BAT to nurture Korea into Asia hub
British American Tobacco (BAT) will nurture Korea into its export hub in the Asia-Pacific region, the head of its Korean unit said Thursday.
In an interview with The Korea Times, BAT Korea CEO Tony Hayward said the company will continue to expand its production capacity and hire more workers, as well as implement more give-back programs to become a more responsible corporate citizen.
“It has been a tough year, but BAT Korea has done a great job, given the current unfavorable business environment,” said Hayward, who came to Korea in September to replace his predecessor Erik Stoel. “Even though I have been here for only three months, I am confident to say that our employees have shown relentless efforts and outstanding performance this year, providing the best quality products to our Korean consumers.”
The cigarette maker plans to complete the expansion of its plant in Sacheon, South Gyeongsang Province, by next February, according to the British national, who said the expansion has increased the number of production workers on its payroll by 100 to 330.
“Our production volumes will more than double to 35 billion sticks from the current 17 billion when our second and third plants go into operation,” the CEO said. “In 2017, we expect to earn more than $260 million by exporting Dunhill, Rothmans and other cigarette brands, up from $100 million this year. This means BAT Korea will export about 70 percent of its production, up from the current 43 percent.”
The Sacheon factory is one of the best BAT factories, Hayward said, stressing that among 44 production facilities in 41 countries around the world, it is rated No. 1 for its outstanding performance in productivity, product quality, cost-savings and other barometers.
“Korean employees work hard to produce the best quality products in a consistent manner,” he said. “Thanks to their hard work and dedication, the Sacheon plant has recorded the highest level of equipment effectiveness and the lowest level of wrapping material wastage among BAT’s 44 plants. This is why the company decided to produce more cigarettes in Korea. BAT will also put the Sacheon factory on the top of its list when it needs to increase production.”
To become a more trusted corporate citizen, BAT Korea, founded in 1990, will continue to expand its corporate social responsibility (CSR) programs, the CEO said. “We are part of the Korean community and as a member, we would like to do more to help people in need the best way we can. We would like to bolster our corporate awareness because we are here to stay and grow together with our business partners and members of the local community.”
‘BAT suffers unfair treatment’
When asked about the ongoing controversy over BAT Korea’s alleged hoarding and tax evasion following a tobacco price hike in January last year, Hayward dismissed the allegations, stressing that the company has never broken the law.
In September, the Board of Audit and Inspection (BAI) concluded that BAT Korea evaded 39.2 billion won in taxes after illegally realizing undue “inventory profits.” The BAI also said that the company, along with Philip Morris International (PMI) Korea, violated Korea’s law that governs hoarding, asking the Ministry of the Interior and the National Tax Service to file a complaint with the prosecution against the two.
“I often struggle to understand how things are in Korea. As for the BAI’s audit, we did not artificially raise our inventories, prior to the cigarette price hike. At the time, BAT Korea did what it had always done in the past,” the CEO said. “Another thing I can’t understand is that KT&G did exactly the same thing. But it is not subject to the BAI audit or the prosecution’s investigation. Korea needs to level the playing field for all businesses, regardless of their origins.”
Hayward also pointed out that the regulators are too lenient toward KT&G, stressing they should strictly enforce the law against Korea’s largest tobacco maker, which accounts for about 60 percent of the local market.
“In 2015, the Fair Trade Commission fined KT&G for violating the antitrust law by forcing retailers to sell its products only in places such as highway service areas. But its dubious practice continues anyway and the regulator takes no further action against the company. I struggle to understand how this sort of thing can happen,” he said.
The British national has been with the company for 17 years since he joined as a financial accounting manager in the Southampton factory in 1999. Since he became the firm’s Africa financial manager in London in 2001, he has been making a substantial contribution to its financial strategies while covering numerous markets around the world, such as Egypt, the United Arab Emirates, Romania and Poland. Hayward then moved back to BAT headquarters in Britain to head a global human resources project. He then went to the Americas to serve as a regional manager, developing his managerial skills before assuming his last role there as regional head of finance of BAT Americas.