British American Tobacco

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British American Tobacco plc
Type Public limited company
Traded as LSEBATS
NYSE MKTBTI
JSE: BTI
Industry Tobacco
Founded 1902
Headquarters London, United Kingdom
Area served Worldwide
Key people Richard Burrows (Chairman)
Nicandro Durante (Chief Executive)
Products Cigarettes
Revenue £15.260 billion (2013)[1]
Operating income £5.820 billion (2013)[1]
Net income £4.199 billion (2013)[1]
Employees 55,000+ (2014)[2]
Subsidiaries Tekel
Bentoel Group
Gelora Djaja (40%)
Souza Cruz
Niemeyer
Website www.bat.com

British American Tobacco plc (informally BAT) is a British multinational tobacco company headquartered in London, United Kingdom.[3] It is the world’s second-largest tobacco company by sales (after Altria Group, the former Philip Morris International).[4]

BAT has a market-leading position in over 50 countries and operations in around 180 countries.[2][5] 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. As of 6 July 2012 it had a market capitalisation of £65.6 billion, the sixth-largest of any company listed on the London Stock Exchange.[6] It has a secondary listing on the Johannesburg Stock Exchange.

History[edit]

1902 to 2000[edit]

The company was formed in 1902, when the United Kingdom's Imperial Tobacco Company and the American Tobacco Company of the USA 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[8] 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 USA.

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.[9] 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.[10] 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.[11]

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.[8]

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.[9]

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.[12]

In 1999 it merged with Rothmans International,[13] 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.[14]

2000 to present[edit]

In 2002, BAT lost a law suit about the right to sell cigarettes under the Marlboro brand name in the UK. It had acquired Rothmans, which had previously bought a license to use the name from Philip Morris. Philip Morris' attorneys invoked a get-out clause for the case of a major change of ownership.[15]

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.[16]

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.

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]

Operations[edit]

Current[edit]

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

International Brands include Dunhill, Kent, 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), 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 (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.[22]

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[edit]

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),[23] 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.[24] B.A.T still owns the minority interest in Zurich.

Senior management[edit]

Nicandro Durante became the chief executive in March 2011.[25]

Sponsorships[edit]

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.[26]

BAT also sponsor the London Symphony Orchestra.[27]

Motorsport[edit]

The success of Formula One motor racing has largely been built on tobacco sponsorship, including that of BAT. 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).[28] BAT used the team to advertise major brands, particularly Lucky Strike and State Express 555.

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.[29] The livery of cars competing at circuits outside of EU jurisdiction can continue (in some cases) to promote tobacco brands but these opportunities are declining as anti-tobacco legislation begins to bite.

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.[30]

Controversies[edit]

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.[31] In 2008 the company was the subject of a BBC2 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'.[32] In many of these undeveloped countries, the awareness of health risks from smoking is very low or nonexistent.[33]

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.[34]

British American Tobacco was declared the winner of the 2008 Roger Award, the award for the worst transnational corporation operating in New Zealand.[35]

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.[36]

Canadian class action lawsuit[edit]

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 $27.30 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.[37]

References[edit]

  1. ^ a b c "Preliminary Results 2013". Retrieved 16 March 2013. 
  2. ^ a b "Who we are". British American Tobacco p.l.c. Retrieved 9 March 2014. 
  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. ^ Leroux, Marcus (27 February 2009). "British American Tobacco profit boosted by weak pound". The Times (UK). Retrieved 29 August 2010. 
  6. ^ "FTSE All-Share Index Ranking". stockchallenge.co.uk. Retrieved 26 December 2011. 
  7. ^ "British American Tobacco: Our History". Bat.com. Retrieved 18 April 2011. 
  8. ^ a b "British American Tobacco: The Early Years 1902–1932". Bat.com. 29 September 1902. Retrieved 18 April 2011. 
  9. ^ a b Cox, Howard (2009). "British American Tobacco Company". In Linsun CHENG. Berkshire Encyclopedia of China. Berkshire Publishing Group. pp. 208–209. ISBN 978-0977015948. 
  10. ^ Tinari, Philip (200). "China Trade: The Art and Commerce of Tobacco". Duke Magazine (Duke University) 91 (4): 1–3. Retrieved 25 May 2012. 
  11. ^ Cox, Howard (1997). "China: the Evolution of BAT’s Cigarette Distribution Network, 1902-41". Business History 39 (3): 30–64. doi:10.1080/00076799700000098. 
  12. ^ Collins, Glenn (5 December 1994). "BAT in Court to defend American Tobacco deal". New York Times. Retrieved 18 April 2011. 
  13. ^ "Rothmans acquisition backed by BAT unit". New York Times. 9 April 1999. Retrieved 18 April 2011. 
  14. ^ "Tobacco Giant withdraws from Burma". Commondreams.org. 7 November 2003. Retrieved 18 April 2011. 
  15. ^ Litterick, David. BAT loses Marlboro licence. July 1, 2005. In: The Daily Telegraph
  16. ^ "BAT intends to acquire Italian tobacco firm". Findarticles.com. Retrieved 18 April 2011. [dead link]
  17. ^ "BAT closing two UK and Ireland factories". Forbes. 13 July 2005. Retrieved 18 April 2011. [dead link]
  18. ^ Tobacco company ready for growth after sale (02.07.08)(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. ^ TIM WHITMIRE Associated Press. "Reynolds Makes Big Move Into Smokeless Tobacco". Salem-news.com. Retrieved 18 April 2011. 
  23. ^ "Eagle Star at Euroarchive". Euroarchiveguide.org. 15 September 1904. Retrieved 18 April 2011. 
  24. ^ "Zurich to pay BAT $18.6bn for finance units". Articles.latimes.com. 17 October 1997. Retrieved 18 April 2011. 
  25. ^ "Nicandro Durante, Chief Executive". Retrieved 26 November 2011. 
  26. ^ "Scorecard: Wills World Cup". Cricketweb.net. 27 February 1996. Retrieved 18 April 2011. 
  27. ^ London Symphony Orchestra
  28. ^ "Constructors: BAR". Grandprix.com. 10 March 2007. Retrieved 18 April 2011. 
  29. ^ "Tobacco advertising ban takes effect on 31 July". Deljpn.ec.europa.eu. 27 July 2005. Retrieved 18 April 2011. 
  30. ^ "BAT exits Formula 1 tobacco sponsorship". Autoracingsport.com. 19 October 2006. Retrieved 18 April 2011. 
  31. ^ "NIGERIA: Govt hits tobacco companies with whopping law suit". Irinnews.org. Retrieved 18 April 2011. 
  32. ^ "Bannatyne takes on Big Tobacco". BBC News. 27 June 2008. Retrieved 18 April 2011. 
  33. ^ Kenyon Rainier Stebbins, Medical Anthropology Quarterly, New Series, Vol. 15, No. 2 (Jun. 2001), pp. 147–170
  34. ^ Ian Cobain and David Leigh (17 October 2005). "Tobacco firm has secret North Korea plant". Guardian (UK). Retrieved 18 April 2011. 
  35. ^ Press Release: CAFCA (3 March 2009). "Roger Awards: British American Tobacco NZ Ltd Wins". Scoop.co.nz. Retrieved 18 April 2011. 
  36. ^ "Obscured by the smoke". Corporate Europe Observatory. 2 June 2009. Retrieved 24 March 2012. 
  37. ^ Reuters C$27 billion suit vs Big Tobacco starts in March 13, 2012. Retrieved 27 September 2012

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