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BAT’s Business Transformation Success in Serbia

In an exclusive interview, Jorge Araya, the South Eastern Europe Area Director for BAT, sheds light on the company’s strategic initiatives and transformative goals in Serbia

Overseeing operations across 13 countries from his base in Bucharest, Araya underscores the pivotal role Serbia plays within BAT’s global framework. From substantial investments in the Vranje factory to launching innovative smokeless products, BAT’s commitment to modernisation and sustainable growth is evident. Araya also addresses critical industry challenges, including underage product use and environmental concerns, highlighting BAT’s efforts to navigate these issues responsibly while fostering a smokefree future. This interview offers a comprehensive look at how BAT is shaping the tobacco industry’s future in Serbia and beyond.

Jorge Araya has been the South Eastern Europe Area Director for BAT since 1st April 2023, overseeing the company’s operations across 13 countries from his base in Bucharest, Romania. His extensive career with BAT began in Chile in 1995, during which he has held numerous senior leadership positions. During his visit to Serbia, Jorge emphasised that Serbia is an extremely important market for BAT, with the company continuing to invest in modernising and developing its business.

A visit to Serbia certainly signifies the importance of a local organisation in the BAT world. How do you position Serbia and the region as small markets with below-average purchasing power compared to the EU?

― Serbia holds a significant position within the BAT group, with continuous investments in production, innovative technology, job creation, and exports. Since the acquisition, BAT has invested over 280 million euros in the Vranje factory in southern Serbia. Additionally, BAT employs more than 500 people in Serbia and has contributed over four billion euros to the Serbian budget through taxes and excises.

Our ambition remains to have 50 million consumers of our non-combustible products by 2030

The factory in Vranje stands out as one of the most successful within the BAT Group, a testament to our commitment to excellence. Remarkably, BAT Vranje is the only European factory to have received the Global Award for Excellence in Quality for four consecutive years, a feat that we can all take pride in.

Looking ahead, new categories are the future of this industry. The group’s global ambition is to predominantly produce smokeless products by 2035, ushering in a new era. Serbia and the Adria Cluster are pivotal in supporting this transformative goal, inspiring us all with the potential of a Smokeless World.

How important are new categories for BAT? Can they fully replace cigarettes?

― Our vision is for a Smokeless World built on smokeless products where, ultimately, cigarettes have become a thing of the past. This is not just a goal, but a commitment to a healthier future. We envision a world where adult smokers have migrated from cigarettes to smokeless alternatives, making a switch to better options.

Our consumers are key to our transformation, and we diligently follow their needs and expectations. Over the last three years, we have invested more than £1.2 billion in developing, commercialising, and science behind a reduced-risk tobacco and nicotine product portfolio.

Six years ago, BAT launched the GLO tobacco heating device in Serbia. At the end of last year, the company also introduced new products—Vuse, the leading global e-cigarette brand by market share, along with VELO nicotine pouches. These initiatives place Serbia at the centre of BAT’s strategy for creating a better tomorrow, thanks to a portfolio of innovative smokeless alternatives.

I am genuinely proud that we are the only company in our industry in Serbia that offers all new product categories. This not only showcases our unwavering commitment to the THR (Tobacco Harm Reduction) concept but also reflects our sincere dedication to building a smoke-free future.

Our ambition remains to have 50 million consumers of our non-combustible products by 2030 and to accelerate the growth of our New Category revenues at a faster rate than our total revenue, aiming to reach £5 billion by 2025. We have already made significant progress towards these targets: as of December 31, 2023, we have 23.9 million consumers of non-combustible products, and revenue from these products accounts for 16.5% of Group revenue.

When it comes to the generation of new heated tobacco and vape products, BAT and the entire industry have two major problems: the consumption of these products by minors and a significant impact on environmental pollution. How do you handle it?

― We are strongly committed to preventing underage access to our products. No one underage should ever smoke or use products containing tobacco or nicotine. Our products are developed, designed, and marketed exclusively to adult consumers. We adhere to Responsible Marketing Principles (RMP) and maintain high standards across all markets where we operate, often exceeding local regulatory requirements.

The factory in Vranje stands out as one of the most successful within the BAT Group

Disposable vapes are just one of the products in our wide portfolio that aligns with our consumer preferences. We acknowledge both the benefits and drawbacks of these products, underscoring the importance of informed discussions to optimise regulations that unlock their full potential for consumers and society. We caution against prohibitions or unilateral decisions, which could inadvertently fuel black market activities.

You had the opportunity to meet with high-level government representatives during your visit to Serbia. What are your impressions?

― First of all, I am delighted to have the opportunity to visit Serbia, which is an exceptionally important market for our company.

We are pleased with the outcomes of our meeting with the Minister of Internal and External Trade in Serbia, Mr Tomislav Momirovic. We are particularly grateful for the commitment to combating the grey economy, which negatively impacts all economic sectors and prevents the state from achieving all its social and developmental plans and needs.

Additionally, we are encouraged by Serbia’s support and clear regulation of new categories, particularly e-cigarettes and nicotine pouches. Effective regulation yields positive results, exemplified by recent amendments to Serbia’s Tobacco Law, which we fully endorse. These amendments not only regulate nicotine levels but also, importantly, prohibit the sale of nicotine products to minors.

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