British American Tobacco

British American Tobacco plc
Public limited company
Traded as LSE: BATS
NYSE MKT: BTI
JSE: BTI
FTSE 100 Component
Industry Tobacco
Founded 1902 (1902)
Headquarters London, WC2
United Kingdom
Area served
 Worldwide
Key people
 Richard Burrows (Chairman)
Nicandro Durante (Chief Executive)
Products Cigarettes
Revenue £14.751 billion (2016)[1]
£5,480 billion (2016)[1]
£4.655 billion (2016)[1]
Total assets £39,773 billion (2016)[2]
Subsidiaries Tekel
Bentoel Group
Souza Cruz
Niemeyer
Website www.bat.com

British American Tobacco plc (BAT) is a British multinational tobacco company headquartered in London, United Kingdom.[3] It is the largest publicly traded tobacco company in the world.[4]

BAT has a market-leading position in over 50 countries and operations in around 180 countries.[5][6] Its four largest-selling brands are Dunhill, Lucky Strike, Kent and Pall Mall, with others including Kool, Benson & Hedges and Rothmans.

BAT has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It has a secondary listing on the Johannesburg Stock Exchange and on the Nairobi Securities Exchange.

History

1902 to 2000

James Buchanan Duke

The company was formed in 1902, when the United Kingdom's Imperial Tobacco Company and the American Tobacco Company of the United States agreed to form a joint venture, the British-American Tobacco Company Ltd.[7] The parent companies agreed not to trade in each other's domestic territory and to assign trademarks, export businesses and overseas subsidiaries to the joint venture. James Buchanan Duke became its chairman and the British American Tobacco business began life in countries as diverse as Canada, China, Germany, South Africa, New Zealand and Australia, but not in the United Kingdom or in the United States.[7]

In China, BAT inherited a factory in the Pudong district of Shanghai from W.D. & H.O. Wills, one of the precursor companies of Imperial Tobacco.[8] Under the management of James Augustus Thomas from Rockingham, North Carolina, USA, by 1919 the Shanghai factory was producing more than 243 million cigarettes per week.[9] Thomas worked closely with the local Wing Tai Vo Tobacco Company, which developed into BAT's principal Chinese partner after its success with the "Ruby Queen" cigarette brand.[10]

In 1911 the American Tobacco Company sold its share of the company. Imperial Tobacco gradually reduced its shareholding, but it was not until 1980 that it divested its remaining interests in the company.[7]

At its peak, in 1937 BAT manufactured and distributed 55 billion cigarettes in China. The company's assets were seized by the Japanese in 1941 following their 1937 invasion. In 1953 the company was ejected from China following the foundation of the People's Republic.[8]

In 1976 the group companies were reorganised under a new holding company, B.A.T Industries. In 1994 BAT acquired its former parent, American Tobacco Company (though reorganised after anti-trust proceedings). This brought the Lucky Strike and Pall Mall brands into BAT's portfolio.[11]

In 1999 it merged with Rothmans International,[12] which included a share in a factory in Burma. This made it the target of criticism from human rights groups. It sold its share of the factory on 6 November 2003 after an "exceptional request" from the British government.[13]

2000 to present

The Globe House: British American Tobacco's current headquarters

In 2002, BAT lost a lawsuit about the right to sell cigarettes under the Marlboro brand name in the UK. It had acquired Rothmans, which had previously bought a licence to use the name from Philip Morris. Philip Morris' attorneys invoked a get-out clause for the case of a major change of ownership.[14]

In 2003, BAT acquired Ente Tabacchi Italiani (ETI) S.p.A, Italy's state tobacco company. The important acquisition would elevate BAT to the number two position in Italy, the second largest tobacco market in the European Union. The scale of the enlarged operations would bring significant opportunities to compete and grow ETI's local brands and BAT's international brands.[15]

In August 2003, BAT acquired a 67.8% holding in the Serbian tobacco company Duvanska Industrija Vranje (DIV), allowing local manufacture of its brands, freeing them from import duties. In the longer term, export opportunities are planned as neighbouring countries in south east Europe developed free trade agreements.[16]

In July 2004 the U.S. business of British American Tobacco (Brown & Williamson) was combined with that of R. J. Reynolds Tobacco Company (R. J. Reynolds), under the R. J. Reynolds name. R. J. Reynolds and Brown & Williamson were the second and third-ranking U.S. tobacco companies prior to the combination. When they combined, R. J. Reynolds became a subsidiary of Reynolds American, with BAT holding a 42% share. In January 2007, BAT closed its remaining UK production plant in Southampton with the loss of over 600 jobs. However, the global Research and Development operation and some financial functions will continue on the site.[17]

Then in 2008 BAT acquired Turkey's state-owned cigarette maker Tekel.

In July 2008, BAT acquired the cigarette and snus operations of the Scandinavian Tobacco Company.[18]

BAT acquired 60% of Indonesia's Bentoel Group in 2009[19] before increasing its stake to 100% the following year.[20]

In May 2011 BAT acquired the Colombian company Productora Tabacalera de Tabacos S.A. (Protabaco).[21]

In October 2016, BAT offered to buy the remaining 57.8 percent of U.S. cigarette maker Reynolds American in a $47 billion takeover that would create the world's biggest listed tobacco company with brands including Newport, Lucky Strike and Pall Mall.[22] In January 2017, Reynolds agreed to an increased $49.4 billion deal.[23] The deal was completed in July 2017.[24]

In April 2017 the company announced the acquisition of a number of Bulgarian cigarette brands from Bulgartabac for more than €100 million.[25]

Operations

Current

One of British American Tobacco's most popular products "Lucky Strike"

International Brands include Dunhill, Kent, North State Lucky Strike, Pall Mall, Vogue, Rothmans International, Winfield, State Express 555, KOOL, and Viceroy. However, British American Tobacco does not necessarily own the rights to all of these brands in every nation they are marketed.

Local brands owned by British American Tobacco include: Benson & Hedges (Bangladesh), John Players Gold Leaf (Bangladesh), State Express 555 (Bangladesh), Belmont (Colombia, Chile, Nicaragua and Venezuela), Jockey Club (Argentina), Stradbroke (Australia), Hollywood (Brazil), du Maurier (Canada), Prince (Denmark), North State (Finland), HB (Germany), Sopianae (Hungary), Wills (India), Ardath, Bentoel, and Country (Indonesia), Carrolls, Carrolls Kings, Grand Parade, Black Allen (Germany), Sweet Afton, Major (Ireland), Boots, Alas (Mexico), Gold Leaf (Bangladesh, Pakistan), Jan III Sobieski (Poland), Yava Gold (Russia), Courtleigh, Peter Styvesant (South Africa), Benson & Hedges, Dunhill, Kent, Pall Mall, Perilly's, Peter Stuyvesant, and Rothmans (Malaysia), Parisienne (Switzerland), Maltepe (Turkey) and Xon (Uzbekistan), Craven A (Vietnam and Jamaica) as well as BAT snus, Holiday, Freedom and Park Drive (New Zealand) Royals (UK), Embassy (Kenya), Viceroy, Newport, Lucky Strike in Dominican Republic and Delta in El Salvador.

On 11 June 2006, R. J. Reynolds Tobacco Company announced that it would be manufacturing Camel brand snus in Sweden in partnership with British American Tobacco; the product would be test-marketed in Portland, Oregon and Austin, Texas by the end of the month.[26]

The Bentoel Group products include Bentoel Biru, Bentoel Mild, Bentoel Sejati, Star Mild, X Mild, 1 Indonesia Masyarakat Dahulukan Pencapaian Dahulukan (taking the principle of 1Malaysia) (neO Mild, unO Mild, and One Mild), Club Mild, Dunhill Fine Cut Mild, Bintang Buana, Tali Jagat, Pr1nsip, Joged, Rawit, Ardath, Benson & Hedges, and Country.

The Gelora Djaja products include Wismilak Spesial, Wismilak Slim, Wismilak Diplomat, Galan Slim, Galan Mild, and MilDay.

Former

BAT has diversified into various fields at different times in its history. Its U.S. retail division, BATUS Retail Group, acquired Gimbels, Kohl's, and Saks Fifth Avenue in the 1970s and Marshall Field's and its divisions in 1982. The United Kingdom retail chain Argos was purchased in 1979. Kohl's grocery stores were sold to A&P in 1983. In 1986, BATUS sold the Kohl's department stores and two Marshall Field's divisions, The Crescent and Frederick & Nelson; BATUS closed Gimbels the same year, with many locations being absorbed by sister division Marshall Field's, as well as Allied Stores' Stern's and Pomeroy's divisions. In 1990 Marshall Field's was sold to Dayton Hudson Corporation (now Target Corporation), Ivey's (another Marshall Field's division) was sold to Dillard's, Saks Fifth Avenue was sold to Investcorp S.A., and Argos was demerged (Argos was acquired by previous parent company GUS plc in 1998).

The group was a major financial services company with the acquisitions of Eagle Star (1984),[27] Allied Dunbar (1985) and the Farmers Group, Inc. (1988). Around 1996 British American Tobacco merged their financial operations into a single operating unit, British American Financial Services (BAFS). This division was merged with Zurich Insurance Company in 1998 to form the Zurich Financial Services Group.[28] B.A.T still owns the minority interest in Zurich.

Senior management

Nicandro Durante became the chief executive in March 2011.[29]

Sponsorships

BAT have found many imaginative ways over the years to keep its brands in the public eye. ITC Limited, in which BAT holds a minority share, as recently as 1996 secured an arrangement to sponsor the Cricket World Cup which was branded the "Wills World Cup" and thereby achieved a high level of brand recognition for the Wills cigarette brand in India where young cricket fans were a key target market.[30]

BAT also sponsor the London Symphony Orchestra.[31]

Motorsport

Jacques Villeneuve driving for BAR at the 1999 Canadian Grand Prix.

In 1997 BAT brought its participation in the sport to new levels with the purchase of the Tyrrell team for approximately £30 million. The team raced as Tyrrell for the 1998 season before being renamed as British American Racing (BAR).[32]

Although Formula One is an exceptionally expensive sport, for BAT the high cost of running an F1 team was justified as a promotional expense because there were few other opportunities for brand promotion. However, in 2005 a European Union (EU) directive was brought into force which required national governments to legislate to prevent tobacco sponsorship.[33]

In 2004 BAR announced that technology partner Honda had purchased a 45% stake and in September 2005 it announced that Honda would be buying the remaining 55% stake. The team raced as Honda Racing F1 Team in 2006, the last year of the Lucky Strike sponsorship before leaving the sport. For the 2006 season, the team was renamed as Honda F1 Racing Team, with BAT only advertised at a couple of races. All links between the two companies were severed for 2007.[34]

Controversies

Smoking bans

Industry documents from the 1970s to the late 1990s shows that tobacco companies were seriously concerned about fatwas against smoking by Muslim jurists in Muslim majority countries.[35] In 1996, an internal document from British American Tobacco warned that, because of the spread of “extremist views” from fundamentalists in countries such as Afghanistan, the industry would have to “prepare to fight a hurricane”.[35] BAT currently states that the study, does not represent the company's views, policies and positions

Nigerian lawsuit

The Nigerian federal government filed a lawsuit against BAT and two other tobacco companies in 2007. Nigeria is seeking $42.4 billion, $34.4 billion of which the government seeks in anticipation of the future cost of treating Nigerians for tobacco-related illnesses. They are also seeking $1.04 billion as a fine for the companies' advertising and marketing campaign allegedly targeting Nigerian youth, and has asked the companies to fund an awareness campaign to educate young people about the dangers of their product. Several Nigerian state governments have filed similar petitions.[36]

Marketing practices

In 2008 the company was the subject of a BBC Two documentary, in which Duncan Bannatyne investigated the marketing practices of the company in Africa and specifically the way the company targets younger Africans with branded music events, competitions and the sale of single cigarette sticks. Many of the practices uncovered by Bannatyne appeared to break BAT's own code of conduct and company standards. Towards the end of the programme, Bannatyne interviewed Dr Chris Proctor, Head of Science and Regulation, in which Proctor admitted that advertisements targeting children from three African countries were 'disappointing'.[37] In many of these undeveloped countries, the awareness of health risks from smoking is very low or nonexistent.[38]

In September 2001, BAT invested $7.1m in North Korean state-owned enterprise called the Korea Sogyong Trading Corporation, which employs 200 people in Pyongyang to produce up to two billion cigarettes a year. The operation is run by BAT's Singapore Division. Brands of cigarettes produced are Kumgansan, Craven A and Viceroy. BAT claims that the cigarettes are produced only for consumption in North Korea, although there are allegations that the cigarettes are smuggled for sale overseas.[39]

British American Tobacco was declared the winner of the 2008 Roger Award, the award for the worst transnational corporation operating in New Zealand.[40]

British American Tobacco spent more than €700,000 lobbying the EU in 2008, up to four times as much as the company declared on the EU's register of interest representatives, according to a report by Corporate Europe Observatory. The report argues that BAT's hidden lobbying activities, which are clearly not in the public interest, should be exposed to public scrutiny.[41]

Canadian class action lawsuit

The three largest Canadian tobacco companies, Imperial Tobacco Canada (a division of British American Tobacco), JTI-Macdonald Corp and Rothmans Benson & Hedges, are the subject of the largest class action lawsuit in Canadian history. The case started on 12 March 2012 in Quebec Superior Court, and the companies face a potential payout of C$27 billion (US $21.6 billion) in damages and penalties. In addition, a number of Canadian provinces are teaming up to sue tobacco companies to recover healthcare costs caused by smoking.[42]

On 1 June 2015, Quebec Superior Court Justice Brian Riordan has awarded more than $15 billion to Quebec smokers in a landmark case that pitted them against three Canadian cigarette giants, including JTI-Macdonald Corp.[43][44]

Australian lawsuit

During 2012 British American Tobacco, along with Philip Morris and Imperial Tobacco, sued the Australian Commonwealth government. At the High Court, they argued that the Commonwealth's plain packaging legislation was unconstitutional because it usurped the companies' intellectual property rights and good will on other than just terms. However, the challenge was unsuccessful.[45]

HMRC Fine for Oversupply

In November 2014, the HMRC fined BAT £650,000 after it was found to be oversupplying its tobacco products in the Belgium market with the likelihood these products would illegally find themselves back into the UK market, with UK excise taxes not paid. The event highlighted a tobacco-smuggling issue that many anti-tobacco activists have been attempting to bring to light for years. Following several investigations, the HMRC reportedly seized more than 1.4 billion cigarettes and 330 tons of hand rolling tobacco in 2013-2014. BAT denied all claims and described the allegation and fine as “unjustified”[46]

Bribery and threats in Africa

In late November 2015, an episode of BBC’s Panorama program alleged that BAT was bribing officials in Rwanda, Burundi and Kenya in exchange for their limiting the implementation of the WHO’s Framework Convention on Tobacco Control in their respective countries. The episode showed documents provided by whistleblower Paul Hopkins, who worked for BAT in Kenya for 13 years. BAT denied the claims.[47]

In 2017 it was reported that BAT and other tobacco companies used a mixture of threats and bullying behaviour to stop or lessen the implementation of anti-smoking legislation in at least eight African countries.[48] One document showed that in Uganda BAT stated that the Tobacco Control Act flew in the face of the country's constitution. Another document showed that lawyers acting on behalf of BAT requested that the high court in Kenya "quash in its entirety" anti-smoking legislation.[48]

The Serious Fraud Office opened a ‘formal investigation’ in August 2017 based on the dossier of evidence supplied by former employee and whistleblower Paul Hopkins. The formal investigation is based on claims by Hopkins that BAT had paid bribes to government officials in Kenya, Burundi, Rwanda and Comoros to undermine tobacco control regulations in the African market which is the only market showing growth. BAT responded by classifying Hopkins as “a rogue former employee”. BAT Chief Executive Nico Durante said BAT operated in 200 countries and he could not give a 100% guarantee that everything was being done by the book. [49][50]

Pakistani lobbying efforts

In April 2015 medical experts and anti-tobacco campaigners accused Philip Barton, the British High Commissioner to Pakistan, of lobbying for BAT interests. Pictures were released showing Barton attending a meeting on March 13 in Islamabad, where BAT executives attempted to convince the Pakistani Finance and Health Minister to prevent plans to print large health warnings on cigarette packets.[51] This activity was deemed contrary to FCO policy. It followed an earlier incident when the British Ambassador to Panama was reprimanded for similar activity on BAT’s behalf.[52]

References

  1. 1 2 3 (PDF) http://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO72TJQU/$FILE/medMDAJTPRB.pdf?openelement. Missing or empty |title= (help)
  2. ↑ (PDF) http://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO72TJQU/$FILE/medMDAJTPRB.pdf?openelement. Missing or empty |title= (help)
  3. ↑ "Contact us". British American Tobacco p.l.c. Retrieved 29 August 2010.
  4. ↑ "BAT in £1.25 billion share buyback as earnings rise". Reuters. 23 February 2012. Retrieved 4 October 2012.
  5. ↑ "Who we are". British American Tobacco p.l.c. Retrieved 9 March 2014.
  6. ↑ Leroux, Marcus (27 February 2009). "British American Tobacco profit boosted by weak pound". The Times. UK. Retrieved 29 August 2010.
  7. 1 2 3 "British American Tobacco: The Early Years 1902–1932". Bat.com. 29 September 1902. Archived from the original on 9 February 2009. Retrieved 18 April 2011.
  8. 1 2 Cox, Howard (2009). "British American Tobacco Company". In Linsun CHENG. Berkshire Encyclopedia of China. Berkshire Publishing Group. pp. 208–209. ISBN 978-0977015948.
  9. ↑ Tinari, Philip (200). "China Trade: The Art and Commerce of Tobacco". Duke Magazine. Duke University. 91 (4): 1–3. Retrieved 25 May 2012.
  10. ↑ Cox, Howard (1997). "China: the Evolution of BAT’s Cigarette Distribution Network, 1902-41" (PDF). Business History. 39 (3): 30–64. doi:10.1080/00076799700000098.
  11. ↑ Collins, Glenn (5 December 1994). "BAT in Court to defend American Tobacco deal". New York Times. Retrieved 18 April 2011.
  12. ↑ "Rothmans acquisition backed by BAT unit". New York Times. 9 April 1999. Retrieved 18 April 2011.
  13. ↑ "Tobacco Giant withdraws from Burma". Commondreams.org. 7 November 2003. Archived from the original on 2 July 2010. Retrieved 18 April 2011.
  14. ↑ Litterick, David. BAT loses Marlboro licence. July 1, 2005. In: The Daily Telegraph
  15. ↑ "BAT intends to acquire Italian tobacco firm". telegraph.co.uk. Archived from the original on 9 May 2015. Retrieved 18 April 2011.
  16. ↑ "BAT and Philip Morris light up in Serbia". The Grocer. 5 August 2003. Retrieved 19 March 2016.
  17. ↑ "BAT closing two UK and Ireland factories". Forbes. 13 July 2005. Archived from the original on 15 January 2006. Retrieved 18 April 2011.
  18. ↑ Tobacco company ready for growth after sale (02.07.08)(in Danish)
  19. ↑ "British American Tobacco acquires control of Indonesia’s Bentoel". Bat.com. Retrieved 18 April 2011.
  20. ↑ "BAT buys Bentoel to challenge Big Three market domination". Jakarta Post. 18 June 2009. Retrieved 24 March 2012.
  21. ↑ Guevarra, Vladimir (26 May 2011). "BAT Buys Colombia's Protabaco". Wall Street Journal Online. Retrieved 25 May 2012.
  22. ↑ Craver, Richard (21 October 2016). "British American Tobacco moves to buy all of Reynolds American in $47B deal". Winston-Salem Journal. Retrieved 21 October 2016.
  23. ↑ "British American Tobacco Agrees to Pay $49 Billion to Take Full Control of Reynolds American". The Wall Street Journal. January 17, 2017. Retrieved January 17, 2017.
  24. ↑ Craver, Richard (July 25, 2017). "Reynolds American now entirely owned by British American Tobacco". Winston-Salem Journal. Retrieved July 25, 2017.
  25. ↑ http://uk.reuters.com/article/uk-bulgaria-tobacco-bat-idUKKBN17E0Q2
  26. ↑ TIM WHITMIRE Associated Press. "Reynolds Makes Big Move Into Smokeless Tobacco". Salem-news.com. Retrieved 18 April 2011.
  27. ↑ "Eagle Star at Euroarchive". Euroarchiveguide.org. 15 September 1904. Retrieved 18 April 2011.
  28. ↑ "Zurich to pay BAT $18.6bn for finance units". Articles.latimes.com. 17 October 1997. Retrieved 18 April 2011.
  29. ↑ "Nicandro Durante, Chief Executive". Retrieved 26 November 2011.
  30. ↑ "Scorecard: Wills World Cup". Cricketweb.net. 27 February 1996. Retrieved 18 April 2011.
  31. ↑ "London Symphony Orchestra - Thank You". London Symphony Orchestra. Retrieved 19 August 2016.
  32. ↑ "Constructors: BAR". Grandprix.com. 10 March 2007. Retrieved 18 April 2011.
  33. ↑ "Tobacco advertising ban takes effect on 31 July". Deljpn.ec.europa.eu. 27 July 2005. Archived from the original on 24 January 2011. Retrieved 18 April 2011.
  34. ↑ "BAT exits Formula 1 tobacco sponsorship". Autoracingsport.com. 19 October 2006. Retrieved 18 April 2011.
  35. 1 2 Boseley, Sarah (20 April 2015). "How tobacco firms tried to undermine Muslim countries' smoking ban". The Guardian. Retrieved 5 February 2017.
  36. ↑ "NIGERIA: Govt hits tobacco companies with whopping law suit". Irinnews.org. Retrieved 18 April 2011.
  37. ↑ "Bannatyne takes on Big Tobacco". BBC News. 27 June 2008. Retrieved 18 April 2011.
  38. ↑ Kenyon Rainier Stebbins, Medical Anthropology Quarterly, New Series, Vol. 15, No. 2 (Jun. 2001), pp. 147–170
  39. ↑ Ian Cobain and David Leigh (17 October 2005). "Tobacco firm has secret North Korea plant". Guardian. UK. Retrieved 18 April 2011.
  40. ↑ Press Release: CAFCA (3 March 2009). "Roger Awards: British American Tobacco NZ Ltd Wins". Scoop.co.nz. Retrieved 18 April 2011.
  41. ↑ "Obscured by the smoke". Corporate Europe Observatory. 2 June 2009. Retrieved 24 March 2012.
  42. ↑ Reuters C$27 billion suit vs Big Tobacco starts in March 13, 2012. Retrieved 27 September 2012
  43. ↑ CTV News Judge awards $15 billion to Quebec smokers Retrieved on June 1st, 2015
  44. ↑ CBC News Tobacco companies ordered to pay $15B in damages Retrieved on June 1st, 2015
  45. ↑ JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited v The Commonwealth [2012] HCA 43 (5 October 2012) AustLII
  46. ↑ Doward, Jamie (15 November 2014). "BAT fined for oversupplying tobacco in low-tax European jurisdictions". Retrieved 23 October 2016 – via The Guardian.
  47. ↑ editor, Sarah Boseley Health (30 November 2015). "British American Tobacco accused of bribing government officials". Retrieved 23 October 2016 – via The Guardian.
  48. 1 2 Boseley, Sarah (12 July 2017). "Threats, bullying, lawsuits: tobacco industry's dirty war for the African market". The Guardian. Retrieved 12 July 2017.
  49. ↑ "Subscribe to read". Financial Times. Retrieved 2017-08-06.
  50. ↑ Boseley, Sarah; Kollewe, Julia (2017-08-01). "Serious Fraud Office opens investigation into BAT bribery claims". The Guardian. ISSN 0261-3077. Retrieved 2017-08-06.
  51. ↑ "BAT team asks govt to withdraw decision". The Nation. Retrieved 2016-05-11.
  52. ↑ "Subscribe to read".
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