Japan Tobacco forecasts strong sales amid tepid heat-not-burn products market

Japan Tobacco expects the country’s heated tobacco market to post moderate growth this year but sees a nearly 80 percent rise in its own sales as it attempts to catch up with the sector leader Philip Morris International.

Japan, a major heated tobacco market globally, saw a sharp slowdown last year following an initial surge in sales after Philip Morris started selling its “heat not burn” products in 2014, as competition heightened and consumers turned more conservative in adopting the new products.

“What we learned last year is it is very difficult to forecast the domestic market” for HNB, said Masamichi Terabatake, CEO of Japan Tobacco, at an earnings briefing. “The growth in (HNB) market slowed down a lot in 2018,” he said, adding, however, the company still believes the category is a growth field in a longer term.

The former state-monopoly last month ratcheted up the smokeless war with the launch of two new products.

Despite commanding 62 percent of the local cigarette market, Japan Tobacco has been caught on the wrong side of the rising popularity of HNB alternatives and has lagged in the category in its own backyard versus the Marlboro maker.

Philip Morris in 2014 started selling its IQOS HNB device in Japan, which has emerged as a fertile test ground for vaping products since e-cigarettes using nicotine-laced liquid are not allowed under the country’s pharmaceutical regulation.

IQOS had a 71.8 percent share of Japan’s HNB market in 2018, while British American Tobacco’s glo had 20.1 percent and Japan Tobacco’s Ploom TECH 8.1 percent, Nomura estimates.

Japan Tobacco said it expects to sell HNB tobacco products equivalent of 5 billion cigarettes this year in Japan, up from 2.8 billion cigarette equivalent last year. Ploom TECH uses tobacco leaf-packed capsules and the company provides sales volume counts in the equivalent of conventional cigarettes.

HNB products, including rivals’, are expected to account for 22-23 percent of Japan’s overall tobacco market in 2019, versus 21 percent a year ago, Japan Tobacco said.

Japan Tobacco expects its domestic sales of conventional cigarettes to fall over 7.5 percent this year, after dropping 11.7 percent in 2018.

Source: https://japantoday.com/category/business/Japan-Tobacco-forecasts-strong-sales-amid-tepid-heat-not-burn-products-market