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British American Tobacco Plc () is the second largest cigarette company in the world. It is based in London and is a constituent of the FTSE 100 Index with a market capitalisation of over £20 billion as of June 2005.
History
Established in 1902, when the United Kingdom's Imperial Tobacco Company and the American Tobacco Company of the USA agreed to form a joint venture, the British-American Tobacco Company Ltd. 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 'Buck' Duke became its chairman. The British American Tobacco business thus began life in countries as diverse as Canada, China, Germany, South Africa and Australia, but not in the United Kingdom or USA.
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.
In 1976 the group companies were reorgansied under a new holding company, B.A.T Industries. In 1994 BAT acquired its former parent, American Tobacco Company (though reogranised after anti-trust proceedings). This brought the Lucky Strike and Pall Mall brands into BAT's portfolio.
In 1999 it acquired Rothmans International, which included a share in a factory in Myanmar. This made it the target of criticism from human rights groups. It sold its share of the factory on November 6, 2003 after a "exceptional request" from the British government.
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.
Other operations
BAT has diversified into various fields at different times in its history. It acquired Saks Fifth Avenue in 1973 and the United Kingdom retail chain Argos in 1979. In 1990 Saks Fifth Avenue was sold to Investcorp S.A. and Argos was demerged (Argos was acquired by now parent 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 (1988). Around 1996 British American Tobacco merged their financial operations into a single operating unit, British American Financial Services (BAFS). This division was sold and merged with Zurich Insurance Company in 1998 to form the Zurich Financial Services Group.
The success of Formula One motor racing has largely been built on tobacco sponsorship, including that of BAT. 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 Tyrell for the 1998 season before being renamed as British American Racing (BAR). BAT used the team to advertise major brands, particularly Lucky Strike and 555. With increasing restrictions being placed upon tobacco companies' opportunities to advertise in Formula One, BAT eventually sold the team to technology partner Honda. In mid-November 2004, BAR announced that Honda had purchased a 45% stake, followed by the remaining 55% in October 2005. The team will race as Honda Racing F1 Team from 2006, last year of the Lucky Strike sponsorship before leaving the sport.
Brands
International Brands include Dunhill, Kent, State Express 555, Pall Mall, Rothmans, Peter Stuyvesant, Benson & Hedges, Winfield, John Player, Lucky Strike, Kool, and Viceroy. However, 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, Jockey Club (Argentina), Stradbroke (Australia), du Maurier (Canada), North State (Finland), HB (Germany), Sopianae (Hungary), Wills (India), Ardath (Indonesia), Carrolls (Ireland), Boots (Mexico) Jan III Sobieski (Poland), Yava Gold (Russia), Courtleigh (South Africa), Parisienne (Switzerland), GPC (United States) and Xon (Uzbekistan), as well as BAT snus.
On June 11, 2006, Reynolds Tobacco announced that it would be manufacturing 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. *
Advertising and Promotion
BAT has been a stout defender of the principle that if a product is legally on sale in a market then it should also be legal to advertise that product's brands. Increasing restrictions on tobacco advertising around the world have limited the company's ability to promote their brands in recent times, especially in their traditional developed world markets.
BAT has found many imaginative ways over the years to keep its brands in the public eye. As recently as 1996 they secured an arrangement to sponsor the Cricket World Cup which was branded the "Wills World Cup" and thereby achieved a high level of brand recognition for the Wills cigarette brand in India where young cricket fans were a key target market.
BAT has also used the glamour of motor sport to promote its brands, most notably in its setting up of British American Racing. Although Formula 1 is an exceptionally expensive sport, for BAT the high cost of running an F1 team is justified as a promotional expense because other brand promotion ( for Lucky Strike) options are not available in many markets. However in 2005 a European Union (EU) directive was brought into force which required national governments to legislate to prevent tobacco sponsorship. The livery of cars competing at circuits outside of EU jurisdiction can continue (in some cases) to promote tobacco brands but these opportunities are declining as anti-tobacco legislation begins to bite. BAT announced in September 2005 that it would sell its 55% shareholding in BAR to Honda. BAT will continue to support BAR in the 2006 F1 season (and brand the cars where it can) but it is likely that the remaining links will be broken shortly thereafter.
External links
- British American Tobacco
- Yahoo! - British American Tobacco plc Company Profile
- BAT 'dragged out' of Burma; The Guardian; November 7, 2003
- George Monbiot, The Guardian, 23 August 2005, "Smoke and mirrors"
Tobacco companies of the United Kingdom | Companies listed on the London Stock Exchange | Companies based in London
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"British American Tobacco"