BAT - About Us - 2012

For more copies of this booklet, the British American Tobacco p.l.c. Annual Report 2011 or Sustainability Report 2011, please contact:British American Tobacco Publications,Unit 80, London Industrial Park, Roding RoadLondon E6 6LS, United KingdomTelephone: +44 (0)20 7511 7797Email: [email protected]

2012

About

www.bat.com


We would like to thank all of the British American Tobacco people who made this booklet possible.Kawshika Abeykoon, Susie Davenport, Senaka De Fonseka, Dinesh Dharmadasa, Cees Foet, Miriam Hiller, Charlotte Hulsenbeck, Svenja Kühlke, Ronald Osubia, Christina Papadam, Alexis Santschi, Cristina Saura Boza and Young-Jae Song.

Editorial teamMike Butcher and Paula Smedley

Designed and produced by Flag. Photography by David Hares, Mike Abrahams and John Gibbons.

At British American Tobacco we have a unique mix of people from many cultures and backgrounds. We are one of the world’s most international businesses, with a responsible approach to doing business from crop to consumer.

of the world's adult

smokers choose our brands1in8

How we work p4Who we are p2

cigarettes sold in 2011

profit from operations in 2011

705bn

£4,721m

markets where our brands are sold

180

Growing our business p6

WHAT’S INSIDE

References in this publication to ‘British American Tobacco’, ‘we’, ‘us’, and ‘our’ when denoting opinion refer to British American Tobacco p.l.c. and when denoting tobacco business activity refer to British American Tobacco Group operating companies, collectively or individually as the case may be.

All performance figures exclude associate companies and relate to 2011 unless otherwise stated.

This booklet has been printed in the UK by Pureprint, a CarbonNeutral®

company using their pureprint and alcofree environmental printing technology. The paper used for this booklet is Amadeus 50% Recycled Silk, comprising 25% post-consumer and 25% pre-consumer waste, and 50% virgin wood fibre sourced from sustainable forests independently certified according to the rules of the Forest Stewardship Council. This document is recyclable.

FSC LOGO TO BE PLACED BY PRINTER

About us

What matters p10 Looking to the future p12 Our people p14Consumers and marketing p8

1

Volume (billion) 143

ReVenue (£m) 3,558

employees 16,661

shaRe of GRoup ReVenue 23%

ameRICas

In 2011 we supplied around 180 markets with 705 billion cigarettes. These were produced at 46 factories in 39 countries.

our business isn’t about getting more people to smoke, or encouraging those that do to smoke more. It’s about really understanding and meeting the different profiles and preferences of adult tobacco consumers. We do this by investing in our brands and our people and through product innovations.

We are the only tobacco business with a significant interest in tobacco growing, providing agronomy support to around 70 per cent of the farmers we purchase leaf from. We also invest heavily in research and development, which involves not only product innovations, but also research into potentially reduced-risk products.

our balanced brand portfolio is designed to meet key consumer needs and we have a successful marketing strategy based on innovation, consumer choice and acting responsibly at all times.

moRe onlIne www.bat.com/aboutus

2

Who we are

cigarette factories

in 39 countries

46


ReVenue (£m) 3,600

employees 12,138



ReVenue (£m) 3,990

employees 12,115



ReVenue (£m) 4,251

employees 15,351


WesTeRn euRope

our four leading brands are Dunhill, Kent, lucky strike and pall mall. We call them our Global Drive Brands. Dunhill offers a range of premium and super-premium cigarettes and cigars at the top end of the market and is sold in more than 120 countries. Kent is our largest premium brand and is sold in more than 75 markets. launched in 1871, Lucky Strike is now sold in more than 60 countries. Pall Mall was introduced in 1899 and is now sold in more than 110 markets around the world.

We have many other leading international and local brands, including Vogue, Viceroy, Kool, Rothmans, peter stuyvesant, Benson & hedges and state express 555.

moRe onlIne Visit our country or area websites www.bat.com/global

our business delivers consistent shareholder return, driven by our well-established strategy. an investor who put £100 into our shares at the end of 2006 would have seen this grow to £266 by the end of 2011. This compares to £108 if the same £100 was invested into the fTse 100 over the same period.

Our leading brands

hypoTheTICal £100 holDInG InVesTeD In 2006

£100

Value aT The enD of 2011 If InVesTeD In The FTSE 100

£108

moRe onlIne www.bat.com/investors

3

Delivering shareholder value

asIa-paCIfIC

easTeRn euRope,mIDDle easT & afRICa

Value aT The enD of 2011 If InVesTeD In BRITISH AMERICAN TOBACCO

£266

4

How we work

Distribution

SourcingWe work with tobacco farmers and

other suppliers to promote high ethical, environmental and workplace standards.

We manage our supply chain responsibly and engage with our suppliers to help address their social, environmental and economic impacts.

We work with our retail partners to ensure they can profitably meet consumer needs. our routes to market allow us to quickly roll out innovations

on a global scale and to fully meet consumer demand. our direct to store sales (Dss) are

often the most effective way of serving retailers and building business partnerships.

In the factory we constantly strive for more efficiency to better meet our objectives. Each day on the factory floor presents its own challenges, and these can be technical or related to our people. But I enjoy finding the right solutions so that we can continue to satisfy our retail customers and meet their needs.

Alexis Santschi, Production Area Manager, Switzerland moRe onlIne

www.bat.com/sourcing

moRe onlIne www.bat.com/distribution

5

Marketing

Productionmanufacturing tobacco products is a large-scale operation and we have

46 cigarette factories in 39 countries. as well as tobacco leaf, we purchase a wide variety of other goods and services from suppliers

and we encourage continuous improvements in business practices, efficiency, quality, innovation and corporate responsibility.

InnovationWe make significant investment into the development of our innovations and into

research and development. These innovations vary across our brands and markets, and our approach enables our companies to adapt

their offerings to local preferences. We also invest heavily in our efforts to

develop potentially reduced-risk products.

We have a successful marketing strategy based on innovation, responsibility and

consumer choice, and our balanced brand portfolio is designed to meet key consumer

needs. our marketing is driven by an excellent understanding of the consumer and

by sticking to the marketing fundamentals that are appropriate to our products.

ConsumersWe recognise that our business revolves around our consumers and our brands. We invest in gathering

comprehensive insights into smokers’ preferences and buying behaviour. This information helps us offer product innovations that are relevant to adult consumers’ tastes,

attitudes, pockets and purchasing patterns.

moRe onlIne www.bat.com/production

moRe onlIne www.bat.com/innovation

moRe onlIne www.bat.com/marketing

moRe onlIne www.bat.com/consumers

6

sustainability underpins our business, and for us it’s all about shared value – creating value for our shareholders, as well as being in the best interests of our stakeholders.

as a business we are operating in a challenging and changing landscape; in the face of this it is all the more important that we focus on achieving sustainable growth. Responsibility is integral to everything that we do and is especially important to a business such as ours, where our products pose real and serious risks to health. our determination to act responsibly spans the whole business, from our commitment to addressing the issues of child labour and working with farmers, to looking at how we can reduce the risks of our products and lessen our environmental impact.

But we recognise that our business starts with our consumers and our brands, and our balanced portfolio is designed to deliver continued growth. We have a great portfolio of brands sold across diverse markets, comprising not only our Global Drive Brands and other international brands, but also strong local brands. Balanced across consumer segments and price points, and backed by industry-leading innovations, we are confident that our brands will remain relevant to adult tobacco consumers and continue to grow.

Growing our business

Growth

Our vision

ResponsibilityWinning organisation

Productivity

in the Dow Jones Sustainability Index

10 years

Leading our industryour vision is to achieve leadership of the global tobacco industry, not just in volume and value, but also in the quality of our business. To be industry leaders we must continue to demonstrate that we are a responsible tobacco Group with outstanding people, brands and products.

our consistent strategy is based on growth, funded by productivity, and delivered by a winning organisation that acts responsibly at all times. our balanced strategy adds value at every stage of our operations, including working directly with tobacco farmers, having our own manufacturing capabilities and investing in research and development.

moRe onlIne www.bat.com

HARM REDuCTION We will strive to bring commercially

viable, consumer acceptable reduced-risk products to market.

MARKETPLACE We will take a lead in upholding high standards of corporate conduct within our marketplace.

ouR GRoup VIsIon anD sTRaTeGy

In Sri Lanka we have been committed to investing in local communities for the past 60 years. Through our Sustainable Agricultural Development Programme I spearhead a project covering 12 districts of Sri Lanka and supporting over 10,600 of the poorest families. The project aims to eradicate poverty, which is both a national and global priority.

Senaka De Fonseka, CSR Manager, Sri Lanka

7

ENvIRONMENT We will actively address the impact of

our business on the natural environment.

SuPPLy CHAIN We will work for positive social, environmental and economic impacts in our supply chain.

PEOPLE AND CuLTuRE We will work to ensure we have the right people and culture to meet our goals.

our sustainability agenda aims to build value for our shareholders and other stakeholders by addressing our social, environmental and economic impacts. This means delivering shareholder returns and doing the right thing by our stakeholders and the environment. This concept of sustainable value underpins all of our sustainability activities. We believe that by taking action to address our impacts today, we will help our business to thrive in the future.

moRe onlIne www.bat.com/sustainability

ouR susTaInaBIlITy aGenDa

8

Working in marketing at British American Tobacco means working in an exciting environment in constant evolution, and with colleagues who are passionate about building brands and product innovations that excite our consumers.

Cristina Saura Boza, Marketing Management Trainee, Spain

Consumers and marketing

our business is about offering adult tobacco consumers high quality brands that they will want to choose over those of our competitors.

successful marketing is the bedrock of growth for any fast moving consumer goods business and we are no exception. We don’t mean ‘selling smoking’ to boost the number of people in the world who smoke or the amount they smoke. We mean growing our share of the large number of adults who choose to be tobacco consumers.

We invest in positioning our high quality brands competitively for the adults who’ve decided they do want to smoke. and we’ve shown that through focus, intelligence, responsiveness and a high priority on responsibility, we can successfully build our brands and win consumers away from competitor brands.

Responsibility is keyWe believe that for a business like ours responsible marketing is paramount. That’s why we have our voluntary International marketing standards (Ims). sticking to these standards gives us a consistent and principled approach to marketing around the world.

This means there are many things we don’t do. Top of the list is that we don’t market to the underage. We don’t do product placements in films, plays or TV programmes, or link our product brands to celebrities or to sporting, professional, social or sexual success. nor do we promote our products through social media. and all of our consumer

packaging carries a visible health warning, even where the law doesn’t require it.

An innovative approachour packaging and product innovations allow us to continue to generate consumers’ interest and meet their preferences. our packaging innovations include Dunhill Reloc (the re-sealable pack that keeps the contents fresher), compact packs, side-opening packs, packs that open like wallets and waterproof packs. our product innovations include menthol capsules contained in filters, such as lucky strike Click & Roll, Kent Convertibles, pall mall Click on and charcoal filters.

Retailer relationshipsBuilding relationships with retailers is an important part of our trade marketing activities. We work with our retail partners to ensure they can profitably meet the expectations of adult smokers with regards to availability, pricing and brand quality. We place as strong an emphasis on being a high quality supplier to the trade as we do on working to ensure high standards among our own suppliers. and we make a special effort to understand and develop joint programmes with global retail partners in order to reach tobacco consumers in key channels.

How do we market products when we can’t advertise?We see it as marketing for a new era. our approach starts with really understanding the different profiles of our consumers. We begin by gathering comprehensive insights into their preferences and buying behaviour, then invest in developments that are truly relevant to tobacco consumers. finally, we ensure that we are able to meet consumer demand at the point of sale.

9

markets where we are the leader

50+Consumers and marketing

10

as well as seeking to reduce the impact of tobacco use on public health, we face a wide range of issues that affect not only our operations, but also our suppliers and our consumers.

We actively seek to address these issues both in the way we work and through positive interactions with governments and regulators. We support appropriate regulation of our industry that maintains a balance between consumer preferences and the interests of society, while allowing us to compete commercially as a business. however, we believe regulations that are too stringent can have unwelcome and unexpected consequences for both consumers and governments.

What mattersfarmers supplying us

around the world

200,000+

some critics of our industry have

suggested that farmers should move out

of tobacco growing. however, tobacco

farming is an important part of the

agricultural economy in many countries.

many farmers are from emerging

economies and choose tobacco because

it grows well in poorer soils. farmers can

earn good yields from very small plots

of tobacco, allowing them to use the

earnings to grow other crops, such

as food.

The RIGhT To Choose

moRe onlIne aT www.bat.com/leaf

I have been growing tobacco for 17 years. Through growing tobacco I have been able to earn the money to educate my children and build houses on my land. And I can care for my family, especially when they are sick. All of this is possible because of the help and support I get from British American Tobacco extension services.

Ronald Osubia, tobacco farmer in Hoima, Uganda

Illicit cigarettes:

who’s paying the price?

WaTCh ouR VIDeo onlIne aT

www.bat.com/theman

11

We believe that tobacco products are only suitable for adult consumers and we do not want children to smoke.

our companies around the world work with retailers in the battle against underage smoking. We run or support programmes including proof-of-age schemes and training to help shop staff spot underage buyers and refuse to sell to them.

A growing problem The illicit trade in tobacco products is big business and includes both counterfeit products and genuine cigarettes that are smuggled across borders. Cigarettes are among the most commonly traded products on the black market. This is due to high profit margins, relative ease of movement and low detection rates and penalties.

The main drivers for the growing trade in illicit cigarettes are economic – cheaper cigarettes for consumers and easy profits for the smugglers and counterfeiters. however, fake cigarettes can mean no quality control, while smuggled cigarettes cost governments billions in lost excise and taxes. legitimate retailers, often small or family businesses, are also damaged as smugglers and criminals steal their trade.

We believe that tackling illicit trade requires cooperation and understanding between tobacco companies, governments and international bodies.

What we’re doingas a business we work to combat illicit trade. our companies around the world are committed to doing everything they reasonably can to minimise the risk of their products being diverted into illicit trade channels.

our anti Illicit Trade Intelligence unit works hand-in-hand with law enforcement agencies worldwide to gather and share intelligence, monitor the destruction of seized products and machinery and analyse suspect fake cigarettes in our laboratories.

Tobacco products are already banned from display in shops in a few countries around the world. however, retail display bans can be costly and difficult to implement for retailers. Driving legitimate sales under the counter also blurs the line between legal and illegal products, playing into the hands of criminals.

youTh smoKInG pReVenTIon

IllICIT TRaDe

DIsplay Bans

plaIn paCKaGInG

moRe onlIne aT www.bat.com/ysp

moRe onlIne aT www.bat.com/displaybans

moRe onlIne aT www.bat.com/plainpackagingmoRe onlIne aT www.bat.com/illicittrade

We believe we are entitled to use our packs to distinguish our products from those of our competitors. Generic packaging would make it easier for criminals to counterfeit tobacco products, increasing the already large black market. This could reduce governments’ tax revenue and disrupt efforts to tackle organised crime.

12

Looking to the futureour research and development principally focuses on tobacco harm reduction, but also explores the development of new products and innovations. our current research focuses both on developing potentially reduced-risk tobacco products – whether combustible (such as cigarettes) or smokeless – and the science required to assess them.

We’ve had a research and development centre in the uK for more than 50 years. In that time we’ve focused on understanding cigarette smoke chemistry, identifying its toxicants, understanding smoking behaviour and trying to develop products with lower levels of toxicants in the smoke.

Harm reductionWe believe that a ‘one product fits all’ approach can’t achieve tobacco harm reduction, so our approach is to make available a range of reduced-risk tobacco and nicotine products for adult consumers.

There are many challenges in this: the science is complex; collaboration is needed between scientists, tobacco companies and regulators; products need to meet consumer expectations; and we need a regulatory framework that supports tobacco harm reduction. But we are committed to meeting these challenges.

Collaborationalongside this, we’re engaging with the scientific and public health communities to try to build more widespread support for this broader approach to tobacco harm reduction. We publish research in peer-reviewed journals and on our dedicated science website, present our findings and views at scientific conferences and we seek to collaborate with others – particularly members of the academic and public health communities – to improve the breadth and quality of our research.

R&D is about discovery, understanding and providing solutions through knowledge and innovation. The work is exciting and I sometimes feel a bit like a detective, researching fundamental processes in the tobacco plant to learn how toxicants are formed and trying to work out ways to prevent it from happening.

Susie Davenport, Plant Production and Field Evaluation Manager, UK

Cigarette filters as we would recognise them today have been commonly used for more than 50 years. and here at British american Tobacco we’re constantly looking for innovative filter technologies that might be capable of reducing the amount of toxicants in cigarette smoke.

for example, we are currently testing a novel nanoporous activated carbon that is a more efficient adsorbent than any carbon we currently use in the filters of our commercial cigarettes. and we are also testing an ion-exchange resin similar to that used in water filters, which we have customised for potential use in our cigarette filters.

noT an oRDInaRy fIlTeR

13

spent on research and development in 2011

£166m

www.bat-science.com

Visit our website written specifically for scientists with an interest in tobacco-related research and related disciplines.

Our people

14

our employees come from many cultures and backgrounds, and our business benefits from the breadth of ideas and experiences they bring.

having such a diversity of people who support each other’s success creates a unique mix. our differences are balanced by a common view on our industry – we support personal choice and the freedom to choose – and that philosophy runs throughout our business.

Being free to discuss and debate means we develop our business in exciting ways and give individuals their voice. empowering teams creates fresh ideas and different experiences, keeping us sharp, innovative and ahead of the game.

for more than a century we have built a reputation as a leading fast moving consumer goods company, and we put a strong emphasis on empowering our people, promoting entrepreneurship and innovation.

We have impressive and inspiring leaders who genuinely care about our people and will support them in the difference they make. We take them to new places – professionally and geographically – and open their mind to new ideas.

employees worldwide56,000+

15

The best thing about British American Tobacco is the open culture and the promotion of diversity. It’s a comfortable and fun place to work in and the support and encouragement I get from everyone drives me to succeed.

Kawshika Abeykoon, Administrative Coordinator, Sri Lanka

It is rewarding to see how we are finding ways of creating profitability and growth even with the constantly changing external environment. I face new challenges each day which helps me to learn and develop.

Young-Jae Song, Marketing Finance Executive, BeNeLux

I have had the opportunity to not only get an in-depth view of departments across the organisation, but also to work with retailers in the field. All of this has given me a brilliant base to acquire an understanding of the company, the market and relevant stakeholders.

Svenja Kühlke, Brand Executive, Germany

If you’re in search of a challenge and want a career that will truly inspire you, British american Tobacco may be the company for you. Visit our careers website to find out more.

www.bat-careers.com

Rewarding careersas you’d expect from a leading global business, we offer highly competitive rewards for success, invest heavily in training and development, and offer truly international career opportunities.

We want our employees to feel rewarded by the challenge of their roles, career opportunities and positive team relationships. We regularly compare ourselves to other multi-national businesses targeting the same pool of world-class talent. This enables us to maintain an attractive salary and benefits package.

16

www.bat.com/health

at British american Tobacco we have long accepted that smoking is a cause of serious diseases, and we know it can be hard to quit.

www.bat-ingredients.com

find out more about what goes into our products, including information on ingredients and other materials used in cigarettes, cigars, snus and other tobacco products.

www.batbiodiversity.com

our Biodiversity partnership with three conservation nGos – the earthwatch Institute, fauna & flora International and The Tropical Biology association – and the projects it supports around the world.

www.bat.com/global

find a complete list of our country and area websites, as well as links to our specialist websites.

www.bat.comyou can find out more about all of the topics covered in this booklet (and more) on

our global website

about science, for scientists, by scientists, offering a look at the work of our Group R&D teams and their research into potentially reduced-risk products.

Visit our careers website to find out what it’s like to work with us and how to contact your local British american Tobacco office about career opportunities.

find out how we are delivering growth in revenue and profit. Read our 2011 annual Report online or download a pDf. you can also watch exclusive video content.

marking our 11th year of social reporting, our 2011 sustainability Report looks at our five key areas of sustainability and describes how we’re preparing for the future.

www.bat-science.com www.bat-careers.com

www.bat.com/sustainabilitywww.bat.com/annualreport

At British American Tobacco we have a unique mix of people from many cultures and backgrounds. We are one of the world’s most international businesses, with a responsible approach to doing business from crop to consumer.

of the world's adult

smokers choose our brands1in8

How we work p4Who we are p2

cigarettes sold in 2011

profit from operations in 2011

705bn

£4,721m

markets where our brands are sold

180

Growing our business p6

WHAT’S INSIDE

References in this publication to ‘British American Tobacco’, ‘we’, ‘us’, and ‘our’ when denoting opinion refer to British American Tobacco p.l.c. and when denoting tobacco business activity refer to British American Tobacco Group operating companies, collectively or individually as the case may be.

All performance figures exclude associate companies and relate to 2011 unless otherwise stated.

This booklet has been printed in the UK by Pureprint, a CarbonNeutral®

company using their pureprint and alcofree environmental printing technology. The paper used for this booklet is Amadeus 50% Recycled Silk, comprising 25% post-consumer and 25% pre-consumer waste, and 50% virgin wood fibre sourced from sustainable forests independently certified according to the rules of the Forest Stewardship Council. This document is recyclable.







2012

About

www.bat.com





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