Japan Tobacco (JT) is set to invest 300 billion yen ($2.25 billion) over the next three years to expand its heated tobacco stick products, with 200 billion yen earmarked for marketing the products outside of Japan. The move comes after a shortage of heated tobacco devices in 2022 due to semiconductor supply chain challenges. JT President Masamichi Terabatake revealed during an interview with Nikkei that the company was back on track for procurement in 2023 and expects to secure more than double Japan’s supply volume compared to the previous year.
Investing in Rollout into New Markets
Terabatake stated that the majority of the 300 billion yen investment will be allocated to the initial costs of rolling out the products into new countries. While JT has not disclosed its investments in heated tobacco products for the years 2020 to 2022, it is expected that the new spending will surpass the total investments made over the past three years.
Heated Tobacco Systems and the Ploom X Product
Heated tobacco systems are devices that produce vapor instead of smoke, and they come in low temperature and high temperature varieties. JT’s flagship product in this category is the Ploom X, which uses a high temperature device to replicate the experience of smoking a traditional cigarette. Currently, JT only sells Ploom X in Japan and the U.K., although the product is set to launch in Italy this month. The company has plans to expand the availability of Ploom X to more than 10 countries in 2023 and aims to reach at least 20 new countries by the end of 2024.
Marketing Strategies and Joint Venture in the U.S.
To gain name recognition and attract customers in new markets, JT plans to invest in pop-up shops and digital sales. The company also intends to develop flavors that cater to the tastes of each specific market. In the United States, JT has formed a joint venture with cigarette giant Altria Group, and the partners are looking to apply for approval from the Food and Drug Administration (FDA) for Ploom by early 2025.
Anticipating Profitability Despite Current Losses
While the heated tobacco segment is currently facing losses due to forward investments, JT anticipates turning a profit from overseas growth in 2028. In addition to marketing and expansion efforts, JT will also allocate funds to research and development, with plans to develop second and third generation devices for the Ploom X product.
##FAQs (Frequently Asked Questions)
Q: What is Japan Tobacco’s plan for its heated tobacco stick products?
A: Japan Tobacco plans to invest 300 billion yen ($2.25 billion) over the next three years to boost its heated tobacco stick products, with a significant portion of the investment allocated to marketing the products outside of Japan.
Q: Why couldn’t Japan Tobacco invest in heated tobacco products in 2022?
A: Japan Tobacco faced a shortage of heated tobacco devices in 2022 due to semiconductor supply chain challenges, which prevented the company from making investments in that year.
Q: Which countries does Japan Tobacco currently sell its Ploom X product?
A: Currently, Japan Tobacco only sells its Ploom X product in Japan and the U.K., although it is set to launch in Italy this month.
Q: How many countries does Japan Tobacco plan to expand the availability of Ploom X to in 2023?
A: Japan Tobacco plans to expand the availability of Ploom X to more than 10 countries in 2023, with a goal of reaching at least 20 new countries by the end of 2024.