A True Transformation

To BAT, “A Better Tomorrow” is more than a catchy slogan.

By Stefanie Rossel

Flora Okereke is head of global regulatory insights and foresights at BAT, responsible for the analysis and forecasting of international regulatory developments on behalf of the company’s 180-plus markets. She has previously held several senior country, regional and global roles at BAT, including legal, corporate and regulatory affairs director for West Africa; head of regulatory affairs for Africa, the Middle East and Eastern Europe; global head of regulatory strategy and engagement; and senior director of government affairs and international policy at Reynolds American Incorporated Services, a subsidiary of R.J. Reynolds Tobacco based in Washington, D.C. She is an advocate of evidence-based regulation. Okereke was called to the Bar of England and Wales (Middle Temple) and later admitted as a solicitor by the Law Society. Tobacco Reporter caught up with Okereke to discuss her views on the remarkable transformations taking place at BAT and throughout the tobacco industry.

Tobacco Reporter: It has been some years since BAT set out on its transformation journey from a single-category company to a multi-category player. In March 2020, it announced its new corporate purpose: to build a better tomorrow, with the aim to reduce the health impact of its business through offering a greater choice of reduced-risk products. You have been with BAT for more than 20 years—can you please describe how working for BAT has changed since the transformation process started?

Okereke: I’ve had the great fortune of working in most parts of our business over the years across every region of the globe. Given the long history and focus on combustibles, the transformation since we launched our first e-cigarette in 2013 is nothing short of miraculous. We have seen the emergence of a multitude of products that are giving adult consumers compelling choices as an alternative to combustibles. And this is a very good thing. Recognizing the strong potential of these new products to reduce the risk in comparison to continued smoking, our CEO invited everyone in our organization in 2020 to embark on a transformation journey to reduce the health impact of our business. The goal of this transformation journey is what we call “A Better Tomorrow.”

Being part of this transformation has engaged employees across the business like never before. There’s a real rise in energy and a renewed commitment and sense of pride amongst our employees as we work together to reduce the health impact of our business.

During the recent Global Forum on Nicotine, you participated in a panel debating whether the industry’s transformation is a myth or reality. Being inside a company during the transformation process, what do you think?

The transformation is real, and we are making tangible change. We are laser-focused on providing adult consumers with a wide range of less risky* products. We are making significantly increased investments year-on-year in reduced-risk products—in 2021 alone, we invested £496 million [$602.73 million]. We are proactively communicating with our adult consumers, encouraging them to switch through over 1 billion inserts to date and over 136 peer-reviewed scientific publications on product manufacturing safety and performance standards of our products.

In parallel, we are expanding availability of reduced-risk products, which are in 57 countries to date, 20 of which have the highest smoking prevalence. We are actively engaging regulators and public health and governments advocating for a regulatory and fiscal framework that recognizes the important role of tobacco harm reduction and is designed to incentivize adult smokers who would otherwise continue to smoke to switch.

We aim to switch 50 million adult smokers to reduced-risk products by 2030. E-cigarettes were only invented in 2003, by a Chinese pharmacist, so when we see the level of progress BAT is making in this area, I think we are doing pretty well.

How can we verify that tobacco companies are really transforming?

For BAT, “A Better Tomorrow” is a world where smokers who would otherwise choose to continue to smoke have the option to switch to less risky alternatives to combustible tobacco. But A Better Tomorrow also represents a renewed commitment by BAT to improve society for all those that are sharing the road in our transformation journey—we are measuring ourselves against the expectations of our customers, our employees, our shareholders, our government partners and the public.

We are setting clear and ambitious goals, measuring ourselves and sharing progress with all of our stakeholders. And we are making significant progress in support of those goals.

We have set a goal of 50 million consumers of our noncombustible products by 2030. Today, over 20 million adult consumers have chosen to use our many reduced-risk products, with 14.6 percent of group revenue delivered by noncombustible products.

We also aim to achieve at least £5 billion in New Category revenues by 2025. In a few short years, we have built a £2 billion New Category revenue business, and we are confident of more than doubling this to reach our revenue target by 2025.

In your panel presentation, you said that the core of the change was the transformation of BAT’s portfolio, but behind it, this meant that smokers are encouraged to switch and that BAT is therefore doing something for society. While this is working quite well in the developed world, what can tobacco companies do to repeat this success in low-income countries?

BAT’s reduced-risk products are available in 57 countries to date—something we are truly proud of. We are rolling these out as fast and as responsibly as we can, including in low-income countries.

It is important to remember that we are not alone in our transformation journey—our governments in low-[income] and middle-income countries have an especially crucial role to play. Progressive, evidence-based regulatory measures will help encourage smokers to transition to reduced-risk products. We believe governments in low-[income] and middle-income countries can introduce three types of regulation to accelerate the transition of smokers from combustibles to reduced-risk products. These include regulations and policies that enable and encourage companies to innovate and bring new products to market, permit clear communications with consumers about the relative risks of products and incentivize consumers to switch from combustibles to reduced-risk* alternatives.

Regulations should allow flavors that adults enjoy, ensure high enough levels of nicotine to satisfy adult smokers, and where products are taxed, acknowledge the reduced-risk profile of products like e-cigarettes, oral nicotine pouches and tobacco-heating products compared to combustibles. To realize the benefit of tobacco harm reduction, the products must remain affordable.

What does the transformation process mean for BAT’s company culture?

My earliest impression when I first joined BAT was how diverse it is, which gave rise to our motto, “Strength in Diversity.” For a company with over 52,000 employees based in over 175 countries with multiple languages and time zones, the advent of the “A Better Tomorrow” vision has been a global rallying cry that has motivated and organized our people around a common purpose to transform our business and benefit society.

The “A Better Tomorrow” purpose has affected our culture positively in many meaningful ways. [For example], 72 percent of new senior management hires are from outside the tobacco industry, and 39 percent of women [work] in management roles. [There are] employee initiatives supported by management to drive and reward new ideas that generate solutions; [and the company has] a comprehensive environmental program addressing factory waste, emissions, plastic and litter.

Most notably, there has been a shift in who our people are and how they expect the business to operate. As we make progress in our transformation, I have personally noted our people taking more pride in our organization and raising their expectations for the company in the way we deliver our commitments. This is making BAT a better company and improving our contribution to society.

Increased focus on complex novel nicotine-delivery systems requires a different composition of staff, i.e., an increasing share of scientists also coming from other industries. How far have these new arrivals impacted on the internal spirit and atmosphere at BAT?

Probably the biggest change I’ve noticed is the diverse types of profiles now applying to join BAT. We have moved from a company selling a product based on agriculture to a high-tech and innovation-focused company. This requires all kinds of expertise that is new—[as mentioned], 72 percent of new senior management hires are now from outside of the tobacco industry. These new hires are bringing new perspectives and capabilities to drive our business transformation.

I believe this shift in hiring will only strengthen our culture and DNA while at the same time propelling us all toward our “A Better Tomorrow” goals.