British American Tobacco : Presentation script (0.2 mb)

BofA Global Research ESG Consumer & Retail

Conference 2021

Presentation script

Presenters: David O'Reilly and Jennie Galbraith

DAVID O'REILLY

Slide 4

• Hello everyone …. I am David O'Reilly - Director of Scientific Research at BAT
• • and I am here with Jennie Galbraith… our Head of ESG.
• We are both delighted to be here to share with you…
• • How BAT is delivering and why we are confident and committed to our unique multi-category approach,
  • To showcase the strength and depth of BAT's Science, R&D and ESG capabilities, which are
  • • playing a key role in accelerating our transformation,
    • and are central to 'Building a Better Tomorrow' for all our stakeholders.

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Slide 5

• Central to our mission to build A Better Tomorrow is Our Purpose: 'to reduce the health impact of our business'
• We want to encourage smokers who would otherwise continue to smoke, to switch completely to reduced risk alternatives
• Given the health impact of cigarettes, it is our biggest ESG responsibility and greatest contribution that we can make to society, andit will drive the sustainable growth of our business.
• So, as we win, society wins.
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Slide 6

• Delivering on our core purpose will transform BAT into a
• • high growth,

• • multi-categoryConsumer Products company,
  • with a reduced impact on public health.
• We have and continue to invest in the rapid growth of our New Category business and have stretching targets…
• • of 50m consumers of our non-combustible products by 2030, up from 13.5m in 2020
  • and New Category revenue of £5bn by 2025, up from £1.4bn in 2020
• This is delivering and our pace of change accelerated in the second half of 2020:
• • We doubled the growth of our consumer numbers, and
  • Had around 50% volume growth in each of the New Categories
• So, let me now take you through the crucial role that Science is playing in this transformation

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Slide 7

• The harm caused by smoking is well recognised, and is why Tobacco Harm Reduction is critical
• However, it is critical to understand where the harm associated with smoking actually comes from
• The evidence shows that most comes from inhaling the products of combustion, and not nicotine
• So, for those consumers who choose not to quit, nicotine delivered without combustion can significantly reduce the health outcomes
• This has been recognised by public health bodies, who support the role of reduced risk alternatives and consumer choice.

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Slide 8

• Tobacco Harm Reduction's importance has been building since the US National Academy of Sciences' Institute of Medicine published its seminal report 'Clearing the Smoke' in 2001
• It laid out a weight of evidence approach to scientifically assess the risk profile of New Products and this is still the bedrock today of tobacco harm reduction science
• • Importantly it concluded that: the closer the risksand exposuresfrom a reduced risk product are to cessation, the more confident a regulator can be in the public health benefit

• This has been central to the FDA's approach and also our approach at BAT

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Slide 9

• Our approach is built around three key pillars that form the backbone of our work in science and our engagement with regulators such as the FDA and other external stakeholders

1. The first is that smokers are most likely to switch when they find a product that satisfies their specific preferences and motivations.
2. The second is the need for world class science.
3. • Both to ensure we are constantly innovating and delivering what consumers want,
   • but also generating robust scientific evidence to demonstrate these products pose less risk to health compared to cigarettes
4. This world-class science can also be used to inform and evolve the standards and regulations that govern this space. So that:
5. • Consumers can have confidence in the products they buy and brands they trust
   • The regulations give consumers access to the best new products
   • And, as an industry, we hold ourselves and others to account to ensure high standards

• And we must do this the right way…and this is why ESG is at the centre of everything we do.
• Let me now take you through these key enablers in turn…

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Slide 10

• We have a unique market-leadingconsumer-centric,multi-category model.
• Led by the consumer, this model leverages our well-established
• • Cross-categoryconsumer insights,
  • deep understanding of product satisfaction,
  • detailed market opportunity mapping
  • And digital consumer understanding…
  • supported by data analytics.
• We believe that this gives us a unique competitive advantage

• … One that would take many years to replicate.
• All of this is underpinned by a strong scientific foundation,
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Slide 11

• It's clear that our multi-category opportunity is huge!
• Both today…
• • by increasing our 17% share of today's 80m new category consumers across THP, vapour and Modern oral
• With an even more exciting opportunity tomorrow …
• • We forecast significant growth in consumer numbers and a near doubling in industry revenue over the next five years.
• It is important to remember that with 1.1bn smokers globally,
• • 2025 is just a milestone
  • We have a significant runway of growth for many years to come.

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Slide 12

• We have already invested in building three powerful global brands across the three categories:
• • Vuse
  • Glo; and
  • Velo
• Each of these brands on its own is important in its own right, and as the only truly multi-category company, we are uniquely positioned, to address the preferences of smokers globally.
• This gives us a clear advantage for consumer acquisition and growth.
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Slide 13

• We have a long history in Science and R&D
• And have been a leader in the area of Tobacco Harm reduction for many years
• We have and continue to invest in world class science and R&D, with our R&D Centres in the UK and US

• • We have recently completed a 12 month clinical study of our tobacco heating product, glo, with very encouraging results.
• In addition we have BTomorrow Ventures,
• a fund that has been set up to help explore and develop new science, technologies and capabilities, in nicotine and beyond.
• To date it has made 12 investments in businesses across the globe to further enhance our Science and R&D partner ecosystem.

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Slide 14

• As highlighted earlier, generating robust scientific evidence about our products is essential to support their role in Tobacco Harm Reduction
• To do this we have a clear Multi-disciplinary Risk Assessment Framework aligned with the US FDA
• Most new category products remain relatively new to the market. This means that they lack the epidemiological data required to characterise the harm reduction impact over decades of use.
• Instead, it is necessary to take a weight of evidence approach based on emissions, exposure and risk levels for each product.
• It is important to build the evidence in each of these domains, using a range of scientific methods.
• And because we have been generating these data for many years, we have now progressed as far as population studies
• The importance of these data is why we publish transparently all of our studies on our science website: 'batscience.com', as we want to ensure anyone can access this important information.

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Slide 15

• So, based on the substantial evidence we have been generating over many years, along with evidence from others, you can see that all our new category products cluster at the low toxicant end of the continuum
• Because these products do not rely on combustion, and with all the evidence we and others have generated, this means that they have the potential to be significantly less harmful to health
• We have made great progress, but as ever in the field of science, we must continue to conduct cutting edge scientific research to help Build A Better Tomorrow.

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