British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Deutsche Bank Conference June 2021
60 slides from British American Tobacco P.l.c's conference presentation, June 2021
Slide 1: Delivering Multi-Stakeholder Value through The Enterprise of the Future
Delivering Multi-Stakeholder Value through The Enterprise of the Future Deutsche Bank Conference June 2021
Slide 2: Important information
Important information The information contained in this presentation in relation to British American Tobacco p.l.c. (“BAT”) and its subsidiaries has been prepared solely for use at this presentation. The presentation is not directed to, or intended for distribution to or use by, any person or entity
Slide 3: Important information
Important information Forward-looking Statements (continued) Additional information concerning these and other factors can be found in BAT’s filings with the U.S. Securities and Exchange Commission (“SEC”), including the Annual Report on Form 20-F and Current Reports on Form 6-K, which may be obtain
Slide 4: Transforming to Create Value for All Stakeholders
Transforming to Create Value for All Stakeholders Kingsley Wheaton | Chief Marketing Officer Dr David O’Reilly | Director of Scientific Research Jennie Galbraith | Head of ESG 4
Slide 5: Building A Better Tomorrow
Building A Better TomorrowTM Committed to Multi-Category – Building strong World-Class Building on transforming the greatest consumer-led science strong ESG and reducing potential to global brands substantiates foundations our health reduce harm with purpose our reduced risk to create shared impact
Slide 6: Committed to transforming and reducing our health impact
1 Committed to transforming and reducing our health impact
Slide 7: Committed to Building A Better Tomorrow
Committed to Building A Better TomorrowTM Our Purpose Our Commitment To provide adult To reduce the consumers with a wide health impact range of enjoyable and of our business less risky products To encourage smokers to switch completely to scientifically-substantiated reduced-risk alternatives* *Bas
Slide 8: Harm Reduction and ESG central to our Strategy
Harm Reduction and ESG central to our Strategy Creating value for all our stakeholders 50 million consumers £5bn New Carbon Eliminate unnecessary single- of non-combustible* Category neutral by use plastic & all plastic products by 2030 Revenue by 2025 2030** packaging recyclable^ by 2025** *Non-com
Slide 9: Delivering Our Purpose is Transforming BAT
Delivering Our Purpose is Transforming BAT From To Multi-category CPG Cigarettes Nicotine & Beyond* Declining Volume Growing Volume Growing Value & Value *Beyond refers to Wellbeing & Stimulation Beyond Nicotine. Target market for consumer acquisition is existing adult smokers/nicotine/beyond nicoti
Slide 10: A Strategy that Starts with the Consumer
A Strategy that Starts with the Consumer Consumer Consumer Digital Insights Multi-Category Moments Portfolio A Unique Consumer-Centric Multi-Category model Consumer Centricity Digitally Product Embedded Boundaries RGM* Product Satisfaction Index * Revenue Growth Management 10
Slide 11: Clear Ambitions for each New Category Brand
Clear Ambitions for each New Category Brand Vapour THP Modern Oral Global leader* Fastest growing Global leader** with a clear THP brand ** leveraging pathway to powered by our superior profitability innovation products * Value share basis. ** Volume share basis. 11 Vuse brand represents c. 80% of F
Slide 12: Confident in Delivering Shared Stakeholder & Shareholder Value
Confident in Delivering Shared Stakeholder & Shareholder Value High 50mn £5bn 3-5% Profit Single Non- New Figure EPS From New Combustible Categories Revenue Consumers** Categories growth* Revenue Growth* by 2030 by 2025^ Adjusted diluted by 2025 (post COVID) Growth and Transformation Towards A Bette
Slide 13: Multi-Category – the greatest potential to reduce harm and create value
2 Multi-Category – the greatest potential to reduce harm and create value
Slide 14: Strategic Rationale for Multi-Category Approach
Strategic Rationale for Multi-Category Approach Opportunity to Consumers reduce harm Market taste MULTI-CATEGORY Commercial profiles opportunity STRATEGY Resilience Regulation to regulation Maximises Ability to Switch Smokers, Reduce Harm and Create Value 14
Slide 15: A Large, Growing Multi-Category Opportunity
A Large, Growing Multi-Category Opportunity 2015 2020 2025* ~33mn ~79mn ~123mn Net Consumers** Net Consumers** Net Consumers** VAPOUR TRAD ORAL THP MODERN ORAL ~£4bn Industry revenue ~£16bn Industry revenue ~£29bn Industry revenue * 2025 estimate based on internal estimates. Industry Incidence Study
Slide 16: Our Multi-Category Strategy is Accelerating our Tobacco Consumer Acquisition
Our Multi-Category Strategy is Accelerating our Tobacco Consumer Acquisition +3.8m Non-Combustible* Consumers over last 4 Quarters +1.4m 14.9m Consumers of Non-Combustibles* +1.1m Q1 2021 +0.8m +0.6m +0.5m 50m Consumers of Non-Combustibles* by 2030 1Q20 2Q20 3Q20 4Q20 1Q21 Growth in Non-Combustible*
Slide 17: In Pioneer New Category Markets Progress is Accelerating
In Pioneer New Category Markets Progress is Accelerating c. 15% of our Developed Market* Revenue 63% 42% 28% 27% 13% Non-Combustible products revenue % Our Transformation is Well Underway Note: % Revenue by market FY2020 *OECD excluding Australia and Turkey where Non-Combustible products are unavail
Slide 18: Building strong consumer-led global brands with purpose
3 Building strong consumer-led global brands with purpose
Slide 19: Leveraging our Insights, Strengths & Capabilities to Encourage Smokers to Switch
Leveraging our Insights, Strengths & Capabilities to Encourage Smokers to Switch Satisfaction Multi-Category Portfolio 3 Key Consumer Motivations Reduced Risk* Science & R&D drive 75% of the decision to switch from Cigarettes Image & Identity Global Brands * Reduced Risk Products: Assuming a complet
Slide 20: Driving Strong Share Growth across all New Categories
Driving Strong Share Growth across all New Categories YTD vs. YTD vs. YTD vs. YTD Apr YTD Apr YTD Apr FY 20 FY 20 FY 20 29.8% +4.9pp 6.2% +0.8pp 16.9% +9.3pp 74.7% +28.5pp 1.7% +1.1pp 6.7% +1.8pp 19.1% +4.3pp 1.4% +1.0pp 79.5% +4.1pp Vype 43.2% +11.7pp 2.7% +1.8pp 54.9% +5.1pp 59.0% 1.5% +0.7pp +9.3
Slide 21: Building powerful Global Brands
Building powerful Global Brands Indexed Brand Power Scores in Top 5 Markets Indexed Brand Power Scores in Top 5 Markets Indexed Brand Power Scores in Top 5 Markets 108 118 113 100 100 100 Q1’20 Q1’21 Q1’20 Q1’21 Q1’20 Q1’21 Brand Power = + + + + 21 Source: New Categories Track, KANTAR Brand Equity M
Slide 22: Driving Significant Vuse Growth and Brand Power
Driving Significant Vuse Growth and Brand Power COMMUNI- PURPOSE INNOVATION CATION EXPERIENCE LOVE 22
Slide 23: First to World with THP Induction Heating
First to World with THP Induction Heating Improved Device Appeal Device Personalization (+50 options / combinations) Sensorial Customization (Base & Intense Boost modes) ½ time to first puff Our best THP product yet 23
Slide 24: Continued International Leadership and Strong US Momentum
Continued International Leadership and Strong US Momentum HYPER-LOCAL MARKETING • Miami Wall scape • Portland Online Advertising DELIVERY IN EVERY CONSUMER MOMENT • ‘On-Demand’ Education • Retail Transformation • 1:1 Engagement USA Brand Awareness at Parity with Market Leader* 24 * Source: Company d
Slide 25: New Category Growth Driven by Rapid Innovation
New Category Growth Driven by Rapid Innovation 2013 2021 2025/30 ? Global Brands Built in < 8 years Superior Products Continued innovation Retail Experience & Online New Categories Revenue + 43% 3-year CAGR * 25 * CAGR over 3 years ending FY20
Slide 26: We are exploring Beyond Nicotine: Leveraging Strengths in On The Go Wellbeing & Stimulation
We are exploring Beyond Nicotine: Leveraging Strengths in “On The Go Wellbeing & Stimulation” Clear portfolio expansion boundaries Beyond “On the Go Nicotine: Wellbeing & Stimulation” Reduced Health Impact Compared to Cigarettes New Nicotine Categories Leveraging Reclaiming High growth Delivery Plat
Slide 27: Building an Ecosystem Beyond Nicotine
Building an Ecosystem Beyond Nicotine Better Tomorrow Target areas: Ventures Health and Functional Science Sustainability Technology 12 investments Wellness products – e.g. closed to date Focus, Energize & Relax • R&D collaboration Vuse CBD Test • c. 20% associate • UK city pilot underway investment
Slide 28: Confident in Delivering Shared Stakeholder & Shareholder Value
Confident in Delivering Shared Stakeholder & Shareholder Value High 50mn £5bn 3-5% Profit Single Non- New Figure EPS From New Combustible Categories Revenue Consumers** Categories growth* Revenue Growth* by 2030 by 2025 Adjusted diluted by 2025 (post COVID) Growth and Transformation Towards A Better
Slide 29: World-Class Science substantiates our reduced risk portfolio
4 World-Class Science substantiates our reduced risk portfolio* *Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive
Slide 30: Most of the Harm from Tobacco is caused by Combustion Not Nicotine
Most of the Harm from Tobacco is caused by Combustion Not Nicotine It’s the other chemical compounds in tobacco, and in the smoke created by setting tobacco on fire, that directly and primarily cause the illness and death, not the nicotine. DR. SCOTT GOTTLIEB US FDA COMMISSIONER (JULY 2017) Nicotine
Slide 31: Understanding Nicotine+
Understanding Nicotine+ • Naturally present in tobacco plants • Extracted and purified to pharmaceutical grade • Widely studied in clinical trials • Scientific consensus recognises that nicotine is highly addictive but does not cause cancer1,2,3 “Its effect is to make “Current evidence does “There i
Slide 32: Tobacco Harm Reduction recognised in Policy and Regulation
Tobacco Harm Reduction recognised in Policy and Regulation in a number of countries “The closer the risks and Food and Drug exposures from the Administration Reduced Risk Products are to cessation …the more Public Health confident a regulator can Science is England informing Policy be in the chances
Slide 33: Evaluated Using a Multi-Disciplinary Risk Assessment Framework
Evaluated Using a Multi-Disciplinary Risk Assessment Framework Emissions Exposure Risk What is in the What happens when exposed What is the long-term vapour/aerosol? to these emissions? health risk? Behavioural Biological Clinical Population Chemistry Sciences Sciences Studies Studies 33
Slide 34: A Portfolio of Non-Combustible solutions
A Portfolio of Non-Combustible solutions Combustibles High 10% Low 100% Toxicants in Emissions 0% TOBACCO & COMBUSTION NO COMBUSTION Most of the Harm from Tobacco is caused by Combustion Not Nicotine*+ *As stated by: Dr. Scott Gottlieb, US FDA Commissioner (July 2017), and UK Royal College of Physic
Slide 35: Reduction in Toxicant Exposure Similar to Cessation
Reduction in Toxicant Exposure Similar to Cessation* Carbon Monoxide Benzene 30 7,000 25 6,000 5,000 Mean CO (ppm) Mean SPMA (ng/24hrs) 20 Cigarette Cigarette 4,000 15 Vuse Vuse 3,000 10 Cessation Cessation 2,000 5 1,000 0 0 Baseline Day 2-3 Day 3-4 Day 4-5 Day 5-6 Day 6-7 Baseline Day 2-3 Day 4-5 D
Slide 36: Biomarker of Potential Harm Responses Similar to Cessation in 90 day study
Biomarker of Potential Harm Responses Similar to Cessation in 90 day study* Magnitude of change relative to cessation glo 0% -25% -50% Biologically -75% Significant Target zone Equivalent -100% 100% = To Cessation Oxidative Cardio Cardio Cardio Lung Lung Lung Inflammation Carcinogenesis Stress Funct
Slide 37: Velo has Toxicant Levels comparable to Cessation Products and lower than Snus
Velo* has Toxicant Levels comparable to Cessation Products (NRT) and lower than Snus -99% -76% Comparable Toxicants vs. Toxicants vs. toxicant profile Cigarettes1 Snus2 to NRT3 1. D.M. Burns et al.; Tob. Control, 17 (2008), pp. 132-141; 2 Approximate reduction. Comparison based on an assessment of s
Slide 38: Extensive Scientific Substantiation support our products as Reduced Risk
Extensive Scientific Substantiation support our products as Reduced Risk* >30 yrs of studies shown Snus Emissions : - 99%1 Emissions : - 90% to - 95%2 is much less risky than smoking Toxicology : - 99%1 Toxicology : - 95%2 Toxicology : even less harmful than Snus3 Our data is published in Our data i
Slide 39: Key External Bodies also Support Reduced Risk / Exposure Nature of all Three New Categories
Key External Bodies also Support Reduced Risk* / Exposure Nature of all Three New Categories Vapour THP Modern Oral ASH FOOD AND DRUG4 (Action on Smoking & Health)1 BfR GERMANY5 ADMINISTRATION Public health charity These particular products could help addicted adult The herein confirmed reductions o
Slide 40: Beyond Nicotine: Industry Leading Safety Science for CBD
Beyond Nicotine: Industry Leading Safety Science for CBD ✓ In vitro studies CBD Genotoxicity ✓ In vivo studies CBD Inhalation Study Foundational CBD considered inhalation study non-genotoxic completed CBD Liver Damage consumption Study Study • Completed two x clinical studies of consumption • Design
Slide 41: Underpinned by World-Class Capabilities in Science and Innovation
Underpinned by World-Class Capabilities in Science and Innovation 2x 114 12 60+ 1500 R&D Peer-reviewed BTVentures Years R&D spend articles and investments manuscripts adding new of R&D specialists since published in New capabilities 2017* Categories Accelerating our transformation through attracting
Slide 42: Building on strong ESG foundations to create shared value for all stakeholders
5 Building on strong ESG foundations to create shared value for all stakeholders
Slide 43: Our Sustainability Agenda
Creating Shared Value through ESG Our Deep-dive How we Sustainability into ESG manage Agenda issues ESG 43
Slide 44: Harm Reduction is the Cornerstone
Harm Reduction is the Cornerstone H Reducing the HEALTH impact of our business CONSUMER CHOICE WORLD-CLASS SCIENCE STANDARDS & REGULATION E S G Excellence in Delivering a positive Robust corporate ENVIRONMENTAL SOCIAL impact GOVERNANCE management • Climate change • Human rights • Business ethics • W
Slide 45: ESG: Strong Progress and Commitment to Transparent Reporting on our Journey
ESG: Strong Progress and Commitment to Transparent Reporting on our Journey Target 2020 Progress E Excellence in • Carbon neutral for Scope 1 & 2 by 2030 • -37% vs 2017 baseline ENVIRONMENTAL • 100% of plastic packaging reusable, recyclable • 82% in 2020 management or compostable by 2025 S • Zero ch
Slide 46: Deep Dive into Four Key Areas
Deep Dive into Four Key Areas Tackling Eliminating Robust Responsible climate child compliance marketing change labour
Slide 47: Building our Capabilities to Succeed in Reducing our Scope 1 & 2 emissions
We are Building our Capabilities to ensure we Succeed in Reducing our Scope 1 & 2 emissions 1 Reduce emissions 37% reduction in scope 1 & 2 emissions v 2017 2 On-site renewables 8 countries have factories with solar energy generation* 3 Renewable energy certificates & Long term power agreements All
Slide 48: Building our Capabilities to Succeed in Reducing our Scope 3 emissions
We are Building our Capabilities to ensure we Succeed in Reducing our Scope 3 emissions Non-leaf Purchased Leaf Other Scope 3* Goods & Services Purchased Top 30 >30% All suppliers engaged reduction in fuel use new product with to improve with upgraded curing developments include delivery against sco
Slide 49: Building our Capabilities to Succeed in Tackling Child Labour
We are Building our Capabilities to ensure we Succeed in Tackling Child Labour ROBUST MONITORING AND REMEDIATION PROCESS 1 Strong Policies 2 Risk Mapping All 0.5% farmers visited incidence 2 1 monthly 3 Farm Visits 4 Identification Our strategy is aligned to 5 Remediation 98.5% incidents 3 resolved
Slide 50: Tackling Child Labour: Longer-Term Focus on Root Causes
We are Building our Capabilities to ensure we Succeed in Tackling Child Labour LONGER-TERM FOCUS ON ROOT CAUSES Human rights assessments 390,000+ Up to 20% attendances at human yield increase with new Training and rights farmer training seed varieties awareness raising 9.2/10 score vs. Enhancing liv
Slide 51: Rigorous Approach to responding to reports of Potential Human Rights breaches
We have a Rigorous Approach to responding to reports of Potential Human Rights breaches Outcomes include: • Engage to understand and gather information Six contracts ceased • Assess facts and develop action plan at highest with farmers in 2020 after three strikes for child labour levels of BAT • Tho
Slide 52: Continuously Strengthening Our Business Conduct & Compliance
Continuously Strengthening Our Business Conduct & Compliance 2021/22 2020 AUDIT, ASSURANCE & 2019 DIGITAL, HARNESSING DATA 2018 EMBED IN AUTOMATION, 3RD PARTY ➢ Data analytics ➢ Automation & RISKS 2017 Integration ORGANISATION ➢ Investigations & ➢ 3rd Party life- STRENGTHENED ➢ Commitment case mgmt.
Slide 53: Responsible Marketing to Adult Tobacco/Nicotine Consumers
Responsible Marketing to Adult Tobacco/ Nicotine Consumers International Marketing Principles Youth Access Prevention (IMP) (YAP) Strengthened YAP approach Mandatory provision of point-of-sale materials* Monitored through internal audit, and overseen by Audit Committee Introduced Refreshed Only part
Slide 54: 2021: Strong ESG recognition
2021: Strong ESG recognition 91 /100 Top 10% *Zero = perfect score 54
Slide 55: ESG is Embedded across our Business
ESG is Embedded across our Business MARKETING LEX* OPERATIONS R&D HR FINANCE IDT H Reducing the health impact of our business Climate change Climate change Climate change financial Water and waste E Sustainable agriculture Leaf R&D disclosures Sustainable agriculture Circular economy Human rights KB
Slide 56: Strong Pipeline of ESG Focused Innovation
Strong Pipeline of ESG Focused Innovation CARBON NEUTRAL POD ‘NO PLASTIC’ DEVICE WIDELY VALIDATED BY VERTIS RETURN PACKAGING RECYCLING RECYCLABLE CAN 56
Slide 57: ESG is a Value Add activity
ESG is a Value Add activity Value Add Efficiencies and Brands Employee removals will results with attraction and in savings purpose retention We expect to see efficiencies of scale Costs are absorbed in existing ways of working Costs 57
Slide 58: See our ESG Reporting Suite for more information
See our ESG Reporting Suite for more information https://www.bat.com/sustainability 58
Slide 59: We have put Sustainability Front and Centre with Strong Ambitions
We have put Sustainability Front and Centre with Strong Ambitions Our ESG Agenda CONSUMERS H SOCIETY Reducing the HEALTH impact of our business CREATES E S G SHARED Excellence in VALUE FOR Delivering a positive Robust corporate ENVIRONMENTAL SOCIAL impact GOVERNANCE management EMPLOYEES SHAREHOLDERS
Slide 60: Appendix
Appendix A1: Environmental Targets Targets cover: climate change, water and waste, sustainable agriculture. Full details are available from the ESG Report https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOAWWEKR/$file/BAT_ESG_Report_2020.pdf. A2: Non-Combustible consumers The number of
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