British American Tobacco plc is a British multinational tobacco company headquartered
in London, United Kingdom. It is one of the world’s five largest tobacco companies.
BAT has a market-leading position in over 50 countries and operations in around 180
countries. 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. It has a secondary listing on the
Johannesburg Stock Exchange.
History 1902 to 2000
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. 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 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. 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. 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. 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.
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.
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. This brought the Lucky Strike
and Pall Mall brands into BAT's portfolio. In 1999 it merged with Rothmans International,
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. 2000 to present
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 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. In 2003, BAT acquired Ente Tabacchi Italiani
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.
In August 2003, BAT acquired a 67.8% holding in the Serbian tobacco company Duvanska Industrija
Vranje, 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.
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.
BAT acquired 60% of Indonesia's Bentoel Group in 2009 before increasing its stake to 100%
the following year. In May 2011 BAT acquired the Colombian company
Productora Tabacalera de Tabacos S.A.. Operations
Current
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, Belmont, Jockey
Club, Stradbroke, Hollywood, du Maurier, Prince, North State, HB, Sopianae, Wills, Ardath,
Bentoel, and Country, Carrolls, Carrolls Kings, Grand Parade, Black Allen, Sweet Afton, Major,
Boots, Alas, Gold Leaf, Jan III Sobieski, Yava Gold, Courtleigh, Benson & Hedges, Dunhill,
Kent, Pall Mall, Perilly's, Peter Stuyvesant, and Rothmans, Parisienne, Maltepe and Xon,
Craven A as well as BAT snus, Holiday, Freedom and Park Drive Royals, Embassy, 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.
The Bentoel Group products include Bentoel Biru, Bentoel Mild, Bentoel Sejati, Star Mild,
X Mild, 1 Indonesia Masyarakat Dahulukan Pencapaian Dahulukan, 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, Ivey's was sold to Dillard's,
Saks Fifth Avenue was sold to Investcorp S.A., and Argos was demerged.
The group was a major financial services company with the acquisitions of Eagle Star, Allied
Dunbar and the Farmers Group, Inc.. Around 1996 British American Tobacco merged their
financial operations into a single operating unit, British American Financial Services.
This division was merged with Zurich Insurance Company in 1998 to form the Zurich Financial
Services Group. B.A.T still owns the minority interest in Zurich.
Senior management Nicandro Durante became the chief executive
in March 2011. 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. BAT also sponsor the London Symphony Orchestra.
Motorsport
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. 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 directive was brought into force which
required national governments to legislate to prevent tobacco sponsorship. The livery
of cars competing at circuits outside of EU jurisdiction can continue 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. Controversies
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. 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'. In many of these undeveloped countries, the awareness of health risks from
smoking is very low or nonexistent. 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.
British American Tobacco was declared the winner of the 2008 Roger Award, the award
for the worst transnational corporation operating in New Zealand.
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.
Canadian class action lawsuit The three largest Canadian tobacco companies,
Imperial Tobacco Canada, 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 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.
References
External links Official website
Imperial Tobacco Canada
Yahoo! – British American Tobacco plc Company Profile
British American Tobacco plc historical stock chart
BAT 'dragged out' of Burma; The Guardian; 7 November 2003
George Monbiot, The Guardian, 23 August 2005, "Smoke and mirrors"
World Health Organisation: WHO Report on the Global Tobacco Epidemic, 2008