More choice, more innovation, potentially less risk
We have a clear ambition to lead the transformation of our industry by offering adult consumers a range of potentially reduced-risk products.
We are transforming tobacco
At BAT, we have been satisfying adult consumers, delivering shareholder value and creating valued employment for over a century.
Today we find ourselves in one of the most dynamic periods of change our industry has ever encountered.
Rapid product innovation, along with advances in societal attitudes and public health awareness, has given us the opportunity to make a substantial leap forward in our long-held ambition to positively impact the lives of millions of our consumers by providing them with potentially reduced-risk tobacco and nicotine products.
We call this ambition Transforming Tobacco and we are fully committed to leading the transformation of our industry and our company.
In 2012, we articulated a clear vision that places adult consumers at the centre of our strategy. Our Transforming Tobacco ambition builds on this vision as we grow our business based on offering our consumers a broad range of outstanding products, informed consumer choice and a drive towards a reduced-risk portfolio. More choice, more innovation, less risk.
It is widely accepted that most of the harm associated with cigarettes is caused by inhaling the smoke produced by the combustion of tobacco, and that cigarette smoking is the most dangerous way of consuming tobacco.
While smokers have historically had very few alternatives to combustible cigarettes, innovation is now providing adult consumers with a greater choice of tobacco and nicotine products that are potentially less risky than cigarettes.
BAT is at the forefront of the development and sale of a whole range of potentially reduced-risk products that provide much of the enjoyment of smoking without burning tobacco. Our growing portfolio of potentially reduced-risk products includes vapour, tobacco heating products (THPs), modern oral products, as well as traditional oral products such as Swedish-style snus and American moist snuff.
Our acquisition of Reynolds American has transformed us into one of the world’s leading vapour companies and has also allowed us to significantly increase the size of our oral tobacco and nicotine products range.
Never before have so many of our consumers around the world had access to so many alternatives to combustible cigarettes. We continue to develop new and ever more innovative products to add to this range of potentially reduced-risk products.
In addition to our commitment to developing and offering a range of high-quality alternative products, we are also committed to working with governments and other stakeholders around the world to develop supportive regulatory regimes.
While we cannot be certain how many smokers will switch to our alternative products, we have already seen several countries dismantle barriers to these new products, which has given millions of additional adult consumers greater choice.
We recognise that our ambition to ‘transform tobacco’ relies not only on our development and commercialisation of new products, but on the support of regulators and society as well.
Greater consumer choice is at the heart of our strategy, but its effects require amplification from sensible regulations that allow adult consumers access to alternative choices, as well as from public health bodies and the media to drive informed consumer decision making.
By working with key stakeholders around the world, we strive to maximise the potential for reduced-risk products: for our consumers, the benefits for public health and a more sustainable and profitable business for our shareholders.
Today, we have industry leading products in vapour; in tobacco heating products; in modern oral products, as well as in the traditional oral category.
Notwithstanding the successes of our new categories, this is just the beginning, and innovation and technology will increasingly be at the heart of our business. Our research and development facility, comprising hundreds of scientists, is focused on the continued development of new and innovative potentially reduced-risk products and categories.
In 2018, we filed 130 patents and expect that number to significantly increase in the coming years.
Of course, expertise in this area is not solely within BAT and, consequently, we have a number of collaborations, partnerships and investments with third parties with a broad range of specialisms to help us drive and develop our pipeline of future products.
Our ongoing transformation is supported by our strong global combustibles business, and every day more than 150 million adult consumers choose BAT brands.
The revenues from this business are vital to provide the investment for our potentially reduced-risk products business, and our global supply chain and worldwide distribution network of over 11 million retail outlets are powerful assets that drive our ambition to offer millions of adult consumers new choices.
As we develop new and potentially reduced-risk product categories, our conventional cigarette business remains strong and continues to grow. This enables us to invest in the development of better and more innovative products, while continuing to deliver strong results and dividends to our shareholders. As a global business operating in over 200 markets, we are using our significant presence and distribution networks to offer our full range of potentially reduced-risk products to as many adult consumers as possible.
We are often asked why we don’t simply stop selling cigarettes. In short, immediately stopping our sales of cigarettes would be neither commercially sensible nor practical: the ongoing consumer demand for these products would either transfer straight to our competitors or, more worryingly, the black market.
We are proud of all our brands and believe that all our products have a role to play in our business’ success and our ambition to ‘transform tobacco’.
Our potentially reduced-risk product business has seen outstanding growth. However, this is just the beginning, and with a consumer base of over one billion smokers and nicotine users in the world, the opportunities presented by these new categories are huge.
While we cannot be certain whether all smokers will switch to potentially reduced-risk products, we are committed to making a range of high-quality, innovative products as widely available as we practically can.
We believe that by doing this, and working with regulators to establish supportive regulatory regimes, many millions of smokers will increasingly make the choice to switch.
If we can all work successfully together, we can drive a scenario in which our consumers will have a range of potentially reduced-risk choices; our shareholders will own an even more sustainable and profitable business; and society could benefit from real progress in tobacco harm reduction.