Japan Tobacco International’s (JTI) Bold Move: A $2.25 Billion Investment in Heat Not Burn Technology
In a strategic business expansion, Japan Tobacco International (JTI), a leading name in the tobacco industry, is gearing up to invest a staggering 300 billion yen, which is approximately $2.25 billion, over the next three years. This significant investment is aimed at promoting their heat not burn product, Ploom X, with a substantial portion of the funds, 200 billion yen or about $1.5 billion, earmarked for markets outside of Japan.
Global Market Expansion and Initial Market Entry Costs
Masamichi Terabatake, the President of JTI, revealed in an interview that the lion’s share of this investment will cover the initial costs associated with entering new markets for promotional activities. This move comes as a response to the challenges faced last year due to a global semiconductor shortage and a lack of sufficient heating equipment for tobacco products, which hindered JTI’s ability to invest. Fortunately, with procurement returning to normal, JTI is confident that this year’s supply volume will more than double that of the previous year in Japan.
Past Investment and Future Plans
Although JTI has not disclosed the specific amounts invested in heated tobacco products from 2020 to 2022, it is clear that the current investment will surpass the expenditure of the past three years. Currently, Ploom X is available in Japan and the UK, with an imminent launch in Italy this month. The company has ambitious plans to roll out Ploom X in over 10 countries this year, with the goal of expanding to at least 20 countries by the end of 2024.
Joint Venture with Altria and FDA’s PMTA Application
In October 2022, JTI joined forces with Altria to establish a joint venture company, with the aim of securing the FDA’s PMTA (Premarket Tobacco Product Application) approval before 2025. This would allow their product to be marketed and sold in compliance within the United States, a crucial step in their global expansion strategy.
From Loss to Profit: The Road to Recovery
Due to long-term investments, JTI’s heating tobacco division is currently operating at a loss. However, the company is optimistic about turning this around by 2028, thanks to projected overseas growth. In addition to market expansion, JTI is also investing in research and development to create second and third generation Ploom X products, indicating a commitment to innovation and improvement in the heated tobacco space.
Global Market Trends and the Impact of Heated Tobacco
According to a report by Euromonitor International, a UK-based research firm, global cigarette sales experienced a 1.5% decline last year. In contrast, the heated tobacco market saw a robust growth of 17%, reaching a value of $33.4 billion. This significant shift underscores the potential of heat not burn products in the global tobacco market.
Russia’s Stance on Vape Sales
In other news related to the vaping industry, Russia has announced an increase in criminal penalties for illegal vape sales, highlighting the growing global concern over the regulation of vape products.
Japan Tobacco International’s massive investment in Ploom X not only signifies their commitment to the heat not burn product category but also reflects a broader trend in the tobacco industry’s shift towards innovative products. As the global market for heated tobacco products continues to expand, JTI’s strategic moves position them to capture a significant share of this growing market. With a focus on overcoming supply chain challenges, securing regulatory approvals, and driving product innovation, JTI is well on its way to becoming a major player in the global heated tobacco arena.
