Annual report and accounts 2023

Focus on our priority markets

Focused investment in our most material combustible opportunities has driven stabilisation of our aggregate market share.

As a challenger business, we need to channel our investment and energies towards the most material opportunities. This means a consistent laser-focus on our five largest combustible markets, which make up around 70% of our operating profits. These are the United States, Germany, the United Kingdom, Spain and Australia. Each market has attractive features. The US and Germany are both markets where cigarettes continue to be relatively affordable, creating opportunity for long-term growth.

Driving value from our broader market portfolio

We have identified a clear role for each of our diverse markets.

In a similar way to how we have focused our investment in our five priority markets, we have brought an equally rigorous approach to creating value and identifying future growth opportunities across our broader portfolio. We have created new structures and processes designed to help the teams in all our markets maximise their contribution to the success of the Group.

In particular, over the past year we have created a new regional structure with the formation of the AAACE region, covering Africa, Asia, Australasia and Central & Eastern Europe. Led by Paola Pocci this unit is being developed as a centre of expertise for our medium-sized and smaller markets, many of which have attractive margins and the potential to become platforms for future growth in combustible tobacco and next generation products.

Building scale in NGP

FY23 saw a step-up in our next generation product operations.

For our potentially reduced-harm business this has been an important year, with product innovation and targeted market launches translating into accelerated revenue growth.

Following the introduction of new propositions in vape, heated tobacco and oral nicotine, we now have credible offerings in all three major categories. And consumers can now buy our NGP in more than 20 European markets, as well as the United States.

This operational acceleration has translated into revenue growth of 26.4% globally, and 40.4% in Europe where we have been focusing our investment.

Simplified and Efficient Operations

We are improving our global processes and digital strategies.

Imperial emerged as the world’s fourth largest tobacco business through bold acquisitions over the past two decades. These transactions have given the Company significant positions in some of the world’s most attractive markets and a strong stable of local and international brands.

Our strategy, launched in 2021, identified a need to better integrate this portfolio of businesses to create simpler, more efficient operations, enabling us to better capture future opportunities. Three years on, our transformation is well underway with significant structural changes, the introduction of new capabilities, and investment in our digital backbone.

Transforming our culture

Over the past three years, as part of Imperial's transformation into a strong challenger business, we have been developing a performance culture which is more collaborative, accountable and inclusive.

This has been a highly structured, multi-year programme and, while we know there is considerable work still to do, we are pleased with our progress so far.

The process of cultural change began in 2021 when, in support of our newly launched strategy, we unveiled a new purpose, vision and five behaviours.

These behaviours, which have been the foundation of all subsequent activity, are: Start with the Consumer; Collaborate with Purpose; Take Accountability with Confidence; Be Authentic and Inclusive to all; and Build our Future.

Putting the Consumer at the centre of the business

We're investing to support a more rigorous approach to consumer insight, innovation and marketing.

A critical enabler for our strategy is to place the consumer at the centre of the business. Our refreshed focus on starting with the consumer is a key element of our challenger mindset. The tobacco and nicotine environment has undergone transformative change recently. Consumer tastes are becoming more eclectic — choice matters more. The pace of innovation is accelerating and there is now a broad NGP ecosystem where partnering is important to success.