Japan Tobacco International to Increase Cigarette Prices by 75%

Japan Tobacco International is the world’s third largest cigarette manufacture, lifting its position in almost three years due to speculation it can raise prices more than the tax increases advised by the health minister.

Japan Tobacco drove 6% to 370,000 yen, the highest intraday level since October 2008. Tobacco taxes in Japan have to be increased until the mean price of a package of cigarettes will constitute 700 yen ($9.15), or 75% higher than the present level, in order to reduce medical costs, Health MinisterYoko Komiyama stated in an interview.

“Tax increases will bring to Japan Tobacco’s revenue growth. If the price will be over 500 yen, it will affect the sales of tobacco, but tobacco companies can still increase revenue when their price growth reflects the higher costs, stated Mikihiko Yamato, a research partner at Japan Invest KK.

The ministry will try to increase tobacco taxes by 100 yen annually for three years.

“At that level, we can hope some people will have the desire to stop smoking, while maintaining the level of tax revenue. I think that it is also the best way to prevent smoking among teenagers,” said Komiyama.

Approximately 10% of Japanese under 20 had lighted up at least once, with 1.2% of them smoking every day, according to a statistics sponsored by the health ministry in 2007.

Attempt to increase taxes have been impeded by government possession of a controlling stake in Japan Tobacco and worries that tax revenue may drop for a country facing the world’s largest public debt.

The tax panel conducted by the Finance Minister Jun Azumi, advises dropping the government’s stake in Japan Tobacco to a third from about half. The manufacturer of Camel and Winston cigarettes has obtained 23% this year in Tokyo trading, valuing at market at 3.7 trillion yen, or $48 billion.

“It is evident that the government will sell a particular amount of Japan Tobacco shares, which will simplify the way company is doing business,” Japan Invest KK’s Yamato said.

The mean price of a package of 20 cigarette raised by 33% last October to 400 yen, or about $5.20. For instance in New York City the average price is $10.80.

Japan Tobacco analysts predict an 11% increase in revenue this fiscal year after raising prices in Russia and other tobacco markets.

The volume of cigarette sales dropped after a tax increase in October lifted prices, according to Japan Tobacco.

The plan to raise taxes comes after the manifesto of the acting Democratic Party of Japan, Komiyama stated. The given manifesto requires canceling the law that the government owns more than half of Japan Tobacco’s shares and states all tobacco-related issues should be added in the health agenda.

KT&G set to take the lead in slim-cigarette market with flagship ESSE brand

When asked what it the most popular cigarette brand in the world, the majority of adult smokers would probably name one of the iconic brands, such as Marlboro, Winston or Lucky Strike, produced by the world’s largest tobacco companies, Philip Morris International, Japan Tobacco International and British American Tobacco.

Nevertheless, if considering only the slim cigarette market segment, it seems that those legendary brands were bypassed by a newcomer, named ESSE and manufactured by South Korean KT&G, which has been steadily growing and capturing international market share.

The Seoul-based tobacco maker reported a two-fold growth in exports, selling 20.8 billion ESSE cigarettes on the international market, up from 11.2 billion in 2009, to outstrip its major competitors, Philip Morris’s Virginia Slims and British American Tobacco’s Vogue.

According to Euromonitor International, a UK consulting agency, KT&G sold 29.2 billion ESSE cigarettes in 2009, while PMI sold 17 billion Virginia Slim cigarettes and BAT sold 11 billion Vogue cigarettes.

“Since its launch in 1996, we have developed Esse cigarette brand as our global flagship brand. This premium brand is currently selling in more than 40 markets across the world including Middle East countries and Russia,” admitted Huh Up, director of global businesses for KT&G.

“It should be mentioned that ESE is currently the best-selling brand in super-slim segment of cigarette market in Iran, Indonesia and Uzbekistan. In Russia, ESSE holds more than 10 percent share of the super-slim segment.”

Mr. Huh mentioned that KT&G, former state-owned cigarette maker, entered the global cigarette market a decade ago, after the domestic market demonstrated saturation.

Trying to promote ESSE and make it a world-famous tobacco product, KT&G showed its potential at organizing various marketing events.

At present, the company is an overwhelming leader of the Korean cigarette market, with 85 percents of the domestic super-slim market.

When one of the styles of ESSE, was launched in the domestic market, it took about a week to reach milestone sales of 10 million packs, becoming the shortest ever period for the company.

Currently, ESSE offers many styles, such as ESSE Super-Slims Menthol and ESSE Super-Slims Special Gold.

“While exporting ESSE brand to other markets, we have opened several manufacturing units in major markets to keep up with growing sales”, Huh admitted. In addition, the company is set to promote its other brands and acquire competitive brands in order to become a solid player on the international tobacco market.

KT&G invested nearly $100 million to establish a production line in Kaluga Region, Russian Federation, in order to supply Eastern Europe region with ESSE cigarettes.

In addition, the company as well: opened manufacturing units in Turkey and Iran to work with Middle East and Asian markets.

Tokyo’s smokers – only venues make health advocates angry

Although Japan has prohibited smoking in the majority of indoor public areas, and even in most streets of the capital, still there is an isle of paradise for Tokyo smokers, called Café Tobacco.

Located in the center of Tokyo and filled with dense white tobacco smoke, ‘Cafe Tobacco’ provides shelter for numerous blue-collar employees from local office centers and other visitors seeking for a drag and a coffee.

“Today people think that smoking person is a villain and should be exorcized from the streets,” complained Masahiko Tonoguchi, a vice president of Towa Food Service Co, owner of Café Tobacco that opened is second café only for smokers in Tokyo last week and plans to launch similar venues in all major Japan cities.

Sitting under an air conditioner, which is constantly working to clean the air from thick smoke, Tonoguchi admitted that they wanted their Café Tobacco to become a refuge for local smokers who usually have nowhere to go to satisfy their need to have a puff.

Outside the Café Tobacco Outside hung a sign showing an amber cigar tip and saying that smoking inside is permitted, what prompted to drawing the attention of more than 500 customers each day, said Café’s manager Akiko Nakanuchi.

Puffing on his cigarette and drinking an ice-tea, Daito Takahashi, a 30-year-old manager, admitted he was delighted to get to know about the Café Tobacco.

“I believe it’s a success,” he exclaimed. “All the bars in this neighborhood prohibit smoking or have a small smoking section, that is always packed with people, eager to have a smoke and coffee break.”

He said that the café is a true refuge for smokers, since only here nobody glares at them accusing of all the sins. So the place has been a oasis for smokers where they can simply relax among other smokers, without any feeling of guiltiness for their unhealthy habit.

However, health groups and anti-smoking advocates are not happy with these smokers-only places.

Kosuke Morigami, a public health expert stated that cigarettes have been proven to be toxic and hazardous for health, so people should simply stop smoking for the sake of their health.

He said that there should not be such smoking-friendly places, but unfortunately, the Health department was not entitled to regulate individual property rights since it violates commercial laws.

The smoking rates in Japan have dropped in the previous years, but, nevertheless they are higher than in many other countries. Smokers account for 40 percent of all male population and 15 percent of women.

In 2002 government prohibited smoking in many public places, including educational facilities, shopping centers and hospitals, however there has been no-enforcement of these laws.

However, Tokyo City Council imposed their own anti-smoking legislation, banning smoking in public transport and even on the majority of streets, excluding specially designated smoking areas.

Japan Tobacco, a leading tobacco company in the country launched several campaigns to support smokers. Their latest campaign included “SmoCar”, a van, equipped with air conditioning system, driving around the city and permitting everybody who wants to have a puff, to stop it and smoke inside.

In 2008, the cigarettes sales in Jappan dropped by five percent, however still managed to generate almost 40 billion dollars.

Although cigarette packs have the same warning labels as in all other countries that signed WHO Tobacco Convention, they are less expensive than in other developed states, costing about 3 dollars per pack.