Daily Management Review

Japanese Smokers Smoked Away from Japan Tobacco by Marlboro’s E-Cigarette


08/12/2016




Japanese Smokers Smoked Away from Japan Tobacco by Marlboro’s E-Cigarette
Making inroads into a market Japan Tobacco (JT) relies on for 40 percent of its profit, its e-cigarette has rapidly captured close to 3 percent of Japanese tobacco sales claims Marlboro maker Philip Morris International.
 
A company spokesman said that the iQOS accounted for 2.2 percent of Japan's tobacco sales in the quarter ended June 30 and which could be an early vindication of Philip Morris's e-cigarette strategy that it has launched in recent times.
 
Accompanied by "HeatSticks", which cost the same as regular cigarettes, the company had rolled out the 9,980 yen ($98.53) electronic smoker in late April and the company claims that the share had climbed to 2.7 percent by the end of June due to these launches.
 
"The figures clearly show that iQOS is stealing a chunk of the rolled tobacco market," said Masashi Mori, analyst at Credit Suisse Securities in Tokyo. There was a notable shrinkage in the overall cigarette sales in June in Japan of shrank 5.2 percent.
 
There was a dip of 3.4 percent in the sale of cigarettes in Japan from July and the total revenues touched 53.4 billion yen, JT said in a statement on Friday.
 
iQOS produces a smokeless aerosol by heating tobacco leaf packed into stubby cigarettes inserted into the device unlike conventional e-cigarettes that vaporize a nicotine infused liquid.
 
Including cities in Switzerland and Italy, so far the company has tested the gadget in seven countries. Japan has regulated nicotine liquids under pharmaceutical laws which have suppressed e-cigarette "vaping" and it is the only country where it is sold nationwide.
 
Philip Morris has been unable to make the most of its early entry into Japan due to the fact that the supply for iQOS, which is made in Malaysia, has outstripped demand. The demand is such that as much as 80,000 yen is being charged for some limited-edition IQOS models.
 
"When Philip Morris can supply enough to meet demand then its push in to the market is very likely to accelerate," UBS Securities Japan analyst Naomi Takagi said.

Social stigmas attached to tobacco are eased and some of smokers' health concerns are addressed by e-cigarettes. As overall cigarette sales shrink globally, tobacco firms are battling to take an early lead in the emerging market.
 
According to research company Euromonitor, with a growth rate of five folds to reach $8 billion in 2014 compared to 2010, sales of e-cigarettes are booming on the other hand. Euromonitor predicts hat by the year 2002, the market is likely to be 20 times the 2010 level. Globaly cigarette generates about $750 billion in revenue.
 
By the end of the year, Philip Morris plans to widen sales of iQOS to 20 countries.
 
Japan Tobacco is struggling to counter the challenge with its own device eve as this former state tobacco monopoly enjoys 60 percent of its domestic market. A vapor from a liquid that is passed through granulated tobacco is created in JT's electronic cigarette stick which is dubbed the Ploom TECH.
 
Yet with no clear indication yet when it will have sufficient production output to do so, the world's No. 3 cigarette maker has so far been unable to match iQOS's nationwide launch.
 
"It doubtful JT will manage a wider launch before the end of the year," Takagi at UBS Securities said.

(Source:www.reuters.com) 






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