A bad year for BAT: but £300 million profit from smuggled cigarettes

Thursday 20 April 2000

Press Release: 27th April 2000

Business decline: A year is a long time in the tobacco business. This time last year British American Tobacco was preening itself over the financial services demerger, plotting the acquisition of Rothmans, celebrating the US settlement and anticipating its share price reaching £6.27. Now its price has fallen to around £3.20, it faces litigation Armageddon in Florida, and its top management stands accused of orchestrating smuggling through intermediaries in Asia and Latin America – with its prominent non-Executive Director (Ken Clarke) forced out to defend the company without having time to read the evidence.

Thousands of deaths: The 753 billion cigarettes sold by BAT in 1999 will be causing damage that will eventually lead to about three-quarters of a million premature deaths attributable to smoking (about one premature death per million cigarettes smoked). That is the human price of BAT’s business activity.

Fingerprints all over cigarette smuggling: In January and February this year ASH presented powerful evidence of the company’s involvement – through third parties – in the control of cigarette smuggling in Asia and Latin America. Under pressure before the House of Commons Health Select Committee, BAT chairman Martin Broughton promised an internal inquiry into his company’s role in tobacco smuggling, to be conducted by Rupert Pennant-Rea – the Chair of the BAT Audit Committee. ASH wrote to BAT outlining the company’s responsibilities for such an inquiry under the Turnbull Code and BAT has promised an interim report at the AGM.

Slammed for bogus science: Despite BAT’s PR offensive to reposition itself as a responsible company on smoking and health issues, its stance on passive smoking has recently been demolished in The Lancet.

AGM accountability: ASH is a small shareholder in BAT and will be attending the BAT AGM to put questions to the board about smuggling, about the harm caused by its products, about its conduct and governance, about its litigation risks and about its product strategy.

Clive Bates of ASH said: “As a crude estimate we reckon that at least £300 million pounds of BAT’s operating profit derives from cigarettes ultimately sold illegally. We will want to know how much BAT does to nurture that criminal business.”

For supporting documents on BAT and smuggling, please download this pdf.