BMI View: Japan Tobacco's drop in revenue and cigarette volume sales in H117 has pushed the company to expand into emerging Asian markets, like the Philippines and Indonesia. Indonesia has long been our top pick for tobacco sales growth and believe that it will continue to witness high growth in tobacco spending between 2017 and 2021. We believe there are further opportunities for tobacco uptake in Southeast Asia, including Vietnam, and expect to see increased levels of investment in the region over the coming years. Japan Tobacco (JT) is facing falling sales in its domestic market of Japan, with the company announcing a downwards adjustment in its operating profit in 2017 by JPY14bn, driven by persistent cigarette sales volume decline. The company reported a drop in its domestic cigarette sales volume by 11.2% over H117 and a fall in revenue from its domestic business market by 7.6% over the same period. This comes on the back of a decline in Japanese smokers, with the smoking prevalence among adult males dropping from 51.3% in 2000 to 33.7% in 2015 (latest available data) according to the World Bank. In addition, the tobacco group has faced stiff competition from international competitors and the growing popularity of the tobacco vapour category, as an alternative to cigarettes.
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