Japanese Domestic Tobacco Business
Mitsuomi Koizumi |
The Japanese domestic tobacco business is positioned as the core source of profits for the JT Group. |
FY 3/2010 Business Performance Summary
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Amid a difficult business environment, the share of JT products remained stable compared with the previous year, with the share of key brands growing steadily.
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Net sales and profits declined but EBITDA exceeded initial forecasts of ¥246.0 billion.
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Japanese Domestic Tobacco Business Adjusted Net Sales Excluding Tax*
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Japanese Domestic Tobacco Business EBITDA
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JT Share
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Total Share of Key Brands*
| (Years ended March 31) |
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As JT implemented measures to enhance the brand equity, including the launch of new products that captured market needs, and conducted sales promotion activities with a particular focus on key brands, the market share of overall JT products remained stable while the share of key brands grew steadily.
Launch New Products Centered on Key Brands
New Products Launched in FY 3/2010
June ´09 |
Mild Seven 100´s Box |
December ´09 |
Pianissimo Icene Menthol One (D-spec) |
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June ´09 |
Mild Seven Lights 100´s Box |
February ´10 |
Mild Seven Impact One Menthol Box |
August ´09 |
Seven Stars Black Charcoal Menthol Box |
March ´10 |
Camel Menthol Mini |
October ´09 |
Winston Lights Box |
| Please be reminded that this section is intended to explain the business operations of JT to investors, but not to promote sales of tobacco products or encourage smoking by consumers. |
Strategies and Specific Measures
Optimizing our Marketing Mix toward Sustainable Growth through the Provision of Quality and Services Commensurate with the Price
Product Strategy
From now on, our product strategy will focus on enhancing the brand equity so as to provide value commensurate with the price, and building a brand portfolio that offers a wider selection of products. Through this strategy, we will maintain and expand our market share.
Enhancing the brand equity to provide value commensurate with the price
- Enhancing product innovation (enhancing R&D capability)
- Expanding the product lineup
- Strengthening programs to improve taste, package design and other features of products
Brand Portfolio Offering a Wide Selection − Japanese Domestic Tobacco Business:
Prices of Major Brands (application basis)
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Distribution Strategy
To achieve top-line growth, the greatest challenge for our distribution strategy is to secure overwhelming superiority in product exposure at retail stores. Specifically, we will strive to secure product exposure in ways suited to the characteristics of each store type through suggestions regarding sales space and the introduction of display boxes. As for sales through vending machines, we will strive to make efficient allocation while making investments necessary for increasing the attractiveness of our products.
Marketing Strategy
Our marketing force, the vast size of which eclipses the marketing teams of our competitors, satisfies the multitude and variety of needs of retailers scattered across the country. We will continue to engage in efficient and effective marketing activities in ways linked to our product and distribution strategies, while complying with regulations and rules such as restrictions on tobacco advertising and prevention of youth smoking.
Improving Quality and Productivity
We will implement measures to maximize customer satisfaction, including constantly improving product quality and strengthening the shipment assurance system. In addition, in line with the planned price revisions in October, we will make capital expenditures in order to provide quality commensurate with the price and to meet the increasingly diverse needs of customers.
Productivity improvement is a critical challenge for any manufacturing company. As part of its effort to improve productivity, JT closed two factories at the end of March 2010 so as to optimize our tobacco production capacity and restructure the Japanese domestic tobacco business in ways to make it more competitive.
In addition, we will close one factory at the end of March 2011; after that, we will have 6 factories in Japanese domestic operation in April 2011.
We will continue to strive toward an even more cost-efficient operating structure.
Fulfilling Our Responsibility as the Market Leader
We will continue to fulfill our responsibilities as the leading tobacco company in the Japanese market by endeavoring to achieve a harmonious coexistence between smokers and nonsmokers. We will also engage in initiatives to improve smoking manners and strive harder to secure and create space and opportunity for smoking, for example by helping to provide comfortable smoking areas.
As a Core Source of Profits for the JT Group
We will ensure that the Japanese domestic tobacco business continues to serve as the JT Group´s core source of profits by overcoming challenges in the Japanese domestic market, such as the continuing decline in total tobacco demand and intensifying competition.
Topics
Zerostyle Mint: Innovative Smokeless Tobacco Product
Developed in Quest to Meet Diverse Customer Needs
History of Tobacco Enjoyment with a Great Variety of Choice
Tobacco has a rich history and is available in a large number of varieties. In different parts of the world, smokeless tobacco including snuff and chewing tobacco are consumed in addition to cigarettes. While the majority of consumers in Japan are smoking cigarettes, demand is increasing for tobacco products designed to be used in places where consideration needs to be given for nearby nonsmokers as well as products with better taste and flavor.
“Zerostyle Mint”: Innovative Smokeless Tobacco Product
“Zerostyle Mint” is a new type of snuff tobacco product. It does not need a flame to light it, and thus is smokeless, allowing consumers to use it in a variety of locations while giving consideration to neighbors at the same time. Through the introduction of the new menthol product, JT believes that it is expanding the opportunity for consumers to use tobacco by providing consumers with a wider selection of tobacco categories to choose from.
As conventional snuff products are relatively new to Japanese consumers, the body of “Zerostyle Mint” is designed so as to accommodate a replaceable cartridge which contains tobacco leaves.
| * | Sales beginning exclusively in Tokyo in mid-May 2010 |
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Commitment to Better Customer Satisfaction
Tobacco is favored among adults as a product that provides mental relaxation and helps to achieve mental concentration, for example.
To help customers enrich their life with tobacco, JT is committed to meeting their diverse range of needs by developing a broad range of cigarettes and other tobacco products as well as by improving taste and flavor.
Following the launch of “Zerostyle Mint,” we will pursue our quest for innovation with an open mind so that we can better satisfy our customers.
| Please be reminded that this section is intended to explain the business operations of JT to investors, but not to promote sales of tobacco products or encourage smoking by consumers. |
Toward Better Smoking Manners and a More Favorable Smoking Environment
(This section only describes activities in Japan.)
We aim to help create a society in which smokers and nonsmokers can coexist in harmony. Enshrined in this goal is our wish to see our valued customers fully enjoy smoking at their own discretion and, at the same time, to make sure they avoid causing discomfort to nonsmokers.
By engaging in various initiatives, we will fulfill our social responsibility as a tobacco company.
Examples of the Various Initiatives
Setting Up Smoking Areas
Public smoking area in front of the Sakai Station in Osaka
TAMAPLAZA TERRACE Smoking Area |
We work closely with local governments and facility managers in setting up smoking areas in public facilities such as railway stations and airports, in order to promote coexistence between smokers and nonsmokers. |
Advice on Separation of Smoking and Nonsmoking Areas
We provide consultation on how to separate smoking and nonsmoking areas within public facilities, commercial facilities and offices in a manner suited to the characteristics of the facilities and the needs of users. In our consulting service, which is free of charge, we offer our know-how and put forward proposals to achieve the kind of separation that would satisfy smokers while giving due consideration to the concerns of nonsmokers.
“Smoking Manners” Campaign Advertising
Campaign Advertising |
Since JT believes that improving the “smoking manners” of individuals is essential to improving those of society as a whole, we are constantly engaged in a campaign to raise awareness about the need for appropriate smoking manners, under the slogan “Pay attention, and you can change your manners.” The advertisements used in this campaign describe specific everyday situations in which smokers are supposed to show good manners, in order to prompt them to pay attention, think, and act appropriately. |
Community Clean-up Event
Community Clean-up Event |
JT has been engaged in the “Pick Up and You will Love Your City” initiative since May 2004 in an effort to eradicate public littering by raising awareness of the problem and organizing rubbish collection. This initiative is aimed at occasions such as community festivals and other public events and conducted in cooperation with local governments, companies, and volunteers. Since these activities began in May 2004, community clean-up events have been held a total of 1,000 times in all of Japan’s prefectures as of April 17, 2010, bringing the number of participating parties to 1,987 and the number of participants to approximately 1.04 million. |
“Smokers’ Style” website |
For further information about JT’s efforts to improve the smoking environment, please access the “Smokers’ Style” website. |
