuring strategy during its upcoming business update.

Declining Cigarette Demand Drives Strategic Shift

BAT's latest move reflects the growing decline in demand for traditional cigarettes worldwide. Consumers are increasingly switching to smoke-free alternatives, prompting tobacco companies to invest heavily in reduced-risk nicotine products.

Earlier this year, BAT projected that global cigarette industry volumes would decline by 2% in 2026, highlighting the long-term challenges facing the tobacco industry.

Factory Closures and AI Reshaping Operations

The restructuring follows several operational changes already implemented by BAT. In January, the company announced the closure of its cigarette manufacturing facility in South Africa, citing rising pressure from illicit tobacco trade.

BAT is also increasing its use of artificial intelligence (AI), automation, and data analytics to streamline operations and improve efficiency.

Interim Chief Financial Officer Javed Iqbal previously stated that AI-driven transformation would significantly reshape the company's workforce, with nearly £500 million of the targeted savings expected to be achieved by 2027.

Outsourcing Expands Across Multiple Countries

As part of its restructuring, BAT has expanded outsourcing partnerships with Accenture, transferring several business functions and service centres across countries including the United Kingdom, Singapore, Costa Rica, Mexico, Poland, Romania, and Malaysia.

The company has also outsourced certain operations in Pakistan to local technology firm Systems Ltd.

Commenting on the restructuring, BAT Chief Executive Officer Tadeu Marroco said the company remains committed to supporting affected employees throughout the transition.

"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," Marroco said.

The restructuring highlights BAT's long-term strategy to strengthen its position in the rapidly evolving nicotine market while reducing its dependence on conventional tobacco products.

Inputs from agencies