JTI: Not in Disposable Game Yet, Exploring Opportunities in Nicotine Pouch

Japan Tobacco (JT) released a report on October 31 which stated that its total revenue for the first three quarters of 2023 increased by 7.4% compared to the previous year, reaching 2,157 billion yen (approximately 14.3 billion USD). Additionally, the company's net profit saw a year-on-year growth of 9.5%, reaching 442 billion yen (approximately 2.9 billion USD).

Masamichi Terabatake, President and CEO of Japan Tobacco, stated that despite fierce market competition, the company's tobacco business continues to experience substantial growth, driven by stable market share expansion and strong pricing strategies.

He openly admits that the company is ramping up its investments in heated tobacco products to establish a foundation for future growth. Despite intense competition in the market, their product Ploom X has already captured a market share of over 10% in the Japanese heated tobacco industry and has shown steady growth from July to September 2023.

Recently, 2FIRSTS conducted an exclusive interview with Japan Tobacco International (JTI) to gain insights into their strategic positioning in the field of emerging tobacco products.

In the exclusive interview, JTI announced that its latest product, WITH2, has been launched in the Japanese market. At the same time, they have plans to expand the market share of their heated tobacco product, Ploom X, globally. It is anticipated that by the end of 2024, Ploom X will be further expanded to 28 countries.

However, JTI has explicitly stated that they have not yet allocated resources to compete in the sales of the currently highly anticipated disposable e-cigarette products, as this emerging niche market faces multiple challenges.

In addition, JTI has announced plans to invest up to 300 billion Japanese yen (approximately 2 billion US dollars) in harm reduction products between 2023 and 2025, with a particular focus on heated tobacco products. They also intend to invest in research and development for niche markets such as heated tobacco and nicotine pouches.

Here is part of the interview:

2FIRSTS: Can you share with our readers JTI’s core values to Tobacco and New Tobacco?

JTI:  JTI believes in the freedom of adults to choose whether they want to smoke or use nicotine products which have the potential to reduce the health risks associated with smoking, such as heated tobacco products, e-cigarettes, and nicotine pouches. At the same time no one should smoke or vape unless they understand the risks that come with it. At JTI, one of our priorities is to provide all the information about our products to our adult consumers so they can make an informed choice on whether they wish to consume them.

2FIRSTS: Has WITH2 already been released in the Japanese market? How is it performing?

JTI: In August 2023, JT introduced a new infused tobacco vapor device called WITH 2 under its new brand WITH. WITH utilizes JT's exclusive patented injection technology, making it compact, portable, and extremely user-friendly, offering adult users a superior sensory experience. WITH 2 is specifically designed for social compatibility, catering to the diverse needs of different users.

As of now, WITH products are only available in the Japanese market. Starting from August 7, 2023, the product will be sold online, and from early September 2023, the sales channel will be expanded to offline stores.

Given that WITH 2 has just been released, detailed information about its product performance may still be in the early stages of release. Therefore, it is necessary to wait for further news and reviews.

2FIRSTS: Can you provide an introduction to JTI's new tobacco product (NGP) portfolio? And how has the Ploom series performed globally?

JTI: JTI believes that reduced-risk products (RRPs) represent the potential to decrease smoking-related risks and are a crucial step in our ongoing development and path to the future. We are continuously expanding our range of smoke-free alternatives, which include Ploom X - heated tobacco product, WITH - infused tobacco product, Logic - e-vapor or e-cigarette product, and Nordic Spirit – nicotine pouches or oral nicotine product. This diversified product portfolio aims to provide consumers with safer options and help reduce smoking-related risks.

Ploom X, the latest and most advanced heated tobacco device from the JTI Group, made its debut in the Japanese market in August 2021. It is expected that by the end of 2024, Ploom X will expand to 28 countries and have plans to reach even more regions by 2025.

As of the second quarter of 2023, JTI has increased its market share in the heated tobacco sector in Japan to 9.5%. Furthermore, our global user base continues to grow steadily, surpassing 1 million users, reflecting a year-on-year growth of approximately 45%. This robust growth trend demonstrates the outstanding performance of JTI Group in the heated tobacco industry.

2FIRSTS: How does JTI view the rapid growth of disposable e-cigarettes and the prevailing trend of pod-system products in Europe?

JTI: We understand the rapid growth of the disposable e-cigarette market, however, we have not yet dedicated resources to compete in selling this product because this emerging niche market faces various challenges.

2FIRSTS: Has JTI ever launched e-cigarettes before? Why did JTI miss the opportunity to capitalize on the high growth potential of e-cigarettes?

JTI: Our e-cigarette product, Logic, has currently entered the markets of the United Kingdom, Ireland, and the United States. Our business philosophy emphasizes consumer-centricity and a commitment to prioritizing investments in heated tobacco sticks, while also not neglecting necessary investments in the traditional tobacco sector. Additionally, we will continue to increase investments in niche markets such as injectable tobacco and nicotine pouches.

2FIRSTS: Are there any other research and development investments or plans by JTI in reducing the harmfulness of tobacco products? If so, is there any data or information that can be disclosed?

JTI: During the period from 2023 to 2025, we will be investing up to 300 billion yen in the field of harm reduction products, with a primary focus on heated tobacco products. We also have plans to invest in research and development for niche markets such as injectable tobacco and nicotine pouches. A significant portion of this substantial funding will be allocated towards ongoing R&D efforts.