British American Tobacco to Cut 5,500 Jobs in AI Restructuring

Workforce reduction targets $793M in annual savings

British American Tobacco announced plans to eliminate approximately 5,500 positions—roughly 20% of its global workforce—while outsourcing an additional 3,500 roles to third-party firms including Accenture. The restructuring, which affects about 9,000 employees total outside the United States, centers on deploying artificial intelligence to streamline operations and reduce costs.

The maker of Lucky Strike and Dunhill cigarettes expects the cost-cutting program to deliver $793 million in annualized savings by 2028, with the majority of those savings targeted for 2027. CEO Tadeu Marroco characterized the overhaul as necessary to make the company "more agile, cost-disciplined and technology-enabled," while acknowledging the impact on employees.

BAT has not specified which geographic markets will bear the brunt of the job cuts. Roles being transferred to external providers include positions in the company's Global Service Hubs in Costa Rica, Mexico, Romania and Malaysia, as well as certain positions in Pakistan and some digital and technology roles in Poland and Romania.

Traditional tobacco faces structural decline

The restructuring comes as BAT confronts a fundamental shift in its core business. The company projects that traditional tobacco product sales will decline 2.5% across the industry this year, continuing a long-term trend that has pressured the company's financial performance.

BAT's sales and profit growth have consistently underperformed in recent years, often missing or narrowly meeting company targets. The company is now targeting revenue growth of 3% to 5% annually over the medium term—a modest goal that reflects the challenging market environment.

The company has already begun streamlining its manufacturing footprint over the past 18 to 24 months, including the previously announced closure of a factory in South Africa.

Regulatory delays hamper smokeless pivot

As cigarette sales decline, BAT has attempted to shift focus toward alternatives like Vuse vapes and Velo nicotine pouches. However, the company trails competitor Philip Morris International in this transition and faces significant regulatory headwinds.

U.S. regulators have adopted a stringent approach to approving licenses for new vaping products, delaying product launches. BAT says these approval challenges have created an opening for illegal Chinese products to flood the market, weighing on the company's sales and market share.

Additional pressures include consumers trading down to cheaper cigarette brands amid high living costs, rising import taxes in key markets, tighter regulations, and illicit trade in countries including Australia and Bangladesh.

Why it matters

BAT's workforce reduction illustrates how AI adoption is reshaping even traditional industries facing structural decline. Rather than using technology purely for growth, the company is deploying AI primarily as a cost-cutting tool to maintain profitability as its core product loses relevance. The move also highlights how regulatory friction in approving harm-reduction alternatives can paradoxically entrench the economics of legacy tobacco products, even as companies attempt to transition their business models. For workers in affected markets, the restructuring demonstrates that AI-driven automation increasingly extends beyond routine tasks to encompass complex operational roles previously considered secure.

The details were first reported by Fox Business, citing company statements and Reuters contributions.