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Founded in 1903 by Albino Souza Cruz with just
16 employees, Souza Cruz is today the undisputed
leader in the Brazilian cigarette market and is among
the largest companies in the country.
Souza Cruz employs around 6,000 people and sells
over 78 billion cigarettes a year. It also provides more
than 117,000 tons of tobacco leaf for export to more
than 50 countries on five continents.
This special feature focuses on how our global
strategy of Growth, Productivity, Responsibility and
Winning Organisation is working in Souza Cruz, a
company contributing significantly to the success
of British American Tobacco.
Brazil
Special feature

Home to nearly 30 million smokers, Brazil is the sixth
largest cigarette market in the world. Brazil produces
around 10 per cent of the world’s tobacco and is the
largest exporter of tobacco leaf.

Spanning the full production cycle from ‘seed to smoke’,
Souza Cruz runs three processing plants, two factories
and an internationally acknowledged R&D centre. An
outstanding distribution operation results in 80 per cent
of volumes being delivered in less than 24 hours.
Processing plant, Santa Cruz do Sul

Albino Souza Cruz –
founder of Souza Cruz
Innovation and creativity remained
key to the company’s early success.
Heritage
In 1903, at the age of just 32,
Portuguese immigrant Albino
Souza Cruz and 16 employees
began to produce cigarettes using an
innovative rolling machine based in
a house in the heart of Rio de Janeiro.
The machine was the first of its kind
in Brazil and was able to roll five
cigarettes simultaneously producing
Dalila, the first brand from Souza
Cruz & Cia. As demand for this initial
product rapidly grew, it soon became
necessary for production to move to
larger premises and in 1910, Souza
Cruz purchased a snuff plant in the
Rue Conde de Bonfim, with snuff
manufacture gradually replaced
by cigarettes.
In order to grow his company still
further, Albino Souza Cruz transferred
stock control to the British American
Tobacco Group in 1914, a move
Packaging from an early Souza Cruz brand
that resulted in greater output
and further rapid development.
Innovation and creativity remained
key to the company’s early success,
with Dalila the first of a series of
brands based on women’s names.
The welfare of his workers was of
paramount importance to Albino
Souza Cruz. In 1910, he introduced
the coffee break to provide a dedicated
rest period for employees and, in
1951, another trail-blazing initiative
was launched in the form of medical
care for staff at the Bonfim factory.
Souza Cruz was listed on the Rio de
Janeiro and São Paolo Stock Exchanges
in 1946 and 1957 respectively and
Albino Souza Cruz continued to chair
the company until 1962. Two years
later, he passed away in Lisbon, leaving
behind him a lasting legacy of one of
Brazil’s most successful business groups
and top-performing companies within
British American Tobacco.

Piola restaurant, São Paulo

Cinema foyer – Reserva Cultural, São Paulo
Hollywood – one of Souza Cruz’s leading brands

72%
Souza Cruz has over
70 per cent of the
legal cigarette market
32%
Derby accounts for one out
of every three cigarettes sold
legally in Brazil
Souza Cruz leads the Brazilian
cigarette market.
Growth
Local brand strength
Souza Cruz leads the Brazilian
cigarette market, with six of the
country’s top-selling brands and
a share of over 70 per cent of the
legal market. Its best-selling brand
is Derby, which became a market
leader in just three months when it
was launched in 1993 and now has
a share of around 32 per cent.
In total, Souza Cruz sells 16 brands
in Brazil including Capri, Charm,
Hilton, Plaza and Ritz, with more
than 30 variants. Leading brands
include Hollywood, Souza Cruz’s
oldest brand, which became Brazil’s
best-selling cigarette during the
1980s. Launched in 1984, Free was
the first Souza Cruz brand to disclose
full lists of ingredients and smoke
constituents, an initiative that was
subsequently adopted by all Souza
Cruz brands. Carlton is the market
leader in the premium segment.
It was the first to launch a range
of flavoured new variants in 2003.
Global Drive Brands
Although the leading cigarette brands
in Brazil are local brands produced by
Souza Cruz, British American Tobacco’s
Global Drive Brands also have a
growing presence in the market.
Kent’s launch in 2002 focused on
brand innovation and was based
around its activated charcoal filter
technology – a first in the Brazilian
cigarette market. In 2005, the 3-Tek
charcoal filter was introduced, again
highlighting Kent’s commitment
to using new technology to deliver
unique flavour.
Lucky Strike continues to develop
its market share through blend and
flavour and packaging innovations.

£6m
Savings on indirect purchases
in 2006
£3m
Savings of over £3 million in
supply chain management
Agrega’s volume-based purchasing
power gives it a keen competitive
edge in negotiations with suppliers.
Productivity
Reducing complexity and costs
All British American Tobacco Group
companies aim to reduce supply
chain complexity and save costs,
with Souza Cruz being no exception.
In 2006, the company delivered
savings of £6 million on indirect
purchases (anything other than
leaf, wrapping materials, cigarette
making machinery and labour).
Souza Cruz also achieved savings
of over £3 million in its supply
chain management through
closer alignment of leaf purchasing,
procurement negotiation,
manufacturing and waste reduction.
Agrega
Souza Cruz has pioneered an
innovative and collaborative approach
to delivering competitive advantage
through reducing the cost of indirects.
In 2001, the company formed a joint
venture called Agrega, with leading
brewer AmBev, to identify potential
reductions in spending on 44 common
product groups in areas such as office
materials and travel. Using economies
of scale and mainly in-house expertise,
Agrega soon became a benchmark
for procurement practice in Brazil,
attracting major clients including
Nestlé, Pfizer and Unibanco.
Agrega’s volume-based purchasing
power gives it a keen competitive edge
in negotiations with suppliers and
today, it encompasses over 80 groups
of materials and services such as IT,
fuel and medical services.
Other British American Tobacco
companies have used Agrega’s success
as a template for establishing their
own versions. In Argentina, Nobleza
Piccardo has worked with Quilmes,
the country’s biggest brewer, to set
up a joint venture to reduce indirect
costs and the business model has also
been rolled out to Cigarrera Bigott in
Venezuela. In 2006, Agrega moved
into Canada and Mexico.
Efficient distribution
The comprehensive Souza Cruz
distribution network directly services
more than 200,000 points of sale. At
the heart of the system is the São Paulo
facility, the largest and most modern
cigarette distribution hub in Latin
America. With around 1,000 vehicles
and some 2,000 sales and delivery staff,
Souza Cruz guarantees delivery periods
of no more than 24 hours between
ordering and receipt of the product
almost everywhere in Brazil. Souza Cruz
has been acknowledged as a model
supplier and an international benchmark
for FMCG logistical operations.

Distribution Centre, São Paulo
Distribution Centre, São Paulo

‘Available Here’ campaign at Varanda das Frutas, São Paulo
Tobacco field, Santa Cruz do Sul

Souza Cruz remains committed to
reducing its environmental impacts
and preserving the biodiversity of
native forests.
Responsibility
Responsibility takes many forms
at Souza Cruz, from youth smoking
prevention programmes to extensive
environmental commitment and
efforts to tackle illicit trade.
Examples include the ‘Available Here’
Social Responsibility Programme,
which aims to ensure that retailers
comply with national legislation
and do not sell tobacco products
to people under 18 years of age.
The initiative encourages retailers
to think of the wider benefits to their
own communities, rather than profit
from tobacco sales to the underaged.
In 2006, more than 210,000 retailers
took part in the programme and
activities are set to expand in 2007.
Environment
Souza Cruz remains committed to
reducing its environmental impacts and
preserving the biodiversity of native
forests. In southern Brazil, it owns
two reforestation areas that together
cover over 5,000 hectares and enable
the company to be self-sufficient
in wood fuel, a source of cleaner
renewable energy for its factories and
leaf processing plants. The company
210,000
Retailers in the ‘Available Here’ youth
smoking prevention programme
has been recognised by the RainForest
Alliance for managing these areas
in line with the stringent standards
defined by the Forest Stewardship
Council and for its efforts to preserve
the environment.
Tackling illicit trade
Illicit trade is a major problem in
Brazil, negatively affecting many
sectors of industry. Only recently it
accounted for around a third of the
total cigarette market. Souza Cruz
has been working with the authorities
and other industries faced with similar
problems to tackle the issue and
these combined endeavours are
beginning to achieve results. During
2006, smuggling was down 7 per cent
and counterfeit dropped 45 per cent,
bringing the share of the total market
attributable to illicit trade below the
30 per cent level.
5,000
Hectares of forest land enabling Souza
Cruz to be self-sufficient in wood fuel

Andrew Gray – General Manager, Souza Cruz
The programme recognises projects
that represent good examples of
leadership and adding value to
the business.
Winning Organisation
Recruiting and developing talented
managers at all levels remains central
to the continuing success of Souza Cruz.
The company runs a development
programme involving academic
centres of excellence in Brazil and
also places staff on secondment
in other British American Tobacco
companies, with around 40 managers
working abroad at any one time.
Initiatives such as the Souza Cruz
Golden Leaf Acknowledgement
Programme aim to motivate employees
and create a working environment
that fosters and encourages high
performance by teams. The programme
recognises projects that represent
good examples of leadership
and adding value to the business,
replicating a similar awards scheme
held for senior management across
British American Tobacco.
Souza Cruz is committed to building
a diverse workforce. For example, the
leaf processing plant at Santa Cruz do
Sul launched a pioneering campaign
in 2005 to further the recruitment of
people with special needs who apply
for seasonal work. All facilities at the
Staff welfare is of
key importance at
Souza Cruz
plant are regularly updated to respond
to the needs of the new recruits and
the campaign has involved raising
extensive awareness among employees
of the relevance of a socially inclusive
working environment.
Staff welfare is of key importance
at Souza Cruz and the company
was one of the first in Brazil to offer
supplementary pension funds before
national private pension legislation
came into place. The Albino Souza
Cruz Pension Foundation has continued
to evolve to offer greater security and
better benefits to its members, making
a real contribution to employee
satisfaction in the process.
Corporate social investment
Many community-based projects are
run by the Institute of Souza Cruz, set
up in 2000, with a particular focus
on education and training for young
people in rural areas. Its core activity
is the Rural Youth Entrepreneurship
Programme, which operates in the
three southernmost states of Brazil
and trains young people to manage
their own lives and businesses.
40
Managers working outside
Brazil, sharing their
knowledge and experience

Distribution in action in São Paulo
Visitors to the sense garden for the
visually impaired at Cachoeirnha

Souza Cruz is one of the most successful companies
within the British American Tobacco Group and the
following awards and achievements reflect some of
the passion, talent and commitment of its employees.
2006 awards
• In its tenth year, the corporate category
of the Hummingbird (Beija-Flor) Trophy,
was awarded to Souza Cruz. The award
was presented by the RioVoluntário
non-governmental organisation in
recognition of the Souza Cruz Volunteers
Programme, which involved most of the
company’s members of staff and benefited
more than 5,000 people across Brazil.
• Souza Cruz was awarded the Sustainable
Enterprise Prize by Meio-Ambiente
Industrial magazine. The criteria for
entry included meeting standards such
as ISO 14001 (Environment), SA 8000
(Social Responsibility) and OHSAS 18001
(Occupational Health and Safety), as well
as carrying out environmental and social
reporting audits.
• For the fifth year, Souza Cruz won
the Prize for Excellence in Customer
Services, awarded by Consumidor
Moderno magazine.
2006 achievements
• For the second year in succession, Souza
Cruz was rated the best company in the
Foods, Beverages and Tobacco sector
by the latest Biggest and Best Yearbook,
which offers the most wide-ranging and
accurate analysis of business in Brazil.
• Souza Cruz was rated the best company
in the Foods, Beverages and Tobacco
segment by the Agri-Business Yearbook.
• Souza Cruz was voted the Best Company
in Brazil’s leaf sector by the editors of
Global Finance magazine.