US cigarette price war forces BAT to cut 700 jobs

THE price war in the US cigarette market has prompted BAT Industries to make 700 employees redundant as part of cost-cutting measures that will lop about pounds 45m off its 1993 profits, writes Paul Durman.

The job losses at Brown & Williamson, BAT's US tobacco business, follow a review by McKinsey, the management consultants. BAT hopes to recover the cost of the reorganisation through increased profitability within two years.

B&W is shedding about 500 of its 1,900-strong sales force, and reducing administrative staff from 600 to 400. Part of the costs arise from having to terminate leases for computers and other equipment.

A BAT spokesman said the reorganisation would give B&W a more effective sales force. 'It had more administrative layers than it needed. Too much of its focus was on getting stock into stores rather than on the sales that were resulting.'

The reorganisation will also reduce the number of sales areas from nine to five.

Drastic price-cutting by Philip Morris, maker of Marlboro, forced B&W to reduce the cost of its cigarettes by 40 cents a packet. Sales of Kool, B&W's menthol brand, suffered in the last quarter of 1993.