Charlotte’s Web Holdings, a supplier of cannabidiol (CBD) hemp extract wellness products, has appointed Jonathan P. Atwood to the company’s board of directors, according to PR Newswire. Atwood is currently the group head of business communications for BAT and is responsible for BAT’s external, internal and corporate brand communications. Atwood was designated as a board nominee by BAT in connection with its November purchase of convertible debenture in Charlotte’s Web.
Atwood held senior management positions at Unilever, most recently leading global supply chain communications. Prior to that, he led sustainability and corporate communications for Unilever North America. Atwood is an advocate of sustainability and has worked closely with B Corps companies.
Charlotte’s Web is the only publicly traded CBD B Corp-certified company.
“We welcome Jonathan as a valuable addition to the board where he can support our international and sustainability ambitions. We look forward to working closely together on our mutually shared interests,” said John Held, chairman of the board of Charlotte’s Web.
Atwood’s appointment brings the total number of directors on the Charlotte’s Web board to six.
BAT released its 2022 financial results, showing that revenue was up 2.3 percent, driven by new category growth and pricing. Adjusted profit from operations was up 4.3 percent, absorbing a negative transactional foreign currency impact of 1.5 percent.
For 2023, the company expects the global tobacco industry volume to be down about 2 percent. An organic constant currency revenue growth of 3 percent to 5 percent is expected, with reported growth impacted by the timing of the transfer of the Russian and Belarussian businesses expected to close in 2023.
“We continue to accelerate our ‘A Better Tomorrow’ transformation at speed,” said BAT CEO Jack Bowles. “Driven by our strong new category momentum, (with revenue approaching £3 billion), we are confident in our £5 billion ($6.09 billion) revenue target by 2025 and now expect new category profitability in 2024, one year ahead of plan.
“Our new category business delivered strong volume, revenue and market share growth and has become a significant contributor to the group’s financial delivery. In 2022, we invested more than £2 billion in new categories to drive long-term sustainable growth while making excellent progress in reducing operating losses by 62 percent.
“While reported results were impacted by a number of one-off charges, we achieved a 150 bps improvement in adjusted operating margin at current rates and another year of 100 percent operating cash conversion, demonstrating our ability to successfully navigate an increasingly challenging macroeconomic environment. This enabled us to return £6.9 billion to shareholders in 2022. I am proud of our people and their focus on delivery of our three strategic priorities, demonstrating once again the strength and resilience of our business.
“Looking forward, while we expect the macroeconomic environment to remain challenging, we will continue to deliver and further accelerate our transformation. We will leverage our well-established multi-category brand portfolio, our new regional structure to enable even greater collaboration and accelerated decision-making and our new market archetype model to guide our strategic choices and resource allocation to further enhance returns.”
PMI made the index for the third year running, achieving an overall score of 80.6 percent.
“Achieving gender balance at all levels of the company is one of our top priorities, and I am delighted that our efforts are recognized again in this year’s index,” said Silke Muenster, chief diversity officer at PMI. “While we are making significant progress, we know we need to keep our foot on the acceleration pedal. An inclusive workplace that leverages the full talents of both women and men is crucial to our smoke-free vision, making our organization more innovative, resourceful and engaged.”
In 2022, PMI achieved its target of ensuring at least 40 percent female representation in managerial roles and announced a new target to achieve 35 percent of women in senior roles by the end of 2025, among other targets.
BAT, which participated in the index for the first time, received a score of 75 percent. BAT was recognized for creating an inclusive culture for women via its recruiting initiatives, adoption of family-friendly policies, sponsoring programs dedicated to educating women, and support of community programs. Inclusion in the index follows BAT being named as a Global Top Employer for a sixth successive year.
“Recognition in this year’s Bloomberg Gender-Equality Index demonstrates our commitment to addressing gender diversity and highlights our concerted global efforts to provide transparent reporting,” said Hae In Kim, BAT’s director of talent, culture and inclusion. “With more than 50,000 employees worldwide, our diversity and inclusion strategy is truly global, and I continue to be incredibly proud of the collective efforts made by all our employees.”
The GEI measures gender equality performance globally across five pillars as set by Bloomberg: leadership and talent pipeline, equal pay and gender pay parity, inclusive culture, anti-sexual harassment policies, and external brand. The 2023 Bloomberg GEI comprises 485 companies from 45 countries and regions.
BAT has been certified as a Global Top Employer for the sixth consecutive year, according to the company.
Certification is granted by the Top Employers Institute, an independent organization that studies the employee offerings of major employers around the world.
“We are delighted to have been recognized once again as a Global Top Employer,” said Hae In Kim, director of talent, culture and inclusion at BAT. “Our people are our most important asset as we strive to build ‘A Better Tomorrow.’ The BAT ethos sets a clear direction for us to enable a diverse and inclusive workplace culture, and we are committed to attracting, developing and retaining a talented workforce by putting our people first.”
In 2023, BAT has been named as a Top Employer in a total of 37 countries across the Americas, Europe, Asia-Pacific, the Middle East and Africa. Certification this year marks the first time BAT’s U.S. subsidiary, Reynolds American Inc., has been named as a Top Employer in the United States.
BAT will close a cigarette manufacturing plant in Switzerland in 2023, reports Reuters.
The closure will cause the layoff of 226 workers. Employees will be given an “advantageous social package,” according to SwissInfo.
“BAT Switzerland confirms that a final decision has been made to transfer cigarette production from Boncourt to larger factories within Europe and to close the Boncourt site,” BAT said in a statement.
Boncourt Mayor Lionel Maitre said the closure is “a shock, a disappointment, a feeling of desperation and a mess.” The factory closure will cause Boncourt to lose its biggest taxpayer.
“Let’s be clear—this is a hard blow, but we will overcome it, and the situation is not hopeless,” said Jura government President David Eray. “This decision brings us face-to-face with the painful consequences that we feared.”
In 2014, BAT closed a research and development facility in Boncourt, laying off about 15 people.
BAT is launching its tobacco-heating product glo in Cyprus, according to The Cyprus Mail. The launch is expected to contribute to the economy and society in Cyprus, boosting employment with new jobs while supporting the country’s network of retailers and distributors.
“BAT is on a transformation journey to build ‘A Better Tomorrow’ by reducing the health impact of our business,” said Vitalii Kochenko, general manager of BAT Hellas responsible for the markets of Cyprus, Greece, Malta and Israel. “We are proud to bring innovation and technology to the local market with BAT’s tobacco-heating product, putting Cyprus amongst the markets that the international group of BAT has chosen for this launch.”
Glo hyper+ in Cyprus is BAT’s latest iteration of its tobacco-heating product. The device combines BAT’s latest tobacco-heating technology, induction heating, and will be accompanied by neo demi slim sticks, which are specially designed to be used with this device.
British American Tobacco prepares for a radically different future.
By Stefanie Rossel
Less than a year after taking over as British American Tobacco’s (BAT) new CEO, Jack Bowles has already left a distinctive mark on the company. In September, the maker of Lucky Strike and Camel cigarettes unveiled a comprehensive restructuring program that included the layoff of 2,300 of its 55,000 employees. A fifth of the job cuts were senior roles. Savings delivered by the measure were to be reinvested in the company’s new categories, such as vapor, tobacco-heating products and oral tobacco, BAT said. The goal is to make BAT a more efficient and agile company and to facilitate business processes.
On the occasion of its capital markets update in mid-March, the company appeared to have reinvented itself: Gone was the tobacco leaf in its logo, replaced by a double swoosh and accompanied by the slogan, “A better tomorrow.” BAT appears to be redefining itself as a consumer goods company.
“Our strategy puts the consumer first, focusing on understanding adult consumer choice and enjoyment,” explained Kingsley Wheaton, BAT’s chief marketing officer. “We will capture lost consumer moments with a portfolio in tobacco, nicotine and beyond. This will enable sustainable, long-term growth with a clear focus on foresights, innovation, brands, activation, teams and technology. We will become a business that defines itself not by the products it sells but by the consumer needs it meets.”
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“The redesigned logo, replacing one that hadn’t altered since the late 1990s, helps to emphasize that an increasing part of BAT’s future is likely to be in noncombustible nicotine products such as smokeless tobacco, vapes and tobacco-heating [products],” says Jonathan Fell, principal at Ash Park. “With ‘beyond nicotine,’ it is also raising the prospect of going into areas such as caffeine or cannabidiol/tetrahydrocannabinol products once the appropriate legal and regulatory framework is in place and the company’s scientists have fully substantiated their safety and efficacy.”
BAT experienced a 4.7 percent reduction in traditional cigarette volume in 2019, according to its most recent annual report. The company’s revenue growth of 5.7 percent to £25.88 billion ($32.26 billion) in 2019 was driven by pricing across the cigarette portfolio and an increase in revenue from traditional oral tobacco and next-generation products (NGPs).
In light of continuously declining global cigarette sales, tobacco companies have increasingly felt the pressure to adapt their business models to the changing environment. Philip Morris and Japan Tobacco International announced similar restructuring and rationalizing measures in the last quarter of 2019.
Jack Bowles aims to make BAT a more efficient and agile company
Faster and more responsive
Upon taking the helm at BAT, Bowles set out three priorities: driving value from combustibles, improving the performance of new categories and simplifying the business. During the capital markets event, Bowles substantiated forthcoming goals. BAT aims to reduce the health impact of its business by offering a greater choice of better and less risky products with the ambition to have 50 million noncombustible product consumers by 2030. By extending its Quantum project, a business simplification program initiated in 2004, the company aims to generate £1 billion over the next three years—money it intends to utilize to accelerate the revenue growth of its “new category” (NC) business. Next to vapor products, NC includes heated-tobacco products (HTPs) and modern oral products, a category comprising white, tobacco-free nicotine pouches, such as Epok, Lyft and Velo. The company will support its strategy by establishing innovation hubs in London, San Francisco, Shenzhen and Tel Aviv in addition to its R&D centers in Winston-Salem, North Carolina, USA, and Southampton, U.K.
While acknowledging that the coronavirus crisis was likely to make NC growth in the first half of 2020 difficult with the company having postponed product launches, Bowles nevertheless expected to make further progress this year toward BAT’s aim to produce revenues of £5 billion through novel products by 2023–2024.
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Consolidating brand properties
In 2019, BAT increased its NC revenue to £1.3 billion, which represents 37 percent growth compared to the previous year and more than double the revenue from two years ago. BAT sold 226 billion vapor units and 9 billion HTP units in 2019, up 19 percent and 32 percent, respectively, over the previous year. With a plus of 188 percent, modern oral products saw extraordinary growth. The company sold 1,194 million pouches in 2019.
In November, BAT began to streamline its NGP portfolio to further accelerate the growth of its NC business, thereby creating three global brands. Vapor products will be branded as Vuse and HTPs will continue to be branded as Glo whereas modern oral products will be marketed under the Velo brand. The brand consolidation, taking place in phases, is set to be completed by the end of 2020.
BAT’s flagship Vype brand will also be migrated to Vuse, currently a brand manufactured by R.J. Reynolds Vapor Co., a subsidiary of Reynolds American Inc. (RAI), which BAT acquired in 2017. Launched in 2013, Vuse once was the U.S.’ most popular e-cigarette, reaching a market share of 33 percent in 2015 before Juul overtook it in 2017. In 2019, Vuse recovered some of the lost territory, claiming a market share of 14 percent. Growth was driven by the launch of Vuse Alto, a pod-mod type vaporizer. In October 2019, RAI submitted a premarket tobacco product application (PMTA) to the U.S. Food and Drug Administration (FDA) seeking market authorization for a range of Vuse flavors. At the time of writing, the FDA’s court-ordered May 12 PMTA deadline was likely to be extended by 120 days because of the coronavirus pandemic.
Fell is confident that BAT will be able to pursue its growth strategy in the U.S. despite the nationwide restrictions on e-cigarette flavors that took effect in February. The ban applies to mint and fruit flavors that are offered in cartridge-based e-cigarettes, such as the pods sold by Juul Labs. Menthol and tobacco flavors continue to be allowed as well as fruit flavors delivered by disposable vapes, vapor devices with an open-tank system and their respective e-liquids. “BAT has been gaining share of the U.S. vaping market, helped by the success of its Vuse Alto device and also because, relative to major competitors, a smaller proportion of its portfolio has been hit by the flavor ban,” says Fell. “In the short term, the growth of the overall vaping category could be impacted by the challenges and ongoing uncertainty posed by the May 2020 PMTA deadline, which may now be extended due to the Covid-19 outbreak. But in the long term, BAT should be in a very strong position to compete energetically in the U.S. vape market and certainly has the resources to meet the increasing regulatory demands.”
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Jonathan Fell
Pushing forward
BAT’s Glo has been sold in Japan and South Korea—the world’s leading HTP markets—along with Eastern Europe, Russia and Canada, among other markets. To support the expansion of Glo across Europe, the company in 2018 started a €800 million ($875 million) five-year investment program in its Romanian factory.
With around 70 percent of global industry volume, Japan is by far the largest market for HTPs. The segment in that country is currently led by Philip Morris International (PMI), which debuted the category in 2014 with the launch of IQOS and holds a 71.8 percent share. BAT launched Glo in Japan in 2016, and the product held a 20.1 percent category share in 2018, according to Reuters. To narrow the gap with IQOS, BAT in 2019 launched three new Glo variants in Japan: Sens, Pro and Nano. A fourth version was supposed to be introduced around press time.
“I think we will see increased efforts in this category, starting with the launch of Glo Hyper—with larger tobacco sticks and a device which uses induction heating—in April,” says Fell. “Rather than stressing it wants to be a leader in HTP specifically, BAT is very committed to its multi-category approach,” he adds. “It is well ahead of PMI in vaping and smokeless and will offer a choice of modern oral tobacco, vapes or tobacco-heating [products] that [are] relevant to consumer needs in individual markets. Hence, BAT says it wants to go ‘from a distant number two to a very strong number two’ in HTP.”
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
British American Tobacco’s cigarette volumes during the 12 months to the end of December, at 665 billion, were increased by about 0.2 percent on those of the 12 months to the end of December 2015, 663 billion. On an organic basis volumes fell by 0.8 percent, a figure set against what the company estimated was an industry-wide decline of about three percent.
Global Drive Brand (GDB) volume grew by 7.5 percent and they now account for 49 percent of group cigarette volume, up from 32 percent in 2011.
The company’s cigarette volumes were increased in its EEMEA (Eastern Europe, Middle East and Africa) region from 229 billion to 236 billion, and in its Western Europe region from 112 billion to 120 billion; but they were down in its Americas region from 124 billion to 113 billion, and in its Asia-Pacific region from 198 billion to 196 billion.
Volume growth in Bangladesh, Ukraine, Russia, Vietnam, Turkey, Mexico, Poland and Indonesia was offset by declines in Pakistan, Brazil, Venezuela and Malaysia.
In presenting today its preliminary results for 2016, BAT reported that the group had increased its market share by more than 0.5 of a percentage point, driven by the performance of its GDBs whose combined share was up by 1.0 percentage point.
Dunhill’s overall market share was flat. The brand’s volume fell by 3.3 percent, driven mainly by industry declines in Malaysia and Brazil, more than offsetting growth in South Korea, Romania and continued growth in Indonesia.
Kent volume increased by 1.0 percent, and its market share was up by 0.1 of a percentage point, driven by the brand’s performance in Chile, Turkey and Japan.
Lucky Strike grew its market share by 0.1 of a percentage point, while the brand’s volume was up by 13.5 percent, with growth in Indonesia, Colombia Egypt, France, Germany and Croatia more than offsetting lower volume in Argentina and Russia.
Pall Mall’s market share grew by 0.1 of a percentage point, with volume marginally higher as growth in Venezuela, Poland, Mexico and Romania more than offset reductions in Pakistan and the migration to Rothmans in Italy.
Rothmans’ 36.9 percent volume growth and its market share increase of 0.7 of a percentage point was driven by the brand’s performance in Russia, Ukraine, Italy, Nigeria, Turkey and South Korea.
The volume of the company’s other international brands declined by 9.0 percent as growth in State Express 555 and Craven A (in Vietnam) was more than offset by lower volume from Peter Stuyvesant (in South Africa), JPGL (largely in SE Asia), and Vogue (where growth in Russia was offset by lower volume in South Korea due to the migration to Rothmans).
Innovations volume grew by 12 percent, driven by the success of tube filters, capsules and the slimmer formats across the GDB portfolio; and they now account for 29 percent of the company’s cigarette volume.
BAT’s tobacco volumes during 2016, at 689 billion were unchanged from those of 2015. Tobacco volumes include, as well as cigarettes, other tobacco products whose volumes are stated in cigarette stick equivalents.
BAT’s revenue, at £14,751 million, was increased by 12.6 percent on that of 2015, £13,104 million.
Adjusted profit from operations was up by 9.8 percent to £5,480 million.
Profit from operations was down by 2.9 percent to £4,655 million.
Adjusted diluted earnings per share were up by 10.4 percent to 247.5p, while basic earnings per share were increased by 8.4 percent to 250.2p.
Dividends per share were up by 10.0 percent to 169.4p.
“The Group delivered a great set of results in 2016, with excellent growth seen across all key business metrics,” said chief executive Nicandro Durante.
“This was achieved despite a challenging backdrop of adverse foreign exchange rates impacting our cost base and ongoing pressure on consumers’ disposable income in many of our key markets.”
British American Tobacco says that it has earned the Top Employer Europe seal of recognition for the seventh consecutive year.
The Company has taken part in the survey, run by the Top Employers Institute, since 2011.
The survey is said to measure the best human resources (HR) practices among employers in Europe.
‘The recognition once again underlines British American Tobacco’s strategy of achieving growth by investing time and energy in its people,’ BAT said in a note posted on its website.
‘British American Tobacco Western Europe is proud to have been certified in all of its 12 participating countries: Belgium, Denmark, Germany, Greece, France, Italy, the Netherlands, Romania, Spain, Switzerland, United Kingdom and Poland.’
“The award recognises the inspiring culture and strong values in our companies across Western Europe,” said Leif Lümkemann, regional head of HR, Western Europe. “It confirms that we are a progressive and leading company for outstanding talent that ambitious people wish to join.”
Meanwhile, David Plink, CEO of the Top Employers Institute, said BAT belonged to an exclusive and renowned global community of top employers.
“The company has been certified as a Top Employer Europe for the seventh consecutive year, positioning themselves among the top employers in the region. They have been certified in 12 countries in Europe. This is a perfect example of an organization that has harmonised its operations in a way which not only benefits its employees but also its operational efficiency on a global scale.”
BAT is carving out a strong, scientifically sound business in next-generation products.
The results of new research have revealed that changes occurred in the expression levels of 123 genes when reconstituted lung tissue was exposed to cigarette smoke, whereas such changes occurred in the case of only two genes when such tissue was exposed to an electronic-cigarette aerosol, British American Tobacco has reported. The test electronic cigarette was the Vype ePen, manufactured for Nicoventures Trading, a wholly owned subsidiary of BAT.
‘The levels of several cytokines, biomarkers of inflammation, were also increased in the lung tissue exposed to conventional cigarette smoke, BAT said in a press note.
‘In this study, scientists at British American Tobacco used a systems-biology-based approach to examine the difference in gene and protein expression between lung cells exposed to smoke and those exposed to the test e-cigarette vapor. They found that human lung tissue exposed to cigarette smoke exhibits changes in gene and protein expression consistent with immune response, oxidative stress and inflammation. By contrast, the same responses were not observed following exposure to test e-cigarette vapour in this study.
‘Systems biology is a relatively new approach that combines biology and computational analysis to model the complex workings of biological systems.
‘Changes in gene expression are important because genes contain the instructions that ensure normal cell function. Genes are subsets of DNA, which contains the genetic instructions to create proteins that go on to perform essential functions as, for example, enzymes, hormones and receptors.
‘The protein-making process involves a flow of genetic information from DNA to RNA molecules to protein: “DNA makes RNA makes protein”.’
In the study, scientists used state-of-the-art ‘next generation sequencing’ of RNA and other tests to identify any disturbance to the process that would signal changes in gene or protein expression.
“Next generation sequencing is revolutionizing and expanding the frontiers of genomic research by offering faster, more detailed and accurate tools to unravel the genetic information from any biological system,” said Dr. Marianna Gaca, pre-clinical assessment manager at BAT.
‘An aerosol exposure system was used to compare the impact of cigarette smoke (from reference cigarette 3R4F) and e-cigarette vapor from Vype ePen, a commercially available e-cigarette,’ BAT said. ‘The exposure system contained human lung tissue – MucilAir™ – which is made up of human airway cells that have been cultured to form various different cell types that make up the lining of the respiratory tract.
‘The cells were exposed to smoke or vapor for five minutes at a time with a 30-minute break in between each exposure, over a period of 2 hours and 20 minutes to better mimic human use behaviour. The cells were allowed to rest for 24 hours and 48 hours following exposure, to allow any treatment-related effects to occur.
‘Cytotoxicity tests showed all cells to be viable. RNA sequencing and observations of changes in protein production revealed that the human lung cells exposed to cigarette smoke exhibit higher number of gene expression changes compared to e-cigarette vapor. The key biological functions affected by cigarette smoke were immune responses, oxidative stress and inflammation, which were not observed on exposure to e-cigarette vapor.’
The results are published in Applied In Vitro Toxicology as part of a special issue on Next Generation Nicotine Products.
