REUTERS, London

British American Tobacco said on Monday it plans to reduce its workforce by about 20 percent, as it pushes ahead with an AI-driven transformation program to cut costs and bolster profits amid regulatory challenges and delayed launches. The tobacco giant said it would cut 5,500 jobs and move a further 3,500 roles to third-party firms, including Accenture, impacting a total of 9,000 employees. The restructuring does not include the US, its biggest market.

The cost-saving programme is expected to add £600 million ($793 million) worth of annualised incremental savings by 2028, with £500 million already targeted by 2027. “These changes affect many of our colleagues and we are focused on supporting them through this transition with care and respect,” CEO Tadeu Marroco said in a statement. He added that the move would make the company more agile, cost-disciplined and technology-enabled.

The Lucky Strike and Dunhill cigarette maker’s sales and profit growth have been sluggish in recent years, falling short of or just reaching its own targets, disappointing some investors. The company’s main profit driver - traditional tobacco - is in terminal decline, with BAT predicting a global, industry-wide decline of 2.5 percent this year. BAT is shifting its focus to smoking alternatives like its Vuse vapes and Velo nicotine pouches to drive growth, but it has faced problems and fallen behind key rival Philip Morris International.

Sales in the critical US market have been constrained by regulatory requirements that have delayed launches and helped rivals from China - often selling without the required permission from US regulators - to take its market share.