Traditional tobacco giants are cutting off their arms to survive, British American Tobacco (BTI.US) to cut global workforce by one-fifth.

As part of its comprehensive plan to reduce costs and simplify operations, British American Tobacco (BTI.US) is cutting approximately one-fifth of its global workforce of 47,000 employees. According to an internal memo revealing the scale of this tobacco giant's transformation, the manufacturer of Dunhill cigarettes will eliminate 5,500 jobs by the end of this year and further outsource 3,500 positions. These numbers do not include the US operations managed by British American Tobacco's subsidiary Reynolds American Inc. Most of the other countries where British American Tobacco operates have been affected by this restructuring plan, with the company set to detail the extent of the job cuts on Monday. Previously, the company had pledged to save 600 million ($ 7.93 billion) in costs by the end of 2028. British American Tobacco saw its stock price on the London Stock Exchange drop by as much as 1.9%, erasing some of the gains made earlier this year. As of last Friday's closing, the stock has risen nearly 13% year-to-date. British American Tobacco is facing declining demand for traditional cigarettes in many markets and needs to invest in and develop more sustainable nicotine alternatives as the popularity of these alternatives rises amid people seeking ways to quit smoking. Like its competitor Philip Morris International Inc. (PM.US), British American Tobacco aims to generate over half of its revenue from "smokeless" nicotine products such as Vuse e-cigarettes and Velo nicotine pouches. As part of the British American Tobacco restructuring, traditional cigarette factories are being closed. In January this year, the company announced the closure of its eighth-largest cigarette factory in South Africa due to competition from illegal trade. Earlier this year, British American Tobacco predicted a 2% decline in global cigarette industry sales by 2026. Interim Chief Financial Officer Javed Iqbal had previously stated in February that the use of artificial intelligence and data analytics tools would also impact staffing levels. He said that most of the cost savings British American Tobacco plans to achieve (around 500 million) will be completed by 2027. British American Tobacco has partnered with Accenture Plc Class A to outsource many functions, including service centers that typically employ a significant portion of the total workforce of the company. In its latest announcement, British American Tobacco stated that positions in the UK, Singapore, Costa Rica, Mexico, Poland, Romania, and Malaysia have since been transferred to Accenture Plc Class A. It also added that some positions in Pakistan have been outsourced to Pakistan-based technology and business company Systems Ltd. Chief Executive Tadeu Marroco stated in a statement, "These changes affect many of our colleagues, and as we lay the groundwork for the future of the company, we are focusing on supporting them through this transition with care and respect."