Monday, April 29, 2013

No. 35: Japan Tobacco gives a lesson for global business development (April 28, 2013)

Japan Tobacco increased the consolidated operating profit 16% over the previous year to more than 532 billion yen in the fiscal year ended March 2013, renewing the past highest consolidated record two years in a row. The company is expected to achieve a two-digit increase in operating profit again in the fiscal ending March 2014. Why is its business so brisk against the background of movements against smoking?

The answer is simple. They cultivated foreign markets and increased its share in the domestic tobacco market. The sales increased 4% to about 2,120 billion yen, of which tobacco sales from foreign markets increased 5% to 1,011 billion yen. Especially, they successfully introduced high-end highly profitable brands like Winston in Russia and the surrounding countries, taking advantage of the growing income level in this region. Sales of these brands increased 10% over the previous year in the number of cigarette. They increased the price of their brands in Russia, France, and Italy. The price hike contributed to the increased profit rate greatly. They focus on cultivating promising foreign markets and introducing premium brands to the upmarket as the income level grows. The strategy is totally simple and logical. They are also successful in the domestic market, increasing the domestic tobacco business 6% to about 690 billion yen. The share increased from about 55% to 60%. This can partly be attributed to the strategy to change the name of the bestselling brand “Mild Seven” to “Mevius.”

The lesson that Japan Tobacco gives is simple: Expand the share both at home and abroad and focus on promising markets with excellent products.  

 From Mild Seven to Mevius

1 comment:

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