In this exclusive interview for Novinite.com with Jorge Araya, SEE Area Director of British American Tobacco (BAT), we delve into BAT's ambitious mission to built A Better Tomorrow™. As the company navigates a transformative era marked by rapid technological advancements and shifting adult consumer preferences, BAT is dedicated to reducing the health impact of its business. This involves a strong focus on developing scientifically validated, reduced-risk alternatives to smoking, underpinned by substantial investments in science, research and innovation. BAT’s approach emphasizes collaboration with regulators and public health organizations to ensure that adult consumers have access to less risky, well-informed choices. This interview offers an in-depth look at how BAT is steering its transformation and the strategic importance of its efforts in Bulgaria and beyond.

What is the driver behind BAT’s purpose to deliver A Better Tomorrow™?

We are going through a period marked by continuous change and transformation, and the company`s journey towards A Better Tomorrow™ is a major process and a very exciting time to experience. Innovation and new technologies are transforming all industries, products, and people's mindset and for us this means reducing the health impact of our business and developing a new category of reduced risk* products which are scientifically substantiated.

Science is a key in our journey for tobacco harm reduction and we invest considerably in research and innovation. Across the current reduced-risk* product categories – vapor, heated products, and oral nicotine pouches – our focus has to be on producing even more robust and accessible science that illustrates the benefits of switching to alternative products rather than smoking. As an industry, we need to contribute here, and we hope that regulators and the wider public health community will join the debate. We need greater collaboration between the industry, governments, and intergovernmental organizations to accelerate the tobacco harm reduction approach, so that consumers are able to make informed decisions about their choices, public health needs to accurately communicate risk, while the industry should be able to responsibly communicate the benefits of switching via appropriate marketing freedoms.

Do you see your organization as a multi-category enterprise of the future?

A decade ago, BAT committed to this transformational journey, which started in 2013 with the launch of our first vapor product. It’s a journey of huge investments in science, innovation and technology, but most of all an investment in a vision and our people, who've played pivotal roles in this remarkable transformation.

For this entire period, we’ve been investing in our transformation, reflected in the multi-category portfolio of products that we offer today, with reduced risk* alternatives to smoking at its core. Close to 350 million pounds are allocated annually in research and science and the 1,600 scientists in BAT are working on the best reduced risk* options for smokers willing to make the change. Of course, ultimately, it is the consumers that will decide which products they use and moving from insights to innovation is, therefore, key for us at BAT, to guide us in the considerable resources invested into our R&D capabilities.

Also, to accelerate our transformation journey, at the end of 2023 we redefined our strategy for ‘Building a Smokeless World’, meaning that we will deploy our global multi-category portfolio to actively encourage smokers to ‘Switch to Better’ nicotine products. This commitment is supported by our new ambition to become a predominantly smokeless business, with 50% of our revenue from non-combustibles by 2035.

Considering that, as well as the fact that more and more BAT organizations on the different markets are transforming into companies with a multi-category portfolio, such as BAT in Bulgaria, yes, I do see our organization as a multi-category enterprise of the future. In this regard, I do believe that the science and innovation will lead our future in the industry.

How does Bulgaria in particular contribute to BAT's global strategy?

Comprising 13 diverse and dynamic countries, including Bulgaria, our South Eastern Europe Area is a wonderful mix of strong businesses, various cultural backgrounds and rich historical roots that inspire all of us in our journey towards A Better Tomorrow™. In Bulgaria the company recently launched a new innovative category – nicotine pouches under popular global BAT brand. With this BAT Bulgaria not only keeps leadership in traditional segment, but also offers consumers an innovative multicategory portfolio – besides the latest product category of nicotine pouches, the company offers to the adult Bulgarian consumers heating products with and without tobacco, designed to be used with the heating device glo, and vapour products, all under popular global brands of BAT. By leading the multi-category transformation in less than 2 years, BAT in Bulgaria makes a key milestone in its development and the importance of the market for SEE Area and the Group’s strategy. Bulgaria is as a lead market for BAT in the growth and transformation of the business which is enabled by the great people that we have in BAT Bulgaria supported by a moderate and predictable regulatory environment.

What are some of the key challenges you faced in the company’s transformation and how did you manage to overcome them?

We are going through a period marked by continuous change and transformation, which requires agility, insights and anticipation. It is a major challenge for any business, certainly, but also on an individual level. At the same time, it has become an opportunity for growth and learning, through the continuous adaptation of the organizational mindset to an environment that is rapidly evolving. Therefore, businesses and companies need to be far more prepared for volatility, more resilient. Talking with consumers and getting insights, transforming organizations into learning organizations, will make a business more resilient. We need very strong consumers’ insights capability, so we are able to predict the market, understand what’s coming and be ahead of the game with the consumers’ interests. And also the supply chain needs to be resilient, the commercial capabilities and financial strength need to be strong, to be prepared for volatility.

The economic cycles are much shorter, putting a lot of constraint in companies’ capacity to operate. BAT is a very resilient business, but gone are the days when you could predict the future and we need to develop a massive muscle as an organization and be ready for any scenario.

Stability and predictability of the economic environment and the fiscal framework is an ongoing challenge. It is important for all actors involved to understand that a stable economic environment and balanced and predictable fiscal policies will generate significant volumes of global investments done by large multinationals like BAT in SEE Area markets’ industry and economy, which have the chance to thus strengthen their economic potential in the region and become stronger and more competitive in the international markets.

Are we going to see more NCs products by BAT, and on Bulgarian market?

I think that all BAT new products are important and each has a key role to play in different categories, for the different adult consumers’ choices.

In 2023, New Categories delivered continued volume-led revenue growth and increased profitability, driven by vapour and nicotine pouches products. As a result, our New Categories portfolio has turned profitable two years ahead of our original target. With only 10% of the world’s 1 billion smokers currently using New Category products, the long-term opportunity for growth as we deliver on our transformation is quite significant.

More importantly than revenues, is what these new category products stand for: A Better Tomorrow™, meaning concrete, science based nicotine products able to offer adult consumers safer options to consume nicotine and have a significant impact for the society overall. We may not have yet the perfect solutions or devices, but the robust science tells us they bring a huge difference from smoking. We highly invest in their development, research and the way we communicate and market them, with accountability and responsibility, and we hope more independent experts, scientists and regulators will understand and join our endeavor.

Also, as mentioned before, last 2 years were key for Bulgaria, as BAT managed to enter the market with its innovative products alternative to smoking in several different categories. What we see is that more and more Bulgarian adult consumers understand the different risk profile of these products and their potential for tobacco harm reduction. This is important for our global strategy for building A Better Tomorrow™, as we encourage those people who otherwise will continue to smoke to completely switch to smokeless alternatives that BAT offers. We are currently the only company in the industry to offer all available reduced risk* products in Bulgaria and will continue to develop our multi-category portfolio in order to meet adult consumers’ needs.

*Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.

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Jorge Araya,

SEE Area Director of BAT

Jorge began his career with BAT in Chile in 1995 and over the last 25 years has held a number of progressive senior leadership roles at both the end-market and regional levels within the AmSSA region, including Head of Brands Mexico, Marketing Director Chile, Marketing Director Brazil and Head of Marketing Americas region. Previous to moving to Romania, Jorge was Executive Vice President, Marketing, for Reynolds, being responsible for all U.S. marketing functions, including consumer, trade and digital marketing.

Since April 1st 2023, he is South Eastern Europe Area Director and coordinates from Bucharest, Romania the BAT’s business in 13 countries included in this Area: Romania, Italy, Turkey, Bulgaria, Ukraine, Serbia, Albania, Macedonia, Bosnia-Herzegovina, Montenegro, Slovenia, Croatia, and Kosovo.

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