Japan Tobacco Inc (JTI) announced a new operating model last week to strengthen the competitiveness and profitability of its tobacco business. A major change will be moving the headquarters of its Japan domestic tobacco business to Geneva, Switzerland to join its international arm there. Therefore, JTI in Geneva will take the lead in management strategy, product development, and sales planning for the Japan market.
“This is the most important turning point since our foundation” said JT group president and c.e.o. Masamichi Terabatake at an online press conference. “We need to allocate resources efficiently to win out. In a press release, Masamichi says the consolidation of the international and domestic divisions will enable the company to “fully leverage our company-wide resources and clearly prioritize business investments globally.”
“We have made progress in several areas to strengthen our global competitiveness and business foundation, including the formation of global teams for our R&D and RRP [reduced risk products] functions as well as transforming the operating and organizational structures in the international tobacco business.
He said that JT has successfully transformed itself over the year “through large-scale transformative acquisitions, such as RJRI and Gallaher, and geographical expansions into emerging markets." And he adds that JT "has expanded its sales through enhanced brand equity, with a focus on global flagship brands, and invested in [RRP] to expand sales.”
The group’s objective going forward is to operate with a stronger consumer-centric mindset and prioritize investments in heated tobacco sticks in the RRP category while maintaining necessary investments towards combustible products. The combination of the two tobacco businesses will enable efficient and effective deployment of resources within the group.
In fiscal 2020, JT sold 68.7 billion cigarettes in Japan, or one-fifth the 303.2 billion sold in fiscal 1985. In contrast, JT sold 435.7 billion cigarettes overseas in fiscal 2020, far more than in Japan. About 70% of the company’s revenue of about ¥2.1 trillion came from overseas
Overview of the initiative to consolidate the existing tobacco businesses into one tobacco business.
Objectives: strengthen the competitiveness in the growing RRP category by leveraging global resources; simplify the organization structure to improve speed in decision-making while building an effective and efficient organization structure; maximize the value offered to consumers through timely resource allocation in a prioritized manner, from a global perspective; unify the tobacco business operations further into one team to proactively offer a portfolio of products and services to anticipate the needs of individual markets; share and deploy best practices on a global basis to accelerate the learnings across different categories and markets.
Actions: consolidate the headquarter functions of the tobacco business, including the Japan market, currently in Tokyo into the existing headquarters of the international tobacco business in Geneva; strategy development functions, performance management functions and decision-making processes for the tobacco business will be consolidated; operate the Japanese market as a key market in a new unified tobacco business; consolidate the reporting lines of supply chain functions of the global tobacco business (manufacturing, leaf procurement, quality assurance, etc.) following the successful consolidation of the R&D functions
The consolidation of the tobacco businesses is scheduled for January 2022.