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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  British American Tobacco Plc    BATS   GB0002875804

BRITISH AMERICAN TOBACCO PLC

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British American Tobacco : Our CMO's keynote speech at GTNF 2020

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09/23/2020 | 06:35am EDT

Speaking at the first virtual GTNF today, Kingsley stressed the need for a United Nations-style 'whole of society' approach to policy development and emphasised the benefits that this more stakeholder-inclusive, tobacco-harm-reduction approach could deliver.

He set out a five-point framework to accelerate progress towards more effective tobacco-harm-reduction policies and outlined the progress BAT is making in our transformational journey to build A Better Tomorrow by reducing the health impact of our business.

You can read a transcript of his speech below.

KINGSLEY WHEATON: Firstly, I'd like to thank our hosts for organising the first virtual GTNF.

This is a really important event, bringing together key stakeholders from across our industry and beyond. In particular, we are honoured to have the involvement of the FDA Center for Tobacco Products, along with some of the world's foremost tobacco control scientists

GTNF is an opportunity for us to discuss, collaborate and take stock of our progress.

Last time I spoke in 2017, I talked about our desire to make a difference and galvanise broad stakeholder support to address the issue of tobacco-related disease. A 'whole-of-society approach' as the United Nations calls it.

Since then much has changed. Yet sadly, some things, I would argue, not fast enough. I hope that when I next address this forum, I will be saluting everyone for the acceleration of progress.

Within BAT, we have a clear purpose. To build 'A Better Tomorrow'. By reducing the health impact of our business. TODAY and EVERY DAY.

People often ask me 'what does A Better Tomorrow' really mean? For me, and put simply, this means focusing on three things; on Innovation, Transformation Sustainability.

It means a step change in our product portfolio, underpinned by sound science and a deep understanding of consumers.

And that need is clear. Adult smokers are more likely to switch to products that have reduced-risk potential, if those product experiences are satisfying.

Understanding and responding to consumer needs is key. Our strategy, at BAT, puts the consumer right at the centre of our transformation. Earlier this year, we announced a bold aim to have 50 million consumers of non-combustible products by 2030.

And to that end, we are more than committed. To-date we have invested very substantially in a range of vibrant, new, non-combustible categories for adult consumers and a growing portfolio that underpins and enables A Better Tomorrow.

Our strategy, uniquely, I would argue, puts the consumer first. Our thought-leading multi-category approach recognises consumers are different and deserve abundant choice.

At BAT, we are transforming from a company that defines itself by the product that we sell to the consumer needs that we meet. It is a strategy that I know every employee at BAT is absolutely committed to.

Key to this transformation is innovation. Innovation, driven by science and deep consumer insights, fuels our constant pursuit of our next generation portfolio.
Why? Because, as I have said, no 'one-size fits all'. Innovation allows us to discover new ways to satisfy evolving consumer preferences, whilst making tobacco harm reduction a reality.

Our portfolio of non-combustible, potentially reduced-risk products currently comprises of three categories:

  • vapour products
  • tobacco heating products (THP)
  • and modern oral products (nicotine pouches and lozenges)

Within these categories our brands must be globally world-class - they act as a signpost, a promise to the consumer. A promise of delivering excellence in quality, choice, satisfaction and stewardship. As a consumer company first and foremost, we are very proud of our brands.

And our performance metrics support that pride.

Globally, in 2014 BAT's revenue journey in next generation products had barely begun. In 2019 non combustibles had reached10% of our revenues. We continue to accelerate our growth in volume and value share in all three categories.

Yet, I believe, the macro headlines can sometimes mask the very substantial progress we are making in key marketplaces. Let me offer some examples:

  • In the UK, just five short years after launching Vype, nearly a third of our revenue is from Vapour products
  • In the US, in the last 12 months Vuse has doubled its value share in Vapour, whilst Vuse Alto, our portfolio keystone, has quadrupled its value share over the same time
  • And in Canada, where Vuse sales account for over 55% of the total Vapour market and we recently celebrated the 1 million vapour consumer milestone
  • And in Japan, our flagship Tobacco Heated Product, glo, now accounts for nearly half of our business

And I believe our growth would have been even more dramatic, had more governments and policy makers supported these categories' development with proportionate, risk-based regulation.

Many significant markets remain in 'new categories' regulatory lock - imagine the increased pace of change were this not the case. That lack of support is an undoubted disappointment for all of us.

Our innovation, of course, is not just focused on our products, it's also focused on how we engage with our consumers. We have rapidly adopted new technologies and digital capabilities in our consumer marketing. Indeed, we recently launched a vapour subscription service in the US and in just three months, half of our entire US e-commerce revenue is accounted for by subscribers.

But it is not enough to develop and sell new products. Doing this in a sustainable and responsible way is fundamental to achieving A Better Tomorrow. A Better Tomorrow that creates multi-stakeholder value.

And here, let me be totally clear. Everything I say is in relation to adult users only. At BAT, we believe that tobacco and nicotine products are adult only categories and support all efforts to ensure this.

With all of this in mind, we recently announced a number of stretching targets that will accelerate our purpose to build 'A Better Tomorrow' and ensure best-in-class environmental, social and governance delivery.

These include: Increasing our consumers of non-combustible products to 50 million by 2030; achieving carbon neutrality by the same year and accelerating our previously set environmental targets to 2025.

I am proud that we already have nearly 12 million regular users of our non-combustible products - an increase of 2.7 million consumers in just 12 months. And we aim to accelerate our adult consumer conversion. I can tell you, first-hand, that BAT is on the move and building significant momentum.

And whilst consumers are a key indicator of how rapidly we can achieve A Better Tomorrow, science and innovation is its very foundation.

Over the last decade, we have built a team of the best scientific talent. Today, we have over 1,500 dedicated scientists and engineers, whilst our scientific papers are available to all on bat-science.com .

It is because we are so committed to transformation through collaborative science, education and information exchange, that it is crucial we share this world-class science in areas such as chemistry, toxicology, clinical trials and population modelling, with consumers, governments and regulators alike.

So now, if I may, turning to the central question in this debate - how to accelerate acceptance of tobacco harm reduction as a genuine public health policy - just as it is recognised within the FCTC and FDA?

To do that, we must engage in a whole-of-society debate about differentiated risk and consumer choice. It is not a debate about 'us versus them', but rather about evidence, education and, importantly, the science underpinning tobacco harm reduction. This is a complex societal issue. And we are absolutely committed to playing our part.

Despite this abundant complexity, we continue to push for a more progressive and consistent approach to regulatory policy. Regulations that are founded in science, not opinion. Evidence trumping ideology, the facts trumping beliefs.

As an industry we must build trust and value. It is neither about abundant speed, nor being reckless and destroying that very trust we seek. We must approach this challenge systematically and thoughtfully.

So, let's find a better, more progressive way. A way that allows ALL key stakeholders to have a seat at the tobacco harm reduction table.
There are 1.1 billion people who consume tobacco and nicotine products globally. To exclude the manufacturers from the conversation is simply, I would argue, cutting off one's nose to spite one's face.

In keeping with the 'whole-of-society' approach called for by the United Nations, where we see progressive public health policy enacted, we see the results.
The United Kingdom, the US FDA and Health Canada have set fine examples, with Public Health England publicly acknowledging the role that vaping products can play in reducing harm, estimating that these products are '95% less harmful than smoking'.

And just a couple of weeks ago, in response to the new independent report on toxicology, Prof John Britton, commented: '…e-cigarettes are substantially less harmful than smoking tobacco… for smokers who find it difficult to quit smoking, vaping is the obvious next best option.'
So, with this in mind, is it right then that certain groups, countries and states are trying to remove consumer choice and prohibit these types of products?

Or perhaps the greatest paradox of them all, the WHO which believes that the 'tobacco industry is not and cannot be a partner in effective tobacco control' advocating for the tobacco industry to be excluded from any, and all, dialogue with Government.

How can this approach, and Article 5.3 of the FCTC, realistically be implemented, if the largest cigarette manufacturer on earth is wholly owned by one of WHO's member states?

Some of the best product-related science can be found in our laboratories. How then can the very people who are generating this science, advocating for tobacco harm reduction and who critically want a regulatory system that is fit for purpose, not have a voice, let alone a seat at that table?

Given the evidence - scientific and commercial - can it be acceptable to adopt such an approach? No, it is not.

Is it right to allow flawed, unexamined science to have a prominent platform, but for us to be silenced? No, it is not.

Is it appropriate for adult access to these new potentially reduced risk products to be limited, or for them to be lumped in with combustible tobacco products? No, it is not.

Is it right that publicly elected politicians and their staff are told they apparently can't be trusted to hear all sides of a debate? No, it is not.

Is it right that we are probably the largest consumer products industry in the world without access to regulators, when those same governments are systematically collecting billions in excise receipts? No, it is not.

And is it sensible to have regulations that do not support harm reduction? Absolutely it is not.

For too long, evidence-based policy making has been ignored. Ideology has trumped sound science. And this must change.

I'm sure each of you has your own perspective on what needs to be done.

I believe however, we need a system that acknowledges the expertise and the ambitions of companies like BAT to deliver 'A Better Tomorrow'. One that is clear about the harm caused by smoking yet recognises, more holistically and consistently, where the real public health gains can be made by actively supporting consumer choice and the role of tobacco harm reduction.

There are five key dimensions I would argue need to be included in the framework to accelerate delivery of tobacco harm reduction:

I believe this five-point framework is critical. The freedom to innovate, the freedom to market, an evidence-based approach to policy formulation, all underpinned by science, with clear consumer communication interacting in a regulatory context where proportional regulation and excise is evident.

I believe we are at a crossroads. I believe we have a very real opportunity for the company I am so proud of, to make a step change that will benefit our stakeholders and enable consumers to choose the path of reduced risk, which they frequently tell us is so important to them.

Surely this is in everyone's interest? So, creating an environment that not only supports but accelerates change, should be a priority for all. More than that, it must be a top priority.

At BAT we have a vision. A vision of the BAT of 100 or even perhaps 50 years from now. How does that company look? What does it feel like? What will be its history?

I sincerely believe, in all likelihood, in a matter of decades the role of combustible products in the revenue of our business will have been diminished substantially. I believe we will have progressively replaced those revenues with alternative, non-combustible product offers.

I believe people will have forgotten, by and large, what the 'T' in BAT stands for - only some learned, long-standing company lags will have some recollection.

And I believe BAT will stand proudly amongst the world's foremost consumer products businesses. That is a vison that is shared by our people worldwide at BAT. That vision is what 'A Better Tomorrow' is about - it is, more than anything, our purpose.

It is about TRANSFORMATION, it is about INNOVATION, and it is about SUSTAINABILITY. And, it is about PRIDE. A proud company, transforming and accelerating that transformation to create 'A Better Tomorrow'.

So, let us come together and work hard. Let us collaborate together. Let us approach this complex problem together. Together we are stronger and together we will succeed.

And although we have not been together today in person, members of the audience, may I thank you and wish you all well.

Disclaimer

British American Tobacco plc published this content on 23 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 September 2020 10:34:04 UTC


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