ManufacturerBritish American Tobacco
British American Tobacco
International manufacturer of Dunhill, Lucky Strike, Kent, State Express 555, Rothmans, Peter Stuyvesant, Benson and Hedges, Kool, Pall Mall, Viceroy, Winfield, and John Player.
British American Tobacco has been in business for more than 100 years, trading through the turbulence of wars, revolutions and nationalisations as well as all the controversy surrounding smoking.
The business was formed in 1902, as a joint venture between the UK’s Imperial Tobacco Company and the American Tobacco Company founded by James ‘Buck’ Duke.
Despite its name, derived from the home bases of its two founding companies, British American Tobacco was established to trade outside both the UK and the USA, and grew from its roots in dozens of countries across Africa, Asia, Latin America and continental Europe.
We were ‘born international’, and have developed over a century’s expertise in operating locally in diverse cultures around the world.
In its first quarter century, British American Tobacco expands rapidly. From Canada to China, the company has from the start a single objective: to seek market leadership in all countries where a market exists.
With operations around the world, the company finally reaches the US in the 1920s with the acquisition of a small North Carolina company, Brown & Williamson.
As trading conditions deteriorate after the Wall Street Crash in 1929, the 1930s sees consolidation across the company, with several distribution networks becoming fully-fledged subsidiaries.
Born international On 29 September 1902 the UK’s Imperial Tobacco Company and the American Tobacco Company of the United States form a joint venture, the British American Tobacco Company, in a bid to end an intense trade war.
Under the agreement, the two companies will not trade in each other’s domestic markets and acquire the right to use each other’s brands and trade marks in their own territory. Imperial Tobacco's and American Tobacco’s businesses outside the ‘home’ markets of the UK and US are transferred to British American Tobacco, giving the new company operations in countries as diverse as Canada, Japan, Germany, Australia, South Africa and China.
James ‘Buck’ Duke, an austere, self-taught commercial genius, becomes the company’s first chairman. His strategy is to devise a superior product, hire the best people to make it, price it as low as possible, and mechanise, organise and merchandise.
The first decade is a chronicle of expansion: to the West Indies in 1904; to India, Ceylon and Egypt in 1905; Holland, Belgium, Sweden and Norway in 1906; Finland, Indonesia and East Africa in 1908; and Malaya (now Malaysia) in 1911.
By 1910, British American Tobacco’s sales are more than 10 billion cigarettes. Profits grow correspondingly quickly.
BAT becomes BritishBy 1911, the American Tobacco Company divests its shares in the joint venture. British American Tobacco is listed on the London Stock Exchange and British investors acquire most of its American parent's shares. The company is now free to conduct its business independently throughout the world, except in the UK where territorial agreements remain with Imperial.
New markets Across the South Atlantic, the company is busy entering new markets. In 1913, a local tobacco manufacturer in Argentina, Bozetti & Co. is acquired. One year later, Brazilian company Souza Cruz is purchased – today, one of the Group’s leading subsidiaries.
First World War 1914–1918 With the coming of war in 1914, the additional demand from the armed forces for tobacco stretches the company’s manufacturing capacity to the limit. In 1915, British American Tobacco cigarette sales total 25 billion.
The First World War creates a unifying corporate culture from what had previously been a disparate Group of companies, while the recruitment of women to replace the men who had gone to war changes the workplace forever.
The post-war world British American Tobacco’s enormous market is the fruit of continuing expansion. In 1921, Cigarrera Bigott Sucs is formed in Venezuela and, in the following few years, acquisitions are made in Chile, Mexico and Central America.
Duke resigns as chairman in 1923. His successor is Sir Hugo Cunliffe-Owen, another powerful, decisive personality. One of Sir Hugo’s first moves as chairman is to acquire, in 1925, the overseas business of Ardath Tobacco and with it the rights of the State Express brand.
British American Tobacco moves into the US market in 1927 with the acquisition of a small North Carolina company, Brown & Williamson.
By 1927 – the company’s 25th anniversary – it is recognised as one of the UK’s leading companies, with 120 subsidiaries and more than 75,000 employees worldwide. It has gained a toehold in the American market and has absorbed its only international rival, Ardath; British American Tobacco is well established in every continent of the globe and profits are running at more than £6 million annually.
A decade of consolidation With tough trading conditions created by the Wall Street Crash in 1929, territorial expansion slows during the 1930s.
Despite the economic downturn, British American Tobacco companies have factories in most countries without government monopolies by 1932. That same year, company depots develop independent distribution networks, which become fully-fledged subsidiaries.Leaf-growing and manufacturing operations are established in India, China, Brazil and Nigeria and Haus Bergmann is acquired in Germany.
First war, then decolonisation, creates turbulent times for British American Tobacco from the 1930s to the 1960s.After the upheaval of the Second World War and the loss of its Chinese operations, the company goes on to lose several end markets. But worldwide sales continue to grow.
Second World War 1939—1945 The impact of the Second World War on British American Tobacco is no less profound than that of the First World War. European operations are severely disrupted. In the Far East, the company loses contact with companies occupied by the Japanese. In China, where the company’s cigarette sales exceed 55 billion in 1937, the Japanese invasion brings British American Tobacco sales to a halt for more than four years.
By 1942, profits that had remained static at £5.5 million right through the depression were down to £3 million. They stayed at that level until the war ended.
The post-war world British American Tobacco faces difficult trading conditions around the world with inflation, the high price of leaf and the need to replace assets lost in the war all depressing profits.
By 1952, the year of British American Tobacco’s 50th anniversary, the environment in which the company operates begins to change. The turmoil created by war ultimately results in the loss of several end markets, including Egypt, Indonesia and China. But even with political instability in some regions, the company continues to succeed.
New leadership
With new Chairman Duncan Oppenheim, 1953 signals a fresh start for the company. Oppenheim’s urbane manner and keen legal intelligence provide a beneficial steadiness during the next 13 years.
Between 1953 and 1955, British American Tobacco ranks third among British, French and German companies, measured by company profits. Global sales exceed 280 billion in 1960 with the company reporting record trading profits of more than £58 million.
In 1956, British American Tobacco obtains the overseas business of Benson & Hedges. With State Express, Benson & Hedges becomes one of the cornerstones of the Group’s predominance in the international brand market.
Diversification
In the early 1960s, British American Tobacco begins to diversify into paper and pulp, cosmetics and the food industry. Stakes in Wiggins Teape and Mardon Packaging are among the company’s initial moves. In 1964, acquisitions include the UK’s Tonibell ice cream company and the Lenthéric fragrance house. Brown & Williamson and British American Tobacco companies in South Africa and Australia also begin to invest in the food industry.
In 1966, British American Tobacco acquires cigar manufacturer Henri Wintermans and company profits exceed £100m for the first time. It also gains a new Chairman, Denzil Clarke, who accelerates the pace of acquisition.
By 1970, British American Tobacco has operations in 50 countries. Diversification with the creation of BAT Industries in the late 1970s and the expansion into financial services in the 1980s gives way by 1989 to a re-focus on the tobacco business.
Acquisition
By 1970, under new Chairman Richard Dobson, British American Tobacco companies are manufacturing in 140 factories across 50 countries. Two years later, with the revocation of its 1902 agreement with Imperial, it gains exclusive ownership of its original brands, including State Express, in the UK and Western Europe.
In the company’s quest for another significant business, British American Tobacco finally settles on retailing where acquisition in the seventies includes Argos in the UK and Saks Fifth Avenue in the United States.
In 1976, the Group undergoes radical reorganisation. With a new Chairman, Peter Macadam, operations are coordinated under a new holding company, B.A.T Industries. Within two years, Industries is the UK’s third largest company and the largest tobacco manufacturer in the free world with annual sales of 500 billion cigarettes.
As the company celebrates its 75th anniversary in 1977, Macadam comments: “We have survived two world wars, the loss of our China business, [and] dispossession in numerous places elsewhere…and we have come through stronger and, I believe, better poised today than we have ever been.”
Meanwhile, Brown & Williamson opens its new US$150 million factory in Macon, Georgia. By the end of the decade, British American Tobacco exports the first batch of cigarettes to China since the nationalisation of its operations there 30 years before.
By the end of the decade, with its acquisition of Lorillard’s international business, the Group acquires several more key brands, including Kent.
Re-focus
By 1981, trading profits from the tobacco operations have tripled over the previous decade to more than £463 million as production capacity steadily increases.
With the acquisition of Eagle Star in 1984, Allied Dunbar the following year, and the Farmers Group in 1988, BAT Industries is by 1989 the largest UK-based insurance group. The same year, with a 24 per cent pre-tax profit increase to more than £2 billion and confronted by a hostile takeover bid, BAT Industries decides to re-focus exclusively on tobacco and financial services and dispose of almost everything else.
New opportunities
In the 1990s, economic liberalisation and the break-up of state monopolies open up new trading opportunities in Central and Eastern Europe and the Far East. British American Tobacco acquires Hungary’s Pecsi Dohanygyar in 1992. Acquisitions and joint ventures follow rapidly in Ukraine, Uzbekistan, the Czech Republic, Russia, Romania and Poland.
Another significant acquisition is that of the American Tobacco Company in 1994, giving British American Tobacco ownership of the Lucky Strike and Pall Mall brands.
Returning to its roots
In 1998, BAT Industries divests its financial services businesses. That same year the company acquires Cigarrera La Moderna, the leading cigarette company in Mexico.
In 1998, British American Tobacco p.l.c. becomes a separately quoted company on the London Stock Exchange, with Martin Broughton as its chairman. In 1999, British American Tobacco, the second largest tobacco company, announces a global merger with Rothmans International, the fourth largest. With the merger, British American Tobacco adds to its portfolio several major brands, including Dunhill.
Into the new millennium
The merger with Rothmans is followed by a major change to the Group’s interests in the Canadian market, now the largest generator of profit for the Group. During 2000, Rothmans' Canadian interests are sold, while the outstanding shares in Imasco, an associate of British American Tobacco, are purchased and its non-tobacco interests are sold. Now a wholly-owned subsidiary focused solely on tobacco, the Canadian operation is known as Imperial Tobacco Canada.
In 2001, the Group announces a series of new investments in countries such as Turkey, Egypt, Vietnam, South Korea and Nigeria.
British American Tobacco celebrates its centenary in 2002. It reaffirms its faith in its people, its products and the tobacco industry as a whole with new investments in Nigeria, South Korea and Turkey.
That same year, it becomes the first tobacco company to publish a Social Report.
The following year British American Tobacco gains control of Peru’s Tabacalera Nacional and wins bids for Italy’s former state tobacco monopoly, ETI, and Serbia’s Duvanska Industrija Vranje. It also announces proposals to combine the US business of Brown & Williamson, its US subsidiary, with RJ Reynolds Tobacco Company.
In November 2003 Martin Broughton discloses that he plans to retire from British American Tobacco at the end of June 2004 after 10 years leading the Group as Chief Executive and, for the last five, as Chairman.
Paul Adams takes over as Chief Executive of the Group in July 2004, with Jan du Plessis as Non-Executive Chairman.
In 2004, the US business of Brown & Williamson and RJ Reynolds Tobacco Company are combined and Reynolds American is formed – a stronger, more sustainable business in which British American Tobacco has a 42% share.
In 2005, British American Tobacco test-markets Swedish-style snus in Sweden and South Africa, giving smokers the chance to enjoy a less harmful form of tobacco, without lighting up.
Our consumers – adult smokers – drive everything we do. Our goal is to satisfy consumers’ demands better and more profitably than our competitors. We invest effort and care in understanding consumers’ preferences, and we know that just as adults make informed choices about smoking, adult smokers make informed choices about brands.
Our brand strategy differentiates us from our competitors and underpins our approach to product development. We continue to build a focused, segmented and differentiated brand portfolio and allocate resources to a full range of brands deployed in the key industry areas that offer the most robust source of volume and profit growth. These are the international, premium, lights and Adult Smokers Under the age of 30 (ASU30) segments.
We continue to invest in our four global drive brands - Kent, Dunhill, Lucky Strike and Pall Mall - which have grown combined volumes by more than 50 per cent since 1999. Vogue, Viceroy, Rothmans, Kool, Benson & Hedges, State Express 555, Peter Stuyvesant, and John Player Gold Leaf are also part of our international brand portfolio, playing a key strategic role in the different regions where we do business.
In May 2005 our companies in South Africa and Sweden launched, under two of our leading brands, year-long trials of Swedish-style snus, a form of smokeless tobacco that several health experts have judged much less harmful than cigarettes.
Official site: http://www.bat.com/
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