Tag: Japan Tobacco International

JT: Strong Quarter Despite Uncertainty

JTI’s headquarters in Geneva
The JT Group reported revenues of ¥581.5 billion ($4.45 billion) in the first quarter of 2022, up 6.2 percent over that reported in the first quarter of 2021. Adjusted operating was ¥194.9 billion during the quarter, 9.4 percent more than in the comparable 2021 quarter. The JT Group posted an operating profit of ¥178.4 billion and a profit of ¥124.1 billion in the quarter, up 11.4 percent and 9.1 percent, respectively, over the 2021 quarter.
“Following the combination of the tobacco businesses this year, the JT Group delivered strong results with adjusted operating profit at constant FX increasing by 4.5 percent,” said JT Group CEO Masamichi Terabatake in a statement. “However, several uncertainties remain, such as the changing operating environment in Russia, the rapidly evolving operational costs and a very volatile inflation. Considering these factors, as of the first quarter, we have decided not to revise the full year guidance.
On March 10, the JT Group announced the suspension of new investments and marketing activities in Russia. The company is currently evaluating various options for its Russia business, including potentially transferring its ownership.
Russia is one of the JT Group’s largest markets. The company has four factories and employs nearly 4,000 people in the country. Terabatake said the company remains committed to its employees in Russia, including to secure their employment.
“We will continue to closely monitor the situation and prioritize the safety of our employees and their families by extending all possible support to affected people. We will take all necessary decisions to address the changing situation in accordance with the group’s management principle, which is to pursue the 4S model.”
Under the 4S model, the JT Group strives to fulfill its responsibilities to consumers, shareholders, employees and the wider society.
April 28, 2022
Russian Tobacco Mogul Faces Scrutiny

Photo: GAlexS
Metro published a profile of Russian tobacco mogul Igor Kesaev, who has been sanctioned by the EU and the U.K. for aiding Russia’s invasion of Ukraine.
Listed by Forbes as Russia’s 35th-richest person last year, Kesaev’s holdings have included a major stake in the V.A. Degtyarev factory, which makes machine guns, anti-tank and anti-aircraft weapons, some of which have been used in Ukraine, according to sources.
Until recently, Kesaev was also the board chairman of Russia’s leading tobacco distributor, TC Megapolis. Kesaev resigned from the board on April 11, 2022, according to a Russian-language press release, which stressed that Megapolis was not subject to EU sanctions and Kesaev did not influence the company’s business.
Kesaev’s involvement in tobacco dates to the early 1990s. As the Soviet Union broke up into its constituent republics, he started an importing business that worked with international tobacco companies eager to get their products into the Russian market, according to a 2014 profile of the magnate published on Forbes’ Russian website.
Russia was—and continues to be—an attractive market for international tobacco companies, with its large population of around 145 million people and one of the highest smoking rates in the world. More than 40 percent of men there light up, according to the World Health Organization.
According to the Forbes profile, Kesaev graduated from Russia’s prestigious Moscow State Institute of International Relations. In the 1990s, he lived in Switzerland, where he developed personal connections with executives at Philip Morris International’s regional headquarters in Lausanne.
Over time, Kesaev built the largest tobacco distributor in Russia through acquisitions of regional competitors, according to Forbes’ Russian website. Today, Megapolis delivers to 160,000 retailers across the country, according to the firm’s website. In 2013, PMI and Japan Tobacco International both purchased 20 percent stakes in Megapolis’ holding company for $750 million each.
Kesaev has also been involved with the tobacco business in Ukraine. Following the toppling of Ukraine’s pro-Russian president, Viktor Yanukovych, in 2014 and Russia’s subsequent annexation of Crimea, Ukrainian officials began scrutinizing the role of Russian companies in various sectors of its economy.
At the time, Trading Company Megapolis-Ukraine controlled 99 percent of Ukraine’s tobacco distribution market, according to research from the Anti-Monopoly Committee of Ukraine.
Kyiv sanctioned Kesaev in 2016 for unspecified actions that it said threatened Ukraine’s national security. A top Ukrainian prosecutor later accused Kesaev of supporting “terrorist organizations” by supplying arms to Russian-backed separatist groups that have been fighting for nearly a decade to carve out two independent states—Donetsk and Luhansk—in eastern Ukraine.
April 26, 2022
Heading for the Exit

Photo: Matvey Salivanchuk
Following Russia’s invasion of Ukraine, tobacco companies to retreat from one of the world’s top cigarette markets.
By Stefanie Rossel
Amid growing pressure, the four leading international tobacco manufacturers have joined the exodus of U.S. and European companies that has followed Russia’s invasion of Ukraine. In early March, after the United States, the European Union and Great Britain imposed economic sanctions, all major cigarette makers announced that they would suspend operations or pull out of Russia altogether—although some did so less enthusiastically than others.
After initially announcing it would merely suspend its planned capital investments in Russia, BAT quickly made a U-turn, signaling a far greater retreat. On March 11, the company announced that its ownership of the business in Russia was no longer sustainable in the current environment, which it described as “highly complex, exceptionally fast-moving and volatile.” BAT is in advanced talks to transfer its Russian business to the SNS group of companies, its distributor in the country since 1993. According to SNS, the level of production and the supply and distribution chain would be maintained with a transfer. As a result of the withdrawal, BAT reduced its annual revenue growth outlook to between 2 percent and 4 percent from the 3 percent to 5 percent announced in February.
BAT’s move came a day after a Russian government commission approved the first step toward nationalizing the assets of departing foreign companies. On March 10, Russia’s economic development ministry published a draft bill that would give state-owned Vnesheconombank and the state export guarantee agency the right to seize the property of foreign firms that left Russian markets of their own accord. The proposed law would treat a corporate decision to exit the business as a criminal bankruptcy and empower authorities to initiate criminal justice proceedings against local management, BAT Chief Marketing Officer Kingsley Wheaton told Reuters in an interview.
After announcing plans to scale down its operations in Russia on March 9, Philip Morris International in late March specified the concrete steps it would take, saying it was working on options to exit the Russian market “in an orderly manner.” The company stated that it had discontinued some of its cigarette brands offered in the market and suspended its marketing activities. Furthermore, it had canceled all product launches planned for this year in Russia, including the introduction of its new tobacco-heating product (THP), IQOS Iluma, and its plans to manufacture more than 20 billion Terea sticks, the consumables for IQOS Iluma. Production of the latter would have involved an ongoing investment of $150 million, which the company also canceled.
JTI, meanwhile, limited its withdrawal from Russia to a suspension of all new investments and marketing activities along with the launch of its most recent THP, Ploom X.
Imperial Brands, which has a relatively small footprint in Russia, announced on March 15 that it had started negotiations with a local third party about a transfer of its Russian assets of operations. “We believe that, in the current circumstances, an orderly transfer of our business as a going concern would be in the best interests of our Russian colleagues,” Imperial Brands wrote in a statement.
In addition to their actions in Russia, all four cigarette manufacturers temporarily closed their production sites in Ukraine to protect their workforce and have pledged to continue paying the salaries of employees in the affected countries.

The decision to leave Russia not only has financial consequences, but it also presents practical challenges. (Photo: Tobacco Reporter archive)
Between a Rock and a Hard Place
In deciding their course of action, cigarette manufacturers faced a dilemma of choosing either to leave and protect their reputations or to stay and continue to benefit from the world’s fourth-largest tobacco market.
The decision to leave not only has financial consequences, but it also presents practical challenges, according to Jon Fell, partner at Ash Park Capital. “It’s one thing to say, ‘we’re no longer going to send our luxury handbags or fashionable training shoes to Russia,’ but if, in addition to factories or distribution centers, you have hundreds or thousands of employees in the country—who up until now have been seen as an integral part of your international company—then you have to take difficult and complex decisions, and there’s no obvious easy, right answer,” he says.
“Sorting the mess out takes time, and you can’t just abandon employees,” adds Fell. “I don’t think the approach of the tobacco industry overall is very different to that of other consumer packaged goods companies, quite a few of whom are continuing to operate in Russia right now—and drawing criticism because of that.”
Russian cigarette makers sold 206 billion cigarettes with an estimated value of $717 billion in 2020, according to Euromonitor International. The market has been declining at a 6 percent compound annual rate over the past 10 years and almost 7 percent over the past five years.
At the same time, the country has developed into a promising market for THPs, which, according to Moningstar, accounted for 11 percent of the total tobacco market in 2021, making the country one of the largest markets for these products outside of Asia.
With a volume share of 38 percent in 2021, JTI has the greatest exposure to Russia of the tobacco multinationals, according to Euromonitor. The company, which in 2018 acquired Donskoy Tabak, has four factories and 4,000 employees in the country. It has invested over $4.6 billion in the past 20 years. In 2020, its tax payments accounted for 1.4 percent of Russia’s state budget. Russia represented almost 16 percent of group volume in 2021, according to Morningstar.

It’s one thing to say, ‘we’re no longer going to send our luxury handbags or fashionable training shoes to Russia,’ but if, in addition to factories or distribution centers, you have hundreds or thousands of employees in the country, then there’s no obvious easy, right answer.
Jon Fell, partner at Ash Park Capital
Costly Exits
For PMI, Russia accounted for almost 10 percent of cigarette and THP unit shipment volume and around 6 percent of its total net revenues in 2021. With a market share of 26 percent, the company has three factories, more than 100 sales outlets and approximately 4,100 employees in the country. Ukraine, where PMI runs a factory in Kharkiv with around 1,300 employees, represents about 13 percent of PMI’s regional volume and contributed almost 2 percent to PMI’s total net revenues in 2021.
Morningstar expects PMI’s tobacco volume from Eastern Europe to decline by 45 percent in 2022 with a slow recovery thereafter as the collapse of the ruble is likely to create translational foreign exchange pressure.
Both Russia and Ukraine are important markets for IQOS, accounting for about 23 percent of PMI’s THP sales. PMI’s shipments of THP consumables in Russia increased from 13.6 billion units to 16.3 billion sticks in 2021 while shipments of cigarettes continued to fall. Considering Russia’s worsening economic outlook in the wake of international sanctions, however, a J.P. Morgan analyst doubted that PMI would still be able to achieve its next-generation product growth targets. Morningstar assumes that PMI’s write-down in case of a market exit could be approximately $7 billion, corresponding to 5 percent of the company’s market capitalization.
Ukraine and Russia combined accounted for 3 percent of BAT’s group revenue in 2021 and a slightly lower proportion of adjusted profit, the company said on its website. Morningstar estimates that the bulk of net revenue from these two countries, 2.5 percent, was generated by Russia, where BAT, according to Euromonitor, held 25 percent of the market in 2021. Employing some 2,500 people in Russia, BAT has a factory in St. Petersburg and 75 regional offices. Since the company entered the market in 1991, it has invested more than $1 billion in Russia. Morningstar reckons that the value of BAT’s operations will depreciate by around $2.2 billion, or about 2.4 percent of its market capitalization, as a result of its withdrawal from Russia.
Among the four players, Imperial Brands is a distant fourth, holding 8 percent of the Russian cigarette market. It operates a production site in Volgograd and has a workforce of 1,000. In 2021, the company said, Ukraine and Russia represented in total around 2 percent of net revenues and 0.5 percent of adjusted profits. Due to the limited profit contribution of the two markets, Imperial Brands explained it expected “a relatively small impact” on its constant currency adjusted profit.

Seeking a Backdoor
How the multinationals’ retreat will impact Russia’s illicit cigarette market is anyone’s guess. “It’s very hard to know how demand and supply of tobacco products will evolve in Russia given all that’s going on with sanctions, ownership of the industry and, presumably, local purchasing power,” says Fell. “I would certainly think that an increase in the size of the illicit market is a risk, and that’s also going to depend on how long this situation lasts.” Illegal cigarette sales represented 10.7 percent of the total Russian tobacco market in 2021, up from 4.6 percent in 2017, according to Statista.
Much will depend on how long the conflict continues. Considering the large amounts invested in Russia over the past 20 years, it’s safe to assume that cigarette manufacturers will do their best to minimize their losses. The companies have built strong positions in the Russian market, and there is demand for their products.
“I’d be surprised if any of the companies—not just the tobacco manufacturers—now exiting Russia are doing so in a way that would prevent their going back in the future, assuming that the war stops at some point, relations are normalized and reentry becomes conceivable,” says Fell. “But arranging that in a way which allows you to say you have exited the country for the time being is no doubt very tricky and is likely to be contributing to decisions taking some time to reach and to be implemented.”
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

April 13, 2022
JT Reports Robust 2021 Driven by Tobacco

Photo: JTI
The JT Group’s revenue increased 11.1 percent to ¥2.32 trillion ($20.15 billion) in 2021. Adjusted operating profit a constant exchange rates was up 22.9 percent to ¥598.4 billion. On a reported basis, operating profit increased 25.4 percent to ¥610.4 billion. The company reported an operating profit of ¥449 billion, up 6.4 percent over that reported in the previous year.
“The JT Group reported a robust performance in 2021, driven by strong momentum across the tobacco business,” said JTI President and CEO Masamichi Terabatake in a statement. “Our consumer-centric approach and strong brand portfolio have enabled share gains in the majority of our markets and resulted in a record sales volume in the international tobacco business.
“Despite a challenging operating environment, including the ongoing pandemic, the group accomplished several important milestones in the year. We implemented measures to generate sustainable growth, notably in our priority investment category where we launched our new HTS [heated tobacco sticks] device, Ploom X, starting in Japan. We also successfully implemented various initiatives related to the new operating model for the consolidated tobacco business, which went live this January.”
Going forward, JTI’s priority will be to expand its presence in the reduced-risk product (RRP) category, with an emphasis on HTS products. The company aims to break even in the RRP category by 2027 by achieving a heated tobacco segment share in the mid-teens across its key HTS markets.
“To reach this goal, we are accelerating necessary business investments and expect an annual average growth rate of adjusted operating profit at constant currency to be mid-single digit during the 2022 business plan period,” said Terabatake. “Furthermore, we plan to grow profit, which in turn will increase shareholder returns, in line with our shareholder return policy.”
February 14, 2022
Tobacco Firms Recognized as Top Employers
BAT, Japan Tobacco International and Imperial Brands have been named as top employers by the Top Employers Institute.
“Being named as a Global Top Employer for the fifth year in a row is a recognition of BAT’s inclusive, engaging culture and innovative working environment,” said Hae In Kim, director of talent, culture and inclusion at BAT, in a statement. “We are continually striving to maintain a workplace where employees feel empowered and well supported, and we are delighted this has been recognized.
“It is an honor to once again be certified by Top Employers Institute,” said Howard Parks, JTI’s senior vice president of people and culture, in a press note. “Our people are at the heart of everything we do, which is why we aim to offer them the best possible working environment. Giving our over 40,000 colleagues the opportunity to grow and providing them with the optimal conditions and support to fulfil their potential is of paramount importance to us.”
“I am delighted that Imperial has been recognized as a Top Employer for another year,” said Alison Clarke, Imperial’s chief people and culture officer, in a statement. “Imperial Brands is a great place to work, grow and develop, and it’s particularly pleasing that—in these challenging times when we can’t always congregate in the way we would like—our people have shown real resilience and embraced new ways of engaging to create an even better place to work.”
The Top Employer certification process is conducted annually by the Top Employers Institute, an independent organization that studies the employee offerings of major employers around the world. Certification recognizes employers that provide best-in-class employment practices, allowing employees to develop themselves personally and professionally while driving business results. Participating companies undergo a rigorous assessment process, which includes an extensive review of employer practices. Several validation sessions are held where evidence of these practices is provided, and an independent audit of the findings is also carried out.
January 20, 2022
JT Group ups Forecast on Robust Nine Months

Masamichi Terabatake
(Photo: JT Group)
The JT Group reported year-to-date revenue of ¥1.77 trillion ($15.5 billion), up 10.9 percent over those in the first nine months of 2020. Adjusted operating profit at constant currency increased 21.9 percent to ¥538.1 billion. On a reported basis, adjusted operating profit increased 23 percent to ¥542.9 billion. The group’s operating profit was ¥480.7 billion, up 23.2 percent over last year’s period. Based on its performance, the JT Group increased its financial forecasts for the full year.
“The JT Group reported a robust year-to-date performance, driven by strong momentum across the tobacco businesses. Our volume performance continued to be strong, driven by market share increases and stable industry volumes from longer than expected travel restrictions,” said JT Group President and CEO Masamichi Terabatake in a statement.
“We revised our full year forecasts upward, reflecting the robust results delivered in the first nine months of 2021 and also favorable currency trends. Following the upward revisions of our forecast, we are pleased to inform our plan to raise our annual dividend guidance by ¥10 to ¥140 per share.
“In Japan, we have received very encouraging feedback from consumers on Ploom X. However, the global semi-conductor shortage is impacting production of heated tobacco devices, so for the remainder of the year, we will prioritize the device supply in the Japanese market where we have already launched Ploom X. We will continue to strive to secure share growth.
“In addition, with our one tobacco business new operating model from January 2022, we will further strengthen our business foundation as well as build a more agile and consumer-centric organization.”
October 29, 2021
Japan Tobacco Launches Ploom X

Photo: JT/JTI
Japan Tobacco is launching Ploom X, its next-generation heated-tobacco device, on Aug. 17, 2021. Ploom X will gradually be made available across Japan, including in convenience stores and select tobacco retail stores. Ploom X will also be available for pre-launch sale at the Club JT online shop from July 26, 2021.
The device was jointly developed by JT in Japan and JTI, the group’s international subsidiary headquartered in Switzerland.
“Ploom X is the first global device developed by JT and JTI, bringing together all our resources to offer the best user experience of our time,” said Daniel Torras, senior vice president of reduced-risk products, in a statement.
“We are delighted to be able to offer this new innovative product to adult consumers in Japan, the world’s leading heated-tobacco market and where product standards and quality are of the highest importance. Listening to consumers globally, we have created a proposition that is aligned with today’s lifestyles and choices. This includes a more authentic tobacco taste, new connectivity possibilities and several options to personalize the device to everyday needs.”

Ploom X is the first global device developed by JT and JTI, bringing together all our resources to offer the best user experience of our time.
Daniel Torras, senior vice president of reduced-risk products, JTI
The new device adopts the aesthetic and innovative “Nastro” design with a more intuitive user experience, with no buttons on its surface. In addition to allowing users to precisely control heating temperature, Ploom X is equipped with a new heating technology, Heatflow, which focuses on airflow.
Ploom X is also equipped with Bluetooth functionalities that connect with users’ smartphones, enable consumers to see the battery status, lock the device and much more.
Along with the device, improved heated-tobacco sticks are being rolled out. The regular tobacco stick flavor is blended with lamina, the most aromatic part of the tobacco leaf. There is a range of 12 different heated-tobacco sticks.
July 15, 2021
JTI to Offer Flexible Work Arrangements
JTI is giving its employees the flexibility to work up to 50 percent of their time per month away from the office, benefit from flexible core hours and work up to 10 days abroad, among other “New Ways of Working” (NWOW) measures, which redefine where and how work is done.
Following the success of remote working during the pandemic, JTI says it has built its new working model around four core elements: greater FLEXibility in ways to work, LEAD with more autonomy, LIVE a more balanced work-life blend and BELONG at JTI—regardless of if one is based in an office, factory or operates in the field.
“Like most people working today, and even before the pandemic hit, achieving more of a work-life balance has been a key priority for our employees,” said Howard Parks, senior vice president of people and culture at JTI, in a statement.
“Flexible working and the ability to work abroad for up to 10 days per year are the latest examples of measures to help every employee feel empowered to strike that balance. Performance and outcomes are what matter here, not hours spent in the office.”
JTI’s NWOW guidance follows the launch in January of the company’s pioneering equal family leave policy, which offers a minimum of 20 weeks fully paid leave to all new parents globally.
We recognize the responsibility we have to do all we can to support our employees and that being happy and content in how they balance their work and personal lives will serve everybody for the better.
Christiane Bisanzio, vice president of diversity and inclusion, JTI
“We recognize the responsibility we have to do all we can to support our employees and that being happy and content in how they balance their work and personal lives will serve everybody for the better,” said Christiane Bisanzio, vice president of diversity and inclusion at JTI. “We understand the importance of flexibility and the need to be agile, which is why our new policy is intended to be evolutionary, and with every new learning, we will improve and refine our approach. As far as JTI is concerned, work is an activity, not a place or time.”
The new policy was rolled out on July 1, 2021, and an additional measure of a four-day work week will be piloted in the first quarter of 2022 across selected locations. Further steps are being taken, including close collaboration with markets, to ensure flexibility is offered to factory and sales teams, including piloting remote working in mature locations from 2022.
July 8, 2021
Japan Tobacco Reports ‘Robust’ First Quarter

Photo: JTI
The Japan Tobacco Group reported revenue of ¥547.4 billion ($5.02 billion) for the first quarter of 2021, up 5.3 percent over the revenue reported in the 2020 first quarter. Adjusted operating profit increased 21.3 percent to ¥178.1 billion while operating profit was up 24.2 percent to ¥160.1 billion. At constant currency, adjusted operating profit was ¥186.9 billion, up 27.2 percent from the 2020 quarter.
“JT Group maintained a strong momentum in the tobacco business, mainly fueled by continued market share gains in combustibles in many markets. Furthermore, temporary and favorable industry volume trends in some mature markets resulted in a robust first quarter,” said Masamichi Terabatake, president and CEO of the JT Group, in a statement.

JT Group maintained a strong momentum in the tobacco business, mainly fueled by continued market share gains in combustibles in many markets.
Masamichi Terabatake, president and CEO, JT Group
“As announced in February, we are focusing our management resources on heated-tobacco sticks and are currently preparing the launch of Ploom X, our next-generation device in this category, in the second half of this year. Additionally, we are making steady progress as planned in developing a blueprint of our new operating model and organizational structure for a combined tobacco business from 2022.
“With our robust first-quarter performance, we aim to achieve our full-year forecast. However, we cannot ignore the uncertainties that the Covid-19 pandemic poses, so we will continue to closely monitor the changing operating environment.”
For the full-year 2021, the JT Group expects revenue to decrease by 0.6 percent to ¥2.08 trillion. Consolidated adjusted operating profit at constant currency is expected to increase by 5.1 percent to ¥512 billion.
On a reported basis, adjusted operating profit is forecast to decrease by 2.5 percent to ¥475 billion. Operating profit is forecast to decrease by 22.6 percent to ¥363 billion.
April 30, 2021
JTI Accused of Stealth ‘Social’ Advertising

Photo: Panuwat D
The Bureau of Investigative Journalism has accused Japan Tobacco International (JTI) of placing stealth advertisements for its tobacco products on Facebook and Instagram in Germany. Germany bans marketing tobacco to teenagers, and the social media platforms prohibit ads or branded content that promotes tobacco-related products.
JTI reportedly set up social media pages that look like lifestyle groups, appearing to center on events, travel and music. The pages were said to promote Camel, American Spirit and Winston cigarettes.
According to the Bureau of Investigative Journalism, “These pages—which are listed under ‘festival’ and ‘community’ in Facebook’s transparency section—use the fonts, color schemes and imagery associated with the brands without making any affiliation explicit, a technique known as alibi marketing.
“The practice appears designed as a workaround to skirt both Facebook’s rules and the German law stating that it is ‘illegal to use promotional information that is likely to encourage juveniles and young adults to engage in [tobacco] consumption.’”
“Our social media accounts represent customary activities within our industry,” JTI responded. “We use age restriction options on our platforms so that minors cannot visit our pages. Our closed communities are only accessible to registered adult smokers.”
The pages require users to enter their names, dates of birth and addresses, which are checked against official German records.
Facebook said no ad brought to its attention violated its policy.
April 27, 2021