Our Strategy

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17 September 2024

CHAPTER 1 . OUR VISION

Our Strategy

Our purpose: Creating A Better Tomorrow™.

Our vision: Building a Smokeless World.

Our mission: Reducing the health impact of our business by encouraging adult smokers who would otherwise continue to smoke to switch to better Smokeless Products.

The World Health Organization (WHO) estimates that cigarette smoking causes over eight million deaths annually. Yet, more than one billion people continue to smoke.^[1]

Tobacco Harm Reduction (THR) is consistent with offering adult smokers who would otherwise continue to smoke, reduced-risk^*† tobacco and nicotine products.

Our business is now focused on facilitating the acceleration of THR globally. Our Smokeless Products are available in more than 80 markets, we have an ambition to achieve 50 million adult consumers^# of our Smokeless Products by 2030, and we want at least 50% of our revenue to come from Smokeless Products by 2035.^[2]

In short, our strategy is to Build a Smokeless World by advancing THR.

Kingsley Wheaton

Chief Strategy & Growth Officer

We believe that innovative Smokeless Products provide sustainable solutions to improve public health, while simultaneously meeting our business goals. Markets such as Poland (Heated Products, Vapour Products, and Oral Nicotine Pouches) and Sweden (Vapour Products, Oral Tobacco Products, and Oral Nicotine Pouches) have shown that Smokeless Products can deliver a commercially sustainable future.^[3]

Three strategic pillars (below) underpin our strategy for Building a Smokeless World. To drive success across these pillars, we have nine key initiatives that span the entire business.

By focusing our efforts and resources into these areas, we can continue to deliver long-term, sustainable growth, advance Tobacco Harm Reduction globally and create A Better Tomorrow™.

Our Strategic Pillars and Nine Underpinning Initiatives Strategy

Quality Growth

Inspiring Smokeless Product Innovations & Brands

A portfolio of Smokeless Products(Heated Products, Vapour Products, Oral Tobacco Products and Nicotine Pouches) which we aim to comprise of at least 50% of our global revenues

Managed Combustible Transition

Funding the transition while managing our commercial reliance on cigarettes to less than 50% of our global revenue by 2035

Beyond Nicotine Foundations

Prudently developing new sources of business through state-of-the-art science and technology

Sustainable Future

Tobacco Harm Reduction Acceptance

Communication and education with a broad range of stakeholders that nicotine is not carcinogenic and is not the primary cause of smoking-related diseases,^[4] and that using Smokeless Products has a lower risk profile than smoking

Shaping the Landscape

Creation of global regulatory frameworks that enable access for consumer relevant smokeless products to adult smokers while preventing underage access

Leading in Sustainability and Integrity

Building sustainability for our Company

Dynamic Business

Exciting, Winning Company

Creating an aspirational and engaged organisation, representative of the diverse nature of our global community

Operational Excellence

Allocating our resources in the most efficient manner to deliver a business with 50% revenue from Smokeless Products

Capital Effectiveness

Delivery of the global commercial plan

Footnotes

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

† Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance.

# The number of consumers of Smokeless Products is defined as the estimated number of Legal Age (minimum 18 years) consumers of the Group’s Smokeless products - which does not necessarily mean these consumers are solus consumers of these products. In markets where regular consumer tracking is in place, this estimate is obtained from adult consumer tracking studies conducted by third parties (including Kantar). In markets where regular consumer tracking is not in place, the number of consumers of Smokeless Products is derived from volume sales of consumables and devices in such markets, using consumption patterns obtained from other similar markets with adult consumer tracking (utilising studies conducted by third parties, including Kantar).

References

[1] World Health Organization, WHO report on the global tobacco epidemic 2021: addressing new and emerging products. 2021. Available at: https://www.paho.org/en/node/82149 (Accessed: 22 July 2024)

[2] Combined Annual and Sustainability Report, Building a Smokeless World. 2023, BAT. Available at: https://www.bat.com/content/dam/batcom/global/main-nav/investors-and-reporting/reporting/combined-annual-and-esg-report/BAT_Annual_Report_Form_20-F_2023.pdf

[3] Wheaton, K., A Purposeful and Profitable Pathway to A Better Tomorrow. BAT Investor Presentation, Barclays Global Consumer Staples Conference - 5 September, 2023. Available at: https://www.bat.com/content/dam/batcom/global/main-nav/investors-and-reporting/investor-presentations/Presentation-slides-40-mb.pdf

[4] U.S. Food & Drug Administration, Nicotine is Why Tobacco Products are Addictive. Available at: https://www.fda.gov/tobacco-products/healtheffects-tobacco-use/nicotine-why-tobacco-products-are-addictive#:~:text=2-,What%20Makes%20Tobacco%20Use%20Harmful%3F,in%20some%20e%2Dcigarette%20aerosols. (Accessed: 1 August 2024).