British American Tobacco (BAT) has announced plans to lay off 2,300 jobs globally by January. The job cuts will eliminate 4% of its workforce including a fifth of its senior managers.
The decision as BAT’s new chief executive, Jack Bowles faces challenges in shifting the company’s profit center from legacy tobacco products to e-cigarettes.
The company’s shares rose up by 1.6% after the announcement. Bowles’ action will also eliminate duplicative business divisions.
BAT employed more than 56,000 people at the end of last year. The announcement to cut jobs comes a day after U.S. President Donald Trump said that the U.S. would remove all flavored e-cigarettes from shelves, as officials warned millions of children had been drawn into nicotine addiction.
Despite Trump’s concerns, companies such as BAT are seeing more of their revenue being generated from e-cigarettes. Demand for traditional tobacco products continues to decline, especially in Western markets, where high taxes, public smoking bans and health worries have persuaded consumers to turn to controversial alternatives.
“My goal is to oversee a step-change in new category growth and significantly simplify or current ways of working and business processes whilst delivering long-term sustainable returns for our shareholders. This is a vital move,” Bowles said.
However, Wednesday’s US developments were seen as a major blow to the burgeoning vaping industry, worth $10.2 billion globally in 2018, according to Grand View Research.
BAT said the planned job cuts would help save money that can be reinvested in the growth of its portfolio and deliver on its target of generating 5 billion pounds ($6.2 billion) of revenue in “new categories” by 2023-24.