British American Tobacco

James Buchanan Duke, founder of American Tobacco Co., became chairman of the joint venture

The company was formed in 1902, when the United Kingdom's Imperial Tobacco Company and the United States' American Tobacco Company agreed to form a joint venture, the "British-American Tobacco Company Ltd."[6] 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 company chairman and business was begun 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.[6]

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.[7] Under the management of James Augustus Thomas from Lawsonville, in North Carolina's Rockingham County, by 1919 the Shanghai factory was producing more than 243 million cigarettes per week.[8] 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.[9]

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.[6]

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 1949 the company was ejected from China following the foundation of the People's Republic.[7]

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.[10]

In 1999 it merged with Rothmans International,[11] 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 in 2003 after an "exceptional request" from the British government.[12]

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.[13]

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.[14]

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.[15]

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.[16]

Then in 2008 BAT acquired Turkey's state-owned cigarette maker Tekel.[17]

In July 2008, BAT acquired the cigarette and snus operations of the Scandinavian Tobacco Group.[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 2015 BAT acquired the Croatian tobacco company TDR d.o.o. Brands and Factory in Kanfanar.[22]

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.[23] In January 2017, Reynolds agreed to an increased $49.4 billion deal.[24] The deal was completed in July 2017.[25]

In April 2017, the company announced the acquisition of a number of Bulgarian cigarette brands from Bulgartabac for more than €100 million.[26]

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. 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 (Vietnam), Belmont (Colombia, Chile, Nicaragua and Venezuela), Jockey Club (Argentina), Stradbroke (Australia), Hollywood, Derby, Free, Minister and Plaza (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), Xon, Astra and Karvon (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 manufacture 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.[28]

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.

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. It purchased the United Kingdom retail chain Argos in 1979. The company sold Kohl's grocery stores 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, Dayton Hudson Corporation (now Target Corporation) purchased Marshall Field's, Dillard's purchased Ivey's (another Marshall Field's division), Investcorp S.A. purchased Saks Fifth Avenue, 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), Allied Dunbar (1985) and the Farmers Group, Inc. (1988).[29] ArounHistory of the company/bank and archive description for Eagle Star Holdings Plcd 1996 British American Tobacco merged its financial operations into a single operating unit, British American Financial Services (BAFS). This division merged with Zurich Insurance Company in 1998 to form the Zurich Financial Services Group.[30]

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).[36]

In 2005 a European Union (EU) directive was brought into force which required national governments to legislate to prevent tobacco sponsorship.[37]

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.[38]

In 2019 McLaren signed a multi-year deal with British American Tobacco. McLaren's announcement of a "global partnership" with BAT brings the company back into F1 for the first time since Honda succeeded BAR.[39] In late 2019 BAT and McLaren announced the signing of an enhanced partnership deal that saw BAT become a Principal Partner of McLaren for the 2020 Formula 1 season.[40]

As far back as 1958, BAT had information that cigarettes cause cancer. Three senior BAT scientists – H.R. Bentley, D.G.I. Felton, and W.W. Reid – travelled to the United States that year and talked to dozens of experts inside and outside of the tobacco industry.[41] According to industry documents, all but one of those consulted believed a connection between cigarettes and cancer had been proved.[42]

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.[43] 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".[43]

The Nigerian federal government filed a lawsuit against BAT and two other tobacco companies in 2007. Nigeria was 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. It is 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.[44] The government withdrew its lawsuit in February 2008.[45]

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'.[46] In many of these undeveloped countries, the awareness of health risks from smoking is very low or nonexistent.[47]

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.[48]

British American Tobacco was declared the winner of the 2008 Roger Award, the award for the worst transnational corporation operating in New Zealand.[49]

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.[50]

The three largest Canadian tobacco companies, Imperial Tobacco Canada (a division of British American Tobacco), JTI-Macdonald Corp and Rothmans Benson & Hedges, were 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 to sue tobacco companies to recover healthcare costs caused by smoking.[51]

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.[52][53]

In 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.[54]

In November 2014, Her Majesty's Revenue and Customs (HMRC) fined BAT £650,000 after it determined that the company glutted the Belgian market with tobacco products with the likelihood these products would illegally find themselves back into the UK, 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".[55]

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.[56]

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.[57] 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.[57]

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.[58][59]

In April 2015, medical experts and anti-tobacco campaigners accused Philip Barton, the British High Commissioner to Pakistan, of lobbying for BAT interests. The group released photos showing Barton attending a meeting on 13 March in Islamabad, where BAT executives attempted to convince the Pakistani Finance and Health Minister to veto plans requiring large health warnings on cigarette packets.[60] This activity was deemed contrary to Foreign and Commonwealth Office (FCO) policy. It followed an earlier incident when the British Ambassador to Panama was reprimanded for similar activity on BAT's behalf.[61]

In August 2017, former employee and whistleblower Paul Hopkins released internal documents to The Guardian, a British newspaper, claiming British American Tobacco actively made efforts to market and sell its products in unstable, deeply impoverished nations and conflict zones, including Somalia, South Sudan, Syria and Iraq. Leaked PowerPoint presentations from 2011 included details of strategies to continue selling black-market cigarettes "in black paper bags" in parts of Somalia controlled by the fundamentalist Islamic militant group Al-Shabaab, plans to develop "a consumer relevant brand portfolio" and "sustainable... volume growth" in South Sudan just two days before the nation gained independence, and the active marketing and growth of the Kent cigarette brand in Iraq and Syria, despite "volatile markets" in the middle of the Iraq War and Syrian Civil War, respectively.[62]