Tag: British American Tobacco

BAT to Engage on Executive Pay

Photo: BAT
BAT will be engaging with its shareholders to better understand their perspectives on the management of executive pay, the company announced in a press note.
At the company’s, annual general meeting on April 28, 2021, significant minorities voted against resolutions dealing with directors’ remuneration and authority to allot shares.
Nearly 40 percent of shareholders voted against Resolution 2—Directors’ Remuneration Report. “Whilst we note that the decisions taken by the remuneration committee have been supported by the majority of our shareholders, we do recognize that a significant minority of shareholders and some shareholder advisory bodies have not been supportive of these decisions, in particular, fixed pay increases awarded to executives in 2020 and 2021,” BAT wrote. “This has been taken on board by the committee, and we are committed to achieving a greater understanding of the underlying reasons that have seen some of our shareholders being unable to support the resolution.”
During the annual general meeting, 27.67 percent of participants voted against Resolution 16—Renewal of Directors’ Authority to Allot Shares. “Through our shareholder engagement, the board is aware that there is a divergence between prevailing U.K. market practice for FTSE companies to retain an authority to allot in line with the IA share capital management guidelines and governance policies maintained by certain overseas investors, which either do not support a general allotment authority or only support a general authority at lower levels,” BAT wrote.
“Whilst we recognize that some shareholders are unable to support an allotment authority at the level sought, we note this level of authority continues to be supported by the majority of our shareholders and is in line with prevailing U.K. market practice. Although there is no present intention to exercise this authority, we continue to consider that this level of authority is appropriate to maintain flexibility for the company.
“We will maintain dialogue with shareholders for which this authority continues to present concerns and will keep best practice in this area under review.”
October 6, 2021
U.S. IQOS Imports Halted

Photo: theaphotography
The International Trade Commission (ITC) has upheld an initial determination from May 2021 that Philip Morris International’s IQOS device infringes on two patents owned by BAT subsidiary Reynolds American Inc. (RAI).
The agency has instituted an import ban and a cease-and-desist order preventing IQOS consumables and devices from being sold in the U.S. in 60 days. PMI’s U.S. partner, Altria Group, plans to continue to sell IQOS through the 60-day period in its existing markets.
BAT welcomed the ruling. “Infringement of our intellectual property undermines our ability to invest and innovate and thereby reduce the health impact of our business,” the company wrote in a statement. “We will therefore defend our IP robustly across the globe.”
The patents relate to an electronically powered device with a heater to generate an aerosol and expire in October 2026 and November 2031. BAT has filed similar cases globally, including in Germany, the U.K., Japan and Italy.
Morgan Stanley said the ruling would have limited financial impact on PMI and Altria, as IQOS in the U.S. is not a meaningful contributor to the companies’ earnings. The outcome of similar cases brought by BAT against PMI internationally, however, could have a greater impact. But so far, PMI has been successful defending cases in the U.K. and Greece.
The investment bank also noted that the IQOS ban applies to imported product, suggesting it may be overcome by shifting production to the U.S.
The ITC decision will now be reviewed by the U.S. Trade Representative. If the decision is not vetoed within 60 days (only a handful have ever been vetoed), it can be appealed to the U.S. Court of Appeals, but the import ban would still be in effect throughout an appeals process.
September 30, 2021
BAT Announces Innovation Hub in Italy

Photo: BAT
BAT will be opening an innovation hub in Trieste, Italy. The company will invest €500 million ($582.2 million) over the next five years in the project.
Covering an area of 20,000 square meters, the hub will host a manufacturing site for BAT’s “new category” products, a digital boutique, an innovation lab and a center of excellence for digital transformation and digital marketing. It will be dedicated to research, development and production of reduced-risk product lines.
The building will be constructed to minimize its environmental impact with the objective of being carbon neutral, with a particular focus on energy efficiency and the use of renewable sources. The facility will also produce energy using a photovoltaic system that converts light into electricity using semiconducting materials.
BAT expects to develop multiple production lines at the facility for the export of reduced-risk products, including Vuse (vapor), Velo (modern oral) and Glo (tobacco-heating products).

The innovation hub will play a key role in our ‘A Better Tomorrow’ transformation as we strive to reduce the health impact of our business.
Kingsley Wheaton, chief marketing officer, BAT
“The innovation hub in Trieste will play a key role in our ‘A Better Tomorrow’ transformation as we strive to reduce the health impact of our business,” said BAT Chief Marketing Officer Kingsley Wheaton in a statement. “Our goal is to create new products, backed by science, that provide adult smokers with enjoyable, less risky alternatives.”
“We are proud to announce the opening of our A Better Tomorrow Innovation Hub, a fundamental part of our transformation goals to reduce the health impact of our business,” said Roberta Palazzetti, president and CEO of BAT Italy and area director for southern Europe. “As a leading center for innovation, Trieste in Italy has been chosen as the home of the project, which demonstrates the capabilities of our country.”
Construction of the structure will begin in mid-November, with the first module scheduled to be completed and activated in May.
September 29, 2021
BAT Suspends Belarus Manufacturing

Photo: Tobacco Reporter archive
BAT has suspended manufacturing of its brands at a state-owned factory in Belarus accused of fueling cigarette smuggling and helping finance the country’s oppressive regime, reports Inews.
The multinational said it had stopped ordering from the Grodno Tobacco Factory (GTF) Neman, which has a longstanding agreement to manufacture some of BAT’s best-selling brands for the Belarusian market.
Belarus has come under heavy international criticism for its heavy-handed suppression of protests against the outcome of last year’s disputed presidential elections.
Last month, the United States announced sanctions targeting individuals and entities it accused of supporting Belarus’ de facto dictator, Alexander Lukashenko, and his cronies by providing funds for sustaining the violent crackdown.
Accounting for 70 percent of domestic cigarette sales, Neman effectively has a monopoly on the Belarusian tobacco market. Washington says it is one of several entities that receive preferential treatment from the regime in return for providing funds to Lukashenko.
“This patronage network sustains [his] violent regime at the expense of the Belarusian people,” according to the U.S. Treasury.
“Following the recent imposition of international sanctions against several Belarusian persons and entities, including GTF Neman, as well as restrictions targeting tobacco manufacturing materials, we have taken steps to ensure all activities remain compliant,” BAT was quoted as saying by Inews.
“BAT has suspended its operations with GTF Neman and currently does not order manufacturing of its product from this factory.”
The company added, however, that as a result of the sanctions, it was now unable to complete a planned on-site independent audit of workplace conditions at GTF Neman, where there have been allegations of human rights abuses against workers who took part in anti-regime protests.
The Neman factory has also been fingered as a major source of illicit cigarettes in the EU. Around 10 percent of the 5.5 billion cigarettes sold illegally in the U.K. annually are believed to have originated in Belarus.
There is no suggestion that BAT is aware of any illicit trade, and the firm says it has “strong controls” to stop its products entering the black market.
“We are satisfied that BAT Belarus applies all the relevant BAT group policies and procedures with regard to combating illicit trade to ensure that products manufactured by GTF Neman under BAT Group’s trademarks are consumed in the Republic of Belarus,” a BAT spokesperson was quoted as saying by Inews earlier this year.
September 15, 2021
BAT Accused of Bribery in Zimbabwe

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A joint investigation by the Bureau of Investigative Journalism, the University of Bath and BBC Panorama suggests BAT may have paid a bribe to Zimbabwe’s former president, Robert Mugabe, reports the BBC.
The investigators obtained leaked documents suggesting BAT funded a network of secret informants to undermine its competitors in southern Africa.
One of its contractors was Forensic Security Services (FSS) of South Africa. Officially tasked with fighting the black market cigarette trade, former employees told the BBC that they broke the law to sabotage BAT’s rivals.
FSS paid a local firm to conduct surveillance on a Savanna Tobacco factory in 2012, but the company got caught. Three of its directors were charged in connection with illegal surveillance.
The joint investigation suggests bribes were paid to secure the release of the directors.
BAT denied the accusations. “We emphatically reject the mischaracterization of our conduct,” the company said in a statement. “Our efforts in combating illicit trade have been aimed at helping law enforcement agencies in the fight against the criminal trade in tobacco products.
“Acting responsibly and with integrity underpins the foundations of our culture.”
BAT’s lawyers said it was not unlawful to pay sources to gather information about criminal behavior.
They said the company rejects the allegation that any steps were taken with the aim of impacting the lawful activities of legitimate competitors or for commercial advantage.
September 13, 2021
Vuse Becomes No. 1 Global Vaping Brand

Photo: BAT
Vuse is now the No. 1 global vaping brand by value share, according to its manufacturer, BAT.
Vuse is the category value share leader in four of the top five vapor markets (Canada, France, Germany and the U.K.), and BAT’s U.S. momentum in vapor means Vuse is now leader by value share in 22 states, up from 20 in July, BAT announced on its website.
In May this year, BAT also announced that Vuse became the world’s first global carbon neutral vape brand.
“We are delighted that Vuse has become the number one global vaping brand,” said Jack Bowles, CEO of BAT. “It is proof that we are building brands of the future, underpinned by strong innovation, as part of our vision for ‘A Better Tomorrow.’
“In the first half, we delivered 50 percent New Category revenue growth and added 2.6 million consumers of our noncombustible products, our highest ever increase, to reach 16.1 million consumers. This momentum is powered by our strong global brands Vuse, Glo and Velo. Each New Category brand grew its category share by more than 280 base share points [bsp] across key markets and recorded volume growth of 70 percent or more.”
At its half-year results, BAT reported that its vapor business performed strongly, with revenue up 59 percent, volume grew by 70 percent and consumer numbers were up by 0.9 million to reach 7.5 million. Since December 2020, Vuse’s value share is up 340 bsp, reaching 34 percent in July 2021.
September 8, 2021
BAT Runner-Up for Best ESG Report
BAT has been recognized by the Corporate Register Reporting Awards as runner-up for Best ESG Report for its 2019 report.
The company also placed fourth for Innovation in Reporting, fifth for Relevance and Materiality, sixth for Openness and Honesty, and ninth for Creativity in Communications.
These awards receive entries from all types of businesses around the world, and the winners are voted for by Corporate Register’s 65,000-plus registered users from across the sustainability profession worldwide.
Best ESG Report is a new category for the 2021 awards, recognizing the shift in recent years from corporate responsibility or sustainability reports to those focused on environmental, social and governance (ESG).

We’re delighted to be recognized in these awards and are committed to continuing to provide information regarding our ESG efforts in clear, transparent and engaging ways.
Jennie Galbraith, group head of ESG, BAT
“As part of our commitment to building ‘A Better Tomorrow,’ ESG is front and center of everything that we do as a business,” said Jennie Galbraith, BAT’s group head of ESG, in a statement. “We have a long history of best practice and transparent reporting on ESG issues—our next report for 2021 will mark the 20th anniversary of our first ever report.
“Over that time, we’ve understood the importance of evolving our approach to meet the needs of our stakeholders and remain at the forefront of leading practice. So, we’re delighted to be recognized in these awards and are committed to continuing to provide information regarding our ESG efforts in clear, transparent and engaging ways.”
“BAT is one of the large corporations who set the pace on transparent reporting around 20 years ago, with a comprehensive approach that included stakeholder engagement, materiality and third-party assurance,” said Paul Scott, director of Corporate Register.
“Since then, much has changed in the reporting field, but I’m pleased to see that BAT has stayed the course and is still pushing the boundaries of transparent reporting. The votes of our stakeholders in the CR Reporting Awards are the proof of this.”
August 24, 2021
Nedal Salem to Lead BAT Malaysia

Photo: BAT
BAT Malaysia has named Nedal Salem as its new managing director, reports The Star.
The appointment follows the resignation of Jonathan Reed, who will take up the role of group head of combustibles with BAT PLC from Sept. 1, 2021.
“On behalf of the board, we thank Jonathan for his visionary leadership and accomplishments during his tenure as [managing director],” said BAT Malaysia chairman Tan Sri Aseh Che Mat. “We have seen a remarkable business turnaround under his leadership and wish Jonathan the very best in his next appointment.”
Salem is currently the managing director and CEO of Ceylon Tobacco Co. in Sri Lanka.
August 19, 2021
SRNT Urged to Undo Industry Exclusion

David O’Reilly (Photo: BAT)
BAT has asked the board of directors of the Society for Research on Nicotine and Tobacco (SRNT) to reverse its decision to ban employees of the tobacco industry from attending the society’s annual conference in 2022.
“We share in SRNT’s stated commitments to the open dissemination of rigorous, peer-reviewed nicotine and tobacco science, with the ultimate goal of reducing public health impact of tobacco use,” wrote BAT Director of Scientific Research David O’Reilly in a letter to the SRNT.
“However, your recent exclusion of employees of the tobacco industry and the contributions of tobacco industry scientists to dialogue at the annual meeting is contrary to your code of conduct and guiding principles.”
Exclusion, O’Reilly noted, impedes “the generation and dissemination of new knowledge concerning nicotine and tobacco.” “In an FDA-regulated market, the industry must routinely provide FDA regulators with scientific evidence about its products. As a result, some of the best science in the tobacco and nicotine space is being generated from tobacco companies,” he wrote.
Exclusion also undercuts the SRNT’s commitment to “open science without bias,” “promoting scientific dialogue” and “empowering members to make their own informed decisions,” according to O’Reilly. “The board’s decision contradicts the evidence-based principles that underpin the U.S. policy approach, which prioritizes science, irrespective of the source,” O’Reilly wrote.
“In light of our concerns, we respectfully request that the SRNT board reconsider its decision and reaffirm that ‘SRNT is committed to nicotine and tobacco researchers around the world.’”
August 2, 2021
Clearing the Smoke

James Murphy (Photos: RAI)
Reynolds’ James Murphy discusses the challenges and
opportunities for tobacco harm reduction.
By Stefanie Rossel
In September 2020, James Murphy took over as executive vice president of research and development at Reynolds American Inc. (RAI), a subsidiary of British American Tobacco and the second-largest tobacco company in the U.S. Tobacco Reporter caught up with Murphy to discuss the challenges and opportunities he faces in his position.
Tobacco Reporter: Upon assuming your position, you conducted a poll among 2,000 U.S. consumers. What were the main findings, and what do you make of them?
James Murphy: We did a poll of 21-plus adults to examine issues related to tobacco harm reduction [THR] because it is an incredibly important priority for us. The results were consistent with other published research; there is confusion about whether innovative products—such as e-cigarettes—present less risk, and in particular, the role of nicotine as a cause of harm.
A similarly large proportion misunderstand nicotine as a cause of smoking-related diseases. Many adult smokers simply do not know that the toxicants generated from tobacco combustion—rather than nicotine or tobacco itself—is the leading cause of smoking-related health harm. Lack of information creates steep barriers for adult smokers to consider a switch to smoke-free tobacco and nicotine alternatives that are potentially less harmful to their health.
Misunderstandings about innovative alternative products, and nicotine itself, are a hurdle toward shared progress. The good news is that reducing harm from combustible tobacco products was considered an important public health priority by more than two-thirds—70 percent—of the adults we surveyed. Thus, there is strong public recognition of the need for innovative solutions to the harms caused by smoking.
This data underscores our commitment and focus on building productive working relationships with legislators and regulators around the country in pursuit of our common goal: reducing smoking rates, keeping tobacco products away from teenagers and ultimately reducing the harm from smoking in America.
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Amid all restrictions on tobacco industry communications, what can the sector do to change consumers’ misperceptions on these issues and encourage smokers’ movement to less hazardous products?
This is a significant issue, and we are engaging with policymakers and legislators—many of whom share such misunderstandings—and the larger scientific and regulatory community. Misunderstanding of nicotine impairs harm reduction, and it must be addressed. As is well studied and understood, the toxicants from the combustion of tobacco drive smoking-related morbidity and mortality.
Yet behavioral research confirms consumer confusion on this point, and recent population-level data published by the Society for Research on Nicotine and Tobacco (SRNT) highlight that up to 80 percent of U.S. adults incorrectly believe that nicotine is responsible for most of the cancer caused by smoking.
Similarly, misunderstanding vapor and vapor flavors can lead to detrimental policies banning products, flavors and even categories of products, whose removal from market could create the unintended consequence of indirectly pushing adults and minors toward cigarettes. We saw this recently in the Yale School of Public Health study regarding San Francisco’s ban on flavored products, where the author found that it was associated with a significant increase in youth smoking there but not in other jurisdictions without the ban.
Regulatory policy should be based on the relative risks of tobacco products. We are committed advocates for a legislative and regulatory framework that recognizes the continuum of risk and includes risk-proportionate policies on taxation, public use and flavors and other aspects of the product that are important to encouraging adult smokers unwilling to quit to switch from cigarettes. Where regulation is based on scientific evidence and not opinion, public policy will benefit public health and contribute to better understandings of these important products.

RAI’s R&D center
During your recent presentation at the GTNF In Focus event, you hinted at the challenge of assessing the risk profiles of other next-generation products, such as modern oral nicotine, for which no epidemiological data are available yet. Can you elaborate?
The FDA is carefully vetting these products, and I have every confidence that their assessment is science-driven and made against the rigorous statutory standard of “appropriate for the protection of public health.” For newer products, such as THP and modern oral nicotine pouches, like vapor with less than a decade on the market, epidemiological data is still in progress.
In the absence of epidemiology, we use a weight-of-evidence approach comprised of laboratory, clinical and real-world population level studies. In our studies, we include both smokers and smokers who quit smoking as epidemiological gateposts and compare clinical and population outcomes for smokers who switch to the next-generation products (NGPs) against these two smoker statuses.
Consider snus usage in Sweden as a strong illustration of THR in action. Smokers have switched to using snus over several decades, and the country now has the lowest lung cancer rates in the whole of the EU. This epidemiological data is the cornerstone of substantiating the beneficial population health impacts of products like snus in countries like Sweden but also within the USA.
In studies we have conducted and published to date, we have demonstrated that users switching to NGPs have similar biological outcomes to smokers who quit. As quitting has known favorable epidemiological outcomes, we can bridge the switch to NGP to quitting and conclude that both will have similar epidemiological outcomes, which would benefit population health in the long run.
The FDA has announced plans to ban menthol as a characterizing flavor in combustible cigarettes and has suggested that the agency may also reduce the nicotine content in cigarettes. Do you consider such measures as a sufficient incentive for smokers to switch to less harmful alternatives? What else needs to be done?
My concern is that any risk-based product standards on cigarettes will lead to confusion in the marketplace. For example, if a menthol product standard is introduced, smokers might wrongly perceive nonmenthol cigarettes as less risky. We know already that the general population misperceives the risks of nicotine when administered in a combustible product versus a noncombustible product and that there are misperceptions regarding the relative risks of vaping compared to smoking. THR presents a better way of reducing the harms from combustible tobacco use. Today in the U.S., millions of smokers have switched to products like vapor or nicotine pouch products. I have spent my career focused on THR and believe we must enable the introduction of satisfying, reduced harm alternatives that will facilitate the switching of smokers down the risk continuum while at the same time ensuring that adequate safeguards are in place against youth usage.
The FDA has recently spoke of finding this “sweet spot,” and ideally, all stakeholders in the THR debate will collaborate to make that happen.

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What are your current research priorities?
Topline, we’re focused on reducing the health impact of our business based on scientifically substantiated reduced-risk products. These products will improve public health and ensure we have a sustainable future. That means establishing and supporting the weight of scientific evidence that appropriately stewarded noncombustion tobacco and nicotine products manufactured to high-quality standards have a role in THR.
In the U.S., we believe that the FDA will play a key role with their stewardship of the PMTA process to ensure that products which are appropriate for the protection of public health remain on market. This regulatory verification will improve smokers’ confidence in these products and facilitate the mass migration of smokers down the risk continuum. There is a large and growing body of evidence—including from Reynolds’ scientists—to support the reduced-risk potential of these categories.
We take two approaches for assessing the risk profile of noncombustible products: if a product has robust epidemiological data, then that data is used as a basis for risk assessment, but for newer products, in the absence of epidemiology—such as THP, vapor and modern oral products—we use a three-stage assessment of emissions, exposure and risk.
Judging from the results of your poll and from recent FDA moves, such as the proposed ban on menthol and planned maximum, nonaddictive nicotine levels in combustible cigarettes, which direction is THR taking in the U.S.?
We believe our broad portfolio of alternatives to combustible cigarettes can accelerate the population-level health benefits supported by the Family Smoking Prevention and Tobacco Control Act and envisioned by the FDA in its consistent endorsement of a comprehensive nicotine regulatory framework.
Potentially less harmful products must be able to compete effectively with the most harmful products, thus moving smokers down the risk continuum of nicotine products. Vaping bans and high taxes on alternatives that may present less risk than cigarettes will not help us reduce the harm from cigarette smoking.

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What are the gaps in THR science from your point of view?
The biggest gap in THR science is caused by an ongoing boycott by various scientific conferences to publicize and share the latest THR research. The recent news from SRNT banning the tobacco industry from future conferences is particularly disappointing. The largest U.S. scientific conference on nicotine and tobacco research banning industry scientists seems counterintuitive. Moreover, the learning process is not merely what we share, but what we can learn from others. Personally, some of the most valuable professional insights I have received were from other U.S.-based academics commenting on our research during SRNT poster sessions.
Science—particularly science that underpins such important public health goals—deserves to be debated on its merits, particularly when the science on those same products is under scientific review by the FDA.
There is room for more consistent methodologies to ensure the consistent assessment of products as there is sometimes conflicting data published on both sides of the THR debate. There is also a gap in evidence for assessing THR products in that we do not have epidemiological data for newer products like THP, vapor [and] modern oral, which have only been on market for five [years] to ten years. That data gap points to a need for agreed proxies to assess individual risk reduction, such as biomarkers of potential harm and quality-of-life measurements, and other real-world evidence which may play a role.
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.

August 1, 2021