Next Generation Products: Japan Tobacco International
Like its competitors, Japan Tobacco International (JTI) has been investing in tobacco and nicotine products that, unlike cigarettes, have potential for growth in developed markets. These products are known as Next Generation Products (NGPs) and are often publicly linked to tobacco companies' harm reduction strategies and labelled “reduced-risk products” (RRPs).
On its corporate website, JTI underlined the importance of “RRPs” to the company's future:
“RRPs are core to the sustainability of our business, as we need to meet ever-evolving, increasingly diverse consumer demands with the best and widest variety of smoking experiences. That’s why we have committed to providing the widest range of consumer choice in the RRP category.”
Snus is a smokeless tobacco product, traditional to Sweden, sold as a paste or in a tiny pouch that is placed between the gum and upper lip for a period of time.
- For more details about this product, see our page on Snus.
Gallaher, acquired by JTI in 2007, was the first cigarette company to invest in snus when it bought a small Swedish snus manufacturer called Gustavus in 2002. In 2013, JTI’s parent company, Japan Tobacco briefly trialed Zerostyle snus in Osaka, Japan, but with little apparent success.
From 2017, JTI has been selling snus in Norway and Sweden through its wholly-owned subsidiary, Nordic Snus. It sells two brands, LD and Nordic Spirit, the latter being a tobacco-free snus (see image 1).
The product category only featured twice in the company’s 2018 annual report, both times as a footnote only. And although the company continues to sell snus, the focus of JTI’s NGP strategy is on HTPs and e-cigarettes.
- For more information about the company's snus investments, go to Cigarette Companies Investing in Snus.
Heated Tobacco Products
JTI’s current HTPs use a hybrid technology which heats a liquid to create a vapour (similar to an e-cigarette), and then passes the vapour through a tobacco-containing capsule. In 2010, JTI’s parent company Japan Tobacco (JT) had launched Zerostyle Mint in Japan, which it described as a “smokeless”, snuff-like tobacco product. However, this device required the user to inhale by mouth through a capsule containing tobacco leaf, unlike snuff which is placed directly in the nose.
Although this was not an HTP, as it did not require lighting or heating, it was a precursor to later devices in terms of its design and also the company’s NGP strategy. Zerostyle Mint was not marketed as a reduced-risk product, but nonetheless was a way for JTI to circumvent social problems associated with smoking, as well as smoke-free regulations. JT’s media release stated at the time:
“The new product does not require a flame, and thus is smokeless, allowing consumers to use it in a variety of locations, being considerate to neighbors [sic] at the same time”.
In 2011, JTI entered into a partnership with San Francisco-based entrepreneurial company Ploom Inc. (which was later renamed Pax Labs: for more information see JUUL Labs). The aim was to commercialise Ploom Inc.’s HTP product, called Ploom, outside the US. It is likely that when JTI gained access to the Ploom product, it ceased sales of its own Zerostyle product. The last time Zerostyle featured in JT corporate external communications was October 2013.
The partnership between JTI and Ploom Inc. came to an end in 2015, and JTI acquired a number of patents and trademarks relating to the product. Since then, JTI has continued to develop, and bring to market, variants of Ploom.
In 2019, the company had three Ploom products in its portfolio: Ploom TECH, Ploom TECH+, and Ploom S (see image 2). What sets the Ploom TECH products apart from other HTPs on the market is that they heat tobacco at “low temperature”: 30°C and 40°C, respectively. In comparison, a conventional cigarette heats to around 600°C; Philip Morris International (PMI)’s IQOS to 350°C;  British American Tobacco (BAT)’s glo to 280°C; and Ploom S, developed by JTI after Ploom TECH, to 200°C. JTI sells a range of tobacco sticks for use with Ploom devices under its Mevius tobacco brand. In December 2019, Japan Tobacco announced that it was introducing new sticks under the Camel brand, for sale in Japan from 2020.
JTI’s HTPs are sold in Japan, Switzerland, the United States (US) and Canada. Despite HTPs appearing to be the main focus of JTI’s NGP strategy, the company has struggled to gain market share, especially in its domestic market. JTI has been criticised for not being able to keep up with market leader PMI, which according to Reuters held 71.8% of Japan’s HTP market in 2018. JTI initially attributed this to repeated production delays which resulted in the company having to suspend sales and being unable to meet consumer demand. But in its 2019 Q3 Results presentation to investors, the company admitted that it was facing “increasing competition in the high-temperature heating category” and that its products were not adequately meeting consumer needs. On its Ploom S product, which was launched in August 2019 (and which falls in the ‘high-temperature heating category’), the company reported that “Trials and retention [were] below our expectation”. A company press release followed in November 2019, announcing that JT was permanently reducing the retail price of Ploom S in Japan from 7,980 yen to 3,480 yen (USD equivalent: $72 to $31).
JTI appears more cautious in its reduced risk claims than its main competitors, PMI and BAT. In 2019, the company website stated: “We cannot say today that Ploom TECH is safer than smoking regular cigarettes but tests have shown that Ploom TECH has a 99% reduction in the constituents recommended by WHO for reduction in cigarette smoke.” However, elsewhere on the website JTI wrote: “Many consumers also choose vaping products for their reduced-risk potential. Increasingly convincing new evidence is emerging that justifies these choices.” The company did not indicate what “convincing new evidence” it was referring to.
E-cigarettes, also known as electronic cigarettes or Electronic Nicotine Delivery Systems (ENDS), do not contain tobacco. The product consists of a battery, a cartridge with nicotine liquid, and a heating mechanism that heats up the liquid to create a vapour.
- For more detail on what an e-cigarette is and the public health debate around the product, go to E-cigarettes: The Basics and E-cigarettes.
In 2014, JTI entered the e-cigarette market by acquiring small e-cigarette companies. First it bought UK-based Zandera, followed one year later by US company Logic. JTI initially sold two brands, E-Lites and Logic, but since 2016 all its e-cigarettes have been sold under the Logic brand (see image 3). In October 2019, the company stated that Logic was sold in 19 countries, including recent launches of the Logic Compact device in the Czech Republic, Germany, Israel and New Zealand.
- For more information, including Logic market share, go to E-Cigarettes: Japan Tobacco International.
Collaboration with Entrepreneurs
To complement its internal NGP Research & Development program, JTI collaborates with tech start-ups to help it grow its NGP business.
As detailed above, the company partnered with entrepreneurial company Ploom Inc in 2011 to develop HTPs. More recently, JTI enlisted the services of tech broker Plug and Play to run a program called “Vapetech”, which allows start-ups to pitch ideas to JTI to help it “explore and develop consumer relevant features for the next generation of products and services”. According to the JTI press release, up to 20 start-ups a year will be given the opportunity to be part of a 3 month program “to develop their product or services and have access to investment and corporate partnerships”.
- Japan Tobacco International
- E-Cigarettes: Japan Tobacco International
- Cigarette Companies Investing in Snus
- Heated Tobacco Products
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- Japan Tobacco International, JTI partners with Plug and Play to launch Vapetech incubator, Media Release, JTI website, 7 March 2019, accessed November 2019