At a Glance 014 Review of Operations 016 Japanese Domestic Tobacco Business 016 International Tobacco Business 020 Pharmaceutical Business 026 Food Business 028 History of the JT Group 030 Notes: Financial data disclosed in “At a glance” are basically rounded. Financial data disclosed in “Review of Operations” are basically rounded down. Business & History The Japanese domestic tobacco business is positioned as the core source of profits for the JT Group. Under a difficult business environment, the Japanese domestic tobacco business continues to explore opportunities for top-line growth and at the same time to build an optimum operating structure. The international tobacco business is actively exploring opportunities for top-line growth so that it can continue to act as the JT Group’s profit growth engine. In the pharmaceutical business, JT will continue to devote efforts to increasing and advancing compounds in a late phase of clinical trial and enhancing the R&D pipeline. In the food business, we are devoting our efforts to the three business areas of beverages, processed foods and seasonings, striving to further strengthen our business foundation for future growth. Business & History page 013 JAPAN TOBACCO INC. Annual Report 2011
Transcript
At a Glance 014Review of Operations 016
Japanese Domestic Tobacco Business 016International Tobacco Business 020Pharmaceutical Business 026Food Business 028
History of the JT Group 030
Notes: Financial data disclosed in “At a glance” are basically rounded.
Financial data disclosed in “Review of Operations” are basically rounded down.
Business & History
The Japanese domestic tobacco business is positioned as the core source of profits for the JT Group. under a difficult business environment, the Japanese domestic tobacco business continues to explore opportunities for top-line growth and at the same time to build an optimum operating structure. The international tobacco business is actively exploring opportunities for top-line growth so that it can continue to act as the JT Group’s profit growth engine. In the pharmaceutical business, JT will continue to devote efforts to increasing and advancing compounds in a late phase of clinical trial and enhancing the R&D pipeline. In the food business, we are devoting our efforts to the three business areas of beverages, processed foods and seasonings, striving to further strengthen our business foundation for future growth.
Business &
History
page 012JAPAN TOBACCO INC. Annual Report 2011
page 013JAPAN TOBACCO INC. Annual Report 2011
2007 2008 2009 2011
270.0 258.5 245.8 233.9
100
200
300
210.2
2010
Source: TIOJ
Total Market(Billions of cigarettes)
2007 2008 2009 2010
174.9 167.8 159.9 151.9134.6
50
150
100
200
2011
Sales Volume(Billions of cigarettes)
Net Sales Excl. Excise Taxes(Billions of yen)
2007 2008 2009 2010 2011
729.4 715.0648.8 616.0 617.9
200
800
600
400
1,000
Note: 2007 – 2008: Excluding revenue from the imported tobacco.
2009 – 2011: Excluding revenues from the imported tobacco, domestic duty free, the China Division, and other miscellaneous.
Note: 2007 – 2009: After royalty acceptance 2010 – 2011: Before royalty acceptance, we have
changed allocation method of the overhead expenses from 2010.
2007 2008 2009 2010 2011
45.5 49.156.8
44.1 47.0
20
40
60
80
Net Sales(Billions of yen)
EBITDA Operating Income (Loss)
2007 2008 2009 2010 2011
–8.2–6.3
4.9
–9.7–11.2–9.6
1.0
–13.6 –13.3
–17.4–20
–10
–15
–5
0
5
10
EBITDA/Operating Income (Loss)(Billions of yen)
2007 2008 2009 2010 2011
326.5 306.7272.3 251.3 257.7245.4
222.3188.3 198.7 212.9
100
200
300
400
EBITDA/Operating Income(Billions of yen)
EBITDA Operating Income
At a Glance
Japanese Domestic Tobacco Business (Years ended March 31)
Overwhelm the competition in the home country market as the core source of profits.
JT GroupThe Japanese domestic tobacco business is the core source of profits for the JT Group. The business environment is becoming increasingly difficult due to a decline in overall demand in the domestic market and intensifying competition. In this business environment, the Japanese domestic tobacco business continues to explore opportunities for top-line growth and at the same time build an optimum operating structure.
The international tobacco business is continuously exploring opportunities for top-line growth so that it can continue to be the JT Group’s profit growth engine.
In the pharmaceutical business, JT will continue to build world-class, unique R&D capabilities and reinforce its market presence through innovative drugs by devoting efforts to increasing and advancing compounds in a late phase of clinical trial and enhancing the R&D pipeline.
In the food business, we are devoting our efforts to the three business areas of beverages, processed foods and seasonings, implementing measures to establish the highest standard of safety management and striving to further strengthen our business foundation for future growth.
Pharmaceutical Business (Years ended March 31)
Pursuing high value-added business by developing world-class innovative drugs
see page 16
see page 26
page 014JAPAN TOBACCO INC. Annual Report 2011
page 015
2007 2008 2009 2010 2011
286.6336.4
436.0394.7 375.0
100
200
300
400
500
Net Sales(Billions of yen)
EBITDA Operating Income (Loss)
2007 2008 2009 2010 2011
12.08.4
17.014.5
17.3
6.7
0.7
–11.5 –13.7–9.4
–15
–10
–5
0
5
10
15
20
EBITDA/Operating Income (Loss)(Billions of yen)
2006 2007 2008 2009 2010
240.1
385.6445.9 434.9 428.4
100
200
300
400
500
Note: 2008 – : Including cigars, pipe tobacco and snus, but not including contract manufactured products
Total Shipment Volume(Billions of cigarettes)
2006 2007 2008 2009 2010
149.1
203.2
245.5 243.4 249.8
100
200
300
Note: GFB in 2006: Winston, Camel, Mild Seven, Salem GFB in 2007 – : Winston, Camel, Mild Seven, Benson
& Hedges, Silk Cut, LD, Sobranie, Glamour
GFB Shipment Volume(Billions of cigarettes)
Note: 2006 – 2007: Excluding revenue from distribution. 2008 – 2010: Excluding revenues from distribution
contract manufacturing and other peripheral business. Note: 2006 – 2008: After royalty payment 2009 – 2010: Before royalty payment
2006 2007 2008 2009 2010
550.3
946.01,080.8
906.8 897.5
300
600
900
1,200
Net Sales Excl. Excise Taxes(Billions of yen)
2006 2007 2008 2009 2010
112.7
270.8
338.0
277.7
81.1
205.4174.8
136.9
288.2
156.1
100
200
300
400
EBITDA/Operating Income(Billions of yen)
EBITDA Operating Income
Food Business (Years ended March 31)
Increasing profits by achieving sustainable growth based on the combined strength of group companies with world-class competitiveness
JT Group Share in Global Cigarette Market (2010)Net Sales Breakdown by Business Segment (FY3/2011)
Pharmaceutical Business
2.4%
Food Business
19.2%
Other Business
1.0%
InternationalTobacco Business
45.9%
International Tobacco Business (Years ended December 31)
Attain a sustainable leadership position in profitability and/or market share in a growing number of markets, and continue to be the driving force for profit growth.
Note: Japanese Domestic Tobacco Business and International Tobacco Business are Adjusted Net Sales Excl. Excise Taxes
Source: Euromonitor
9.8%
see page 20
see page 28
Japanese Domestic Tobacco Business
31.6%
Business &
History
page 014JAPAN TOBACCO INC. Annual Report 2011
page 015JAPAN TOBACCO INC. Annual Report 2011
Japanese Domestic Tobacco Business
FY3/2011 Business Performance Summary
* Adjusted net sales excluding taxes do not account for revenue from the imported tobacco, domestic duty free, China Division and other miscellaneous business.
When looking at the component ratio of price segments by JT sales volume, share of premium price segment increased significantly.
JT leads the market share in the premium price segment above 440 yen.
As products in the premium price segment increased, product mix improved significantly after the price amendment
Review of Operations
Sales volume
134.6 billion cigarettes
Down 11.3%
Adjusted net sales excluding taxes*
¥ 617.9 billion
Up 0.3%
EBITDA
¥ 257.6 billion
Up 2.6%
Operating income
¥ 212.9 billion
Up 7.1%
Japanese Domestic Tobacco Business –EBITDA(Billions of yen)
FY3/2010
Price and product mix effect
Sales promotion and others
Leaf tobacco reappraisal gain/loss
Cost
FY3/2011
Volume effect
251.2
+70.8
–52.4
–4.1
+5.5
–13.5
257.6
160 180 200 220 240 260 280
Japanese Domestic Tobacco Business –Adjusted Net Sales Excluding Taxes*(Billions of yen)
Component ratio of price segment in JT sales volume
FY3/2010
Volume effect
Price and product mix effect
FY3/2011
Others
615.9
–69.8
+70.8
+0.9
617.9
500 520 540 560 580 600 620
less than ¥400 ¥410 more than ¥440 (Since Oct. 2010) less than ¥320 ¥300 more than ¥290 (Before Sep 2010)
0%
50%
100%
FY3/2011Oct–Mar (after tax increase)
FY3/2010
8.0
13.0
79.0
27.2
66.0
6.8
* Adjusted net sales excluding taxes do not account for revenue from the imported tobacco, domestic duty free, China Division and other miscellaneous.
As the effect of strategic pricing offset the volume decline, adjusted net sales excluding taxes remained broadly flat while EBITDA increased.
page 016JAPAN TOBACCO INC. Annual Report 2011
page 017JAPAN TOBACCO INC. Annual Report 2011
JT Share(Years ended March 31)
(%)
Total Share of Key Brands*(Years ended March 31)
(%)
2008200743.5
44.5
44.5
45.1
44.8
43.7
44.0
45.5
46.5
2009 2010 2011
2007 200863.5
64.564.1
64.964.965.1
64.8
65.5
66.5
2009 2010 2011
The Japanese domestic tobacco business is positioned as the core source of
profits for the JT Group.
Due to factors such as the aging of Japanese society and growing aware-
ness about the health risks associated with smoking and tightening of smok-
ing-related regulations, demand has been declining. Moreover, the steep tax
increase in October 2010 has resulted in a significant drop in demand and
the business environment is becoming increasingly difficult. JT will strive
to achieve continuous growth by providing quality and services suitable for
the prices of its products. At the same time, JT will improve its productivity
in order to increase the value of its Japanese domestic tobacco business in
the medium term.Mitsuomi KoizumiPresident, Tobacco Business
* Mild Seven, Seven Stars, Pianissimo (The market share figure for key brands is inclusive and retrospective of market share figures for ‘icene’ and ‘Lucia,’ which were integrated into the Pianissimo family in January 2010)
Market share moved significantly, affected by the tax increase and the price amendment.
Market share was affected by the tax increase and the price amendment as the range for price increase was varied for each product. Market share was also affected by the earthquake due to temporary suspension of shipment of all products.
New products, mainly of key brands, were aggres-sively introduced.
Mild Seven Family• The Mild Seven family has won numerous loyal
customers since its launch in June 1977.• As Japan’s major cigarette brand, Mild Seven has consistently com-
manded the No. 1* share of the Japanese domestic market for more than 30 years since 1978.
• Today, the Mild Seven family encompasses 25 products (as of April 30, 2011), reflecting the evolution that it has undergone in step with the changing times and brand expansion.
* Source: TIOJ
Seven Stars Family• Launched in 1969, Seven Stars featured Japan’s
first domestically produced charcoal filter in pursuit of better taste.
• Since its launch, Seven Stars has consistently offered unique value in terms of taste, aroma, and product design.
• The Seven Stars family comprises a lineup of 10 products (as of April 30, 2011) centered on Seven Stars, which recorded the top* performance by brand in the fiscal year ended March 2011. The Seven Stars family contin-ues to capture a growing share of the market.
* Source: TIOJ
Pianissimo Family• In August 1995, the Pianissimo family saw the
launch of Japan’s first 1 mg-tar menthol cigarette product featuring reduced odor and smoke*.
• Pianissimo, an FSK (Filter Super King) slim menthol product, has contin-ued to achieve growth after undergoing the Japanese tobacco market’s first integration of brands in the fiscal year ended March 2010.
• The Pianissimo family, a core JT tobacco franchise, features a diverse lineup of 8 products (as of April 2011), centered on Pianissimo One, the No. 1** 1mg menthol product.
* Reduced smoke: Less smoke is released from the tip of the cigarette based on a visual comparison with conventional JT cigarette products.
** Source: TIOJ
NEw PRODUCTS LAUNChED IN FY3/2011
April 2010 Seven Stars Black Impact BoxMay 2010 Zerostyle MintJune 2010 Winston Lights 6 Box
Winston Extra 3 BoxWinston Ultra One 100’s Box.
July 2010 Mild Seven Aqua Squash Menthol 7 BoxNovember 2010 Pianissimo Super Slims Menthol One
January 2011 Mild Seven D-SPEC One 100’s Box
<FEATURES OF KEY BRANDS>
Business &
History
page 016JAPAN TOBACCO INC. Annual Report 2011
page 017JAPAN TOBACCO INC. Annual Report 2011
PRODUCT STRATEgY
Our product strategy will focus on enhancing the brand equity so as to provide value commensurate with the price, and build-ing a brand portfolio that offers a wide selection of products. To that end, we will strive to enhance product innovation (enhance R&D capability), broaden the scope of brand extension and strengthen the programs to improve package design and other product features so as to maintain and expand our market share.
DISTRIBUTION STRATEgY
The greatest challenge for our distribution strategy is to secure overwhelming superiority in product exposure at retail stores. We will strive to secure product exposure in ways suited to the characteristics of each store type by making suggestions for store remodeling that will give more visibility to products and by introducing display boxes. As for sales through vending machines, we will strive to make efficient allocation while making investments necessary for increasing the attractiveness of our products.
MARKETINg STRATEgY
Our marketing force, the vast size of which eclipses the marketing teams of our competitors, satisfies the multitude and variety of needs of retailers scattered across the country. We will continue to engage in efficient and effective marketing activities in ways linked to our product and distribution strategies, while complying with regulations and rules such as restrictions on tobacco advertising and prevention of youth smoking.
IMPROvINg QUALITY AND PRODUCTIvITY
We will implement measures to maximize customer satisfaction, including constantly improving product quality and strengthen-ing the shipment assurance system. As part of this effort, we will renew the process of raw materials processing and introduce a new tobacco blending method and a new tobacco processing technology so that we can satisfy customers’ diverse preferences by providing products with a wide variety of tastes and aromas.
Regarding productivity improvement, which is a critical chal-lenge for any manufacturer, we closed three factories by the end of March 2011 as scheduled under the current medium-term management plan. As of April, there were six factories in opera-tion in Japan.
We will continue to strive toward an even more cost-efficient operating structure.
FULFILLINg OUR RESPONSIBILITY AS ThE MARKET LEADER
We will continue to fulfill our responsibilities as the leading tobacco company in the Japanese market by endeavoring to achieve a harmonious coexistence between smokers and non-smokers. We will also engage in initiatives to improve smoking manners and strive harder to secure and create space and opportunity for smoking, for example, by helping to provide comfortable smoking areas.
AS A CORE SOURCE OF PROFITS FOR ThE JT gROUP
We will ensure that the Japanese domestic tobacco business contin-ues to serve as the JT Group’s core source of profits by overcoming challenges in the Japanese domestic market, such as the continuing decline in total tobacco demand and intensifying competition.
Strategies and Specific Measures
Optimizing our marketing mix toward sustainable growth through the provision of quality and services commensurate with the price
page 018JAPAN TOBACCO INC. Annual Report 2011
page 019JAPAN TOBACCO INC. Annual Report 2011
D-SPEC
Regarding the Caster brand, which many customers have applauded for its low level of odor,
its balance of aromatic essences has been improved so as to further reduce odor while keep-
ing the taste unchanged. As a result, the Caster brand has been renewed as a product that
meets JT’s D-spec low odor standard that enhances the enjoyment of taste.
ROUND-CORNER BOx
Regarding the box package products in the Mild Seven family, we adopted a round-corner box
package as widely requested by customers. As a result, these products feature the Mild
Seven family’s image of being stylish and graceful and are also user-friendly as their package
shape follows the contours of the hand.
DESIgN UNIFICATION
The package of the Mild Seven Impact One 100’s Box was changed from a regular box to a
round-corner box. In addition, the Blue Wind symbol of the Mild Seven family is indicated on
the package in the shape of a sharp streamline, as on the package of the Mild Seven Impact
One Menthol, so as to convey the sense of “impact.”
PRODUCT UPgRADE
We are striving to upgrade our products so that we can satisfy customers’ diversifying needs.
RENEwAL OF 3 PRODUCTS IN ThE SEvEN STARS FAMILY
We will build a more sophisticated lineup of products in response to customers’ requests for
better package design, taste and aroma.
<Seven Stars Deep Menthol Box (former Seven Stars Menthol Box)>
The strong menthol flavor and rich taste of this product have become more distinct as a result
Seven Stars Black Impact Box Seven Stars Solid Box
Topics: Product Innovation
Seven Stars Deep Menthol Box
Seven Stars Solid Menthol Box
Seven Stars Solid Box
Please be reminded that this section is intended to explain the business operations of JT to investors, but not to promote sales of tobacco products or encourage smoking by consumers.
Business &
History
page 018JAPAN TOBACCO INC. Annual Report 2011
page 019JAPAN TOBACCO INC. Annual Report 2011
FY3/2011 Business Performance Summary
<At Constant Rates of Exchange>***
Core net sales increased by 5.6% driven by:
Robust pricing Market share gains in key markets owing to our continued
investment in our brands and our excellence in trade marketing
Favorable currency exchange movements
Total shipment volume*
428.4 billion cigarettes
Down 1.5%
Core net sales excluding excise taxes**
$10,144 million
Up 4.8%
GFB shipment volume
249.8 billion cigarettes
Up 2.7%
EBITDA
$3,194 million
Up 7.7%
Core net sales excluding excise taxes**
$10,223 million
Up 5.6%
EBITDA
$3,282 million
Up 10.7%
* Total shipment volume includes cigars, pipe tobacco and snus, but does not include contract manufactured products.
** Core net sales exclude revenue from distribution, contract manufactur-ing and other peripheral business.
*** Applying the previous year currency exchange rates.
International Tobacco Business
Strong EBITDA growth of 10.7%, or 7.7% at constant rates of exchange driven by:
Continued price/mix improvements, more than compensat-ing for the impact of shipment volume decline due to indus-try contraction as well as for increasing leaf costs and additional investment in brands and global infrastructure
Favorable currency exchange movements
* Core net sales exclude revenue from distribution, contract manufacturing and other peripheral business.
** The forex impact represents the fluctuation between the US dollar and other currencies.*** The US dollar is the reporting currency for our International Tobacco Business.**** Applying the previous year currency exchange rates.
8,000
9,682
–128
+589
10,144
+79
10,223
8,500 9,000 9,500 10,000 10,500
FY3/2010
Volume
Price/product mix
FY3/2011 at constant rates of exchange****
Forex impact**
FY3/2011
International Tobacco Business – Core Net Sales Excluding Taxes*(Millions of US dollars)***
International Tobacco Business – EBITDA(Millions of US dollars)***
2,965
–91
–233
+553
3,194
+88
3,282
2,800 2,900 3,000 3,100 3,200 3,4003,300 3,500
FY3/2010
Price/product mix
Others
FY3/2011 at constant rates of exchange****
FY3/2011
Volume
Forex impact**
page 020JAPAN TOBACCO INC. Annual Report 2011
page 021JAPAN TOBACCO INC. Annual Report 2011
Camel is an iconic international brand and originator of the American Blend type of cigarette since 1913. Now sold in more than 100 countries around the world. Camel’s 2010 performance has been strengthened by the successful
introduction of Black & White line extension and the new Brand World leading to market share gains in most key markets.
First introduced in 1954, Winston has proved its status as JTI’s key growth driver, becoming in 2007 the 2nd* largest cigarette brand in the world. After
almost a decade of strong momentum, Winston further accelerated its sales volume growth in the Middle East, Western Europe & CIS in 2010. Winston’s performance has been strengthened by Super Slims brand extensions and ongoing product innovation.* Source: Euromonitor
Originating in Japan and launched in 1977, Mild Seven is the top-selling premium charcoal brand. Its key
markets outside Japan are Taiwan, Korea, Russia and Malaysia.
Launched in 1964, Silk Cut estab-lished its credentials as one of the first low tar brands in the 1970’s, long before it became the norm for
other manufacturers. JTI owns the Silk Cut trademark throughout the EU with the core markets being the UK, Ireland and Greece, where the brand enjoys a significant market share in the premium segment.
Sobranie is one of the world’s oldest tobacco brands and has been synonymous with luxury cigarettes since 1879. This heri-
tage, exquisite style and the best selected tobaccos have made Sobranie one of the most prestigious brands in the world. Since 2009 a new generation Sobranie range has been rolling out across CIS markets.
Originally created for the Prince of Wales in 1873, Benson & Hedges has a proud British
heritage. Today, JTI owns the Benson & Hedges trademark in EU markets (excl. Baltics) where it is a leading Virginia premium brand. Benson & Hedges is continuously evolving its portfolio and brand extensions to adapt to its consumers’ lifestyles.
LD was launched in 1999 as a mid-price proposition in the Russian market. The brand achieved immedi-
ate success and is accepted as a credible international proposition. Since 2007 LD has grown continuously, expanding its presence to more than 30 countries across multiple regions supported by its constant portfolio expansion in response to consumer aspirations.
Glamour is JTI’s leading Super Slims brand. Since its introduction in 2005, Glam-
our has achieved remarkable growth consoli-dating its No. 1 position as a Super Slims brand in several CIS markets. Glamour is constantly expanding its geographical presence and evolving portfolio in the growing Super Slims segment.
Japan Tobacco International (JTI), JT Group’s international tobacco
business, continues to be the profit growth engine of the JT Group, mainly
thanks to its brands, its people and its diversified geographic profile. Our
continued investment in our business and innovation meant that share of
market grew in most key markets, despite ongoing economic difficulties
and a challenging operating environment.
While the economic recovery is still fragile and pressure is mounting
on the regulatory front, we believe that, based on our quality top-line
growth and strong brand portfolio, we will continue delivering strong
results in the future.
Pierre de LaboucherePresident & CEO, Japan Tobacco International
ENgINEWinston and Camel are the engine brands driving JTI’s growth.
STRONghOLDFour stronghold brands have a significant presence in their respective regions increasing the competitive power of JTI’s portfolio.
FUTURE POTENTIALSobranie and Glamour have strong future growth potential.
gLOBAL FLAgShIP BRANDS PORTFOLIO
The eight Global Flagship Brands (GFB) constitute the core of JTI’s brand portfolio, to drive quality top-line growth.
Business &
History
page 020JAPAN TOBACCO INC. Annual Report 2011
page 021JAPAN TOBACCO INC. Annual Report 2011
gFB PORTFOLIO MOMENTUM
2010 GFB shipment volume vs. 2009
(Unit: billion cigarettes)
Volume/Year-on-year growth Year-on-year change
2009 243.4
Premium and above brands 1.1 +1.4%
Sub-premium 3.3 +2.5%
Mid/Value 2.1 +6.1%
2010 249.8 +2.7%
CIS+ South & West Europe North & Central Europe Rest-of-the-World
CIS+ South & West Europe North & Central Europe Rest-of-the-World
* Rest-of-the-World core net sales include HQ
CIS+ South & West Europe North & Central Europe Rest-of-the-World
REgIONAL BREAKDOwN
Total shipment volume Core net sales*
48%
15%
11%
26% 31%
21%18%
30% 30%
24%22%
24%
Share in key markets
2009 2010 ppt. change
RUSSIA 36.7% 36.9% +0.2
FRANCE 14.8% 16.0% +1.2
ITALY 18.5% 19.7% +1.2
SPAIN 20.6% 20.8% +0.2
UK 39.2% 39.0% –0.2
TURKEY 19.0% 22.6% +3.6
TAIwAN 38.0% 38.4% +0.4
* Twelve months moving average** Market shares do not include Roll-Your-Own/Make-Your-Own.Data source: AC Nielsen, Logista and Altadis
Operating Performance
JTI gained share in key markets as a result of our strength in all price segments, as well as our excellence in trade marketing.
GFB shipment volumes grew 2.7% to 249.8 billion cigarettes building on our strong brand equity, which we are constantly strengthening and which will continue to drive our perfor-mance in the future.
Total shipment volumes decreased by 1.5% to 428.4 billion cigarettes due to global industry contraction caused by eco-nomic difficulties and excise tax increases.
GFB shipment volumes grew 2.7% versus 2009, representing 58.3% of our total shipment volume
Winston drove GFB growth, performing strongly in the Middle East and Italy, while LD performed strongly in Poland, Turkey and Hungary.
Our volume in the premium and above segments grew 1.4%, or 1.1 billion cigarettes, driven by markets such as Korea, Turkey, France and Czech Republic.
EBITA (excluding HQ allocation)
page 022JAPAN TOBACCO INC. Annual Report 2011
page 023JAPAN TOBACCO INC. Annual Report 2011
Strategies and Specific Measures
Quality top-line growth is JTI’s overriding priority. JTI remains committed to deploying its key strategies under the guiding principle of continuous improvement.
Build and nurture outstanding brands Continue to enhance productivity Sharpen focus on responsibility and credibility Develop human resources as a cornerstone of growth
EBITDA EBITDA Margin
* As of 2009, EBITDA margin based on the revenue which excludes distribution, contract manufacturing and other peripheral business.
+26% CAgR
(%)
2000
338
10%
2001
400
2002
441
2003 2004 2005
551712
925
2006
1,090
2007
2,452
2008 2009
3,452
2,965
2010Reported
3,282
32%
1,000
2,000
3,000
4,000
5,000
8
16
24
32
40
EBITDA AND EBITDA MARgIN, 2000–2010
(Millions of US dollars)
2011 Outlook: keep growing the top-line and con-tinue to be JT Group’s profit growth engine.
In 2010, pricing remained robust despite the recession and drove our performance, as we achieved 7.7% EBITDA growth at con-stant rates of exchange.
We will remain focused on growing the top-line, through continued investment in our business. Looking into 2011, we are cautiously optimistic. Despite the lingering economic uncer-tainty, we are confident that with our strong brand portfolio and our focused strategy of growing the top-line, we will continue to deliver strong results.
• A market rebound in Turkey and Taiwan in H2/2010• Strong shipment volume growth led by the Middle East and Korea• At constant rates of exchange, core net sales excluding excise taxes and EBITA
grew 4.8% and 3.0%, respectively.
NORTh & CENTRAL EUROPE (Unit: billions of cigarettes)
• Solid total and GFB volume growth• Strong pricing drove core net sales and EBITA growth• At constant rates of exchange, core net sales excluding excise taxes and EBITA
grew 6.4% and 9.7%, respectively.
SOUTh & wEST EUROPE (Unit: billions of cigarettes)
• Continued industry contraction, with a rebound in H2/2010• JTI gained market share in all key markets• Favorable pricing more than offset shipment volume declines, driving core net
sales and EBITA growth• At constant rates of exchange, core net sales excluding excise taxes and EBITA
grew 1.7% and 4.5%, respectively.
* Total shipment volume includes cigars, pipe tobacco and snus, but does not include contract manufactured products** Core net sales exclude revenue from distribution, contract manufacturing and other peripheral business
Business &
History
page 022JAPAN TOBACCO INC. Annual Report 2011
page 023JAPAN TOBACCO INC. Annual Report 2011
Market Share in Russia(%)
Market Share in Turkey(%)
Total Industry Size (Billions of cigarettes)
Total Industry Size (Billions of cigarettes)
Market Share of GFB & Non-GFB(%)
Market Share of GFB & Non-GFB(%)
201020092008
405 390 380–3.6% –2.7%
0
100
200
300
400
500
201020092008
104 10396–1.2%
–9.6%
0
30
60
90
120
150
33.8 34.9 35.7 36.7 36.9
19.2 19.0 18.1
14.6 15.9 17.6 19.0 19.2
17.7 17.7
0
10
20
30
40
20102009200820072006
11.2
14.416.9
19.0
22.6
8.6
11.212.9 13.8
17.1
2.6
3.34.1
5.2
5.5
0
10
5
15
20
25
20102009200820072006
Non-GFB GFB Data source: AC Nielsen
Data source: JTI internal data
Non-GFB GFBData source: AC Nielsen
Data source: AC Nielsen
0
5
10
29
34
39
2.43.24.4
9.7
3.45.0
10.4
3.9
5.2
10.6
3.8
5.2
10.3
4.0
5.2
10.5
4.0
5.2
10.8
4.0
5.2
10.8
31.9
35.7 33.7
36.734.636.9
34.536.7
34.737.0
34.837.1
34.636.8
2.4 2.1 2.1 2.1 2.1 2.0
Q4Q3Q2Q1201020092008
0
3
6
13
19
25
0.50.9
3.1
11.4
1.5
4.2
11.7
2.3
4.9
13.4
1.8
4.8
12.6
2.5
5.1
13.2
2.6
5.1
13.7
2.2
4.7
14.016.919.0
22.621.2
22.8 23.5 23.0
0.6 1.4 1.0 1.3 1.5 1.6
Q4Q3Q2Q1201020092008
12-month moving average
12-month moving average
3-month average
3-month average
Russia is JTI’s largest market, where we
lead both in terms of share of market and
share of value.
• In 2010, JTI strengthened its market share
leadership and grew share of value.
• Over the last 18 months, JTI has led
industry pricing to fully recover excise tax
increases and cost inflation.
After a 3.6% decline in 2009 due to the
economic crisis, overall market contraction
stabilized in the second half of 2010, slow-
ing to 2.7% decline in year 2010.
we steadily increased our gFB market
share, despite a competitive environment
that continues to be challenging.
• We will continue to focus on GFB brand
equity building and portfolio optimization
through new launches and innovations.
Turkey, the largest market in the Rest-of-
the-world cluster, is also the 2nd largest
market by shipment volume for JTI.
we continued to be the fastest grow-
ing manufacturer in this market.
• Winston remained both the largest and
fastest-growing brand in the market.
• In the competitive popular and value
segments, JTI maintained its position,
capturing down-trading consumers.
gFB enjoyed strong volume and share
growth thanks to their increasing con-
sumer appeal and growing brand equity,
despite rising competitive pressure.
• Continuing to invest in our brand equity
with a focus on Winston and Camel.
• Strengthening our portfolio to enhance its
relevance to consumers.
JTI Total Share of MarketJTI Total Share of ValueWinstonLDPeter IPremium and above brands
JTI Total Share of MarketWinstonMonte CarloLDCamel
Russian Market
Turkish Market
Data source: AC Nielsen
Data source: AC Nielsen
page 024JAPAN TOBACCO INC. Annual Report 2011
page 025JAPAN TOBACCO INC. Annual Report 2011
LINE ExTENSIONS TO wIDEN ThE SCOPE OF ExISTINg BRANDS:
• Camel Black & White, successfully introduced in France and now available in 11 markets
worldwide, represents a modern interpretation of the Camel brand. It was built as a flexible
proposition that can adapt to local market needs through different formats, to address
relevant consumer trends.
• Camel Essential was extended into Roll-Your-Own with a unique pack.
• Winston’s launch of XS King Size Super Slims in the CIS markets became the year’s big-
gest innovation story. Sales in excess of 3 billion units in 2010 propelled XS to regional
number 2 position in the King Size Super Slims segment and strengthened Winston’s
leadership in Russia.
• LD Club was successfully launched in Russia and Ukraine in 2010 as the first compact
format cigarette in the Value segment. LD Club offers a cosmopolitan premium style, up-to-
date and convenient format at an accessible price and contributes to the LD image as a
modern and international brand. In Russia, LD Club has become number 3 position in the
King Size Super Slims segment after Winston XS.
• Winston Avant Edition, an image enhancer with clear innovation and premium cues,
launched in Ukraine and having positive impact on Winston performance post-launch phase.
• Benson & Hedges Slide, representing the modern, progressive style of the B&H brand, has
been launched in 10 markets across Europe, achieving strong growth in Central Europe in
2010. The Slide range, in tune with a new and socially interactive style that takes its cues
from the design codes of technological innovation, provides a new target audience with a
relevant proposition from Benson & Hedges.
• Amber Leaf new mini pouch CPB (Crush Proof Box) – a 12.5g pouch with papers offered
together in a cigarette pack format, addresses the key consumer needs of increased conve-
nience and freshness.
TEChNOLOgY TO TAKE ADvANTAgE OF OUR ENgINEERINg KNOw-hOw:
• LSS (Less Smoke Smell) line extension is Mild Seven’s strategic innovation anchor and its
success helped Mild Seven retain its status as the fastest growing international brand in
the Korean market.
• WRC (Wrapped Re-functional Charcoal) filter is the newly invented technology to compete
in the emerging premium menthol segment, especially in Asia. WRC technology delivers
perfect balance between refreshing menthol and smooth tobacco taste.
Innovation
This section is intended to explain the business operations of JT to investors, not to promote sales of tobacco products or encourage smoking by consumers.
LSS (Less Smoke Smell) line extension is Mild Seven’s strategic innovation anchor and its
success helped Mild Seven retain its status as the fastest growing international brand in
To continue strengthening our brand equity and further enhance the growth momentum of our GFB, JTI’s strategy places significant emphasis on investment behind brands, including innovations. These innovations take several forms:
Business &
History
page 024JAPAN TOBACCO INC. Annual Report 2011
page 025JAPAN TOBACCO INC. Annual Report 2011
Pharmaceutical Business – Net Sales(Billions of yen)
Pharmaceutical Business – EBITDA(Billions of yen)
42.0
44.0
+2.9
+0
46.9
43.0 44.0 45.0 46.0 47.0 –16.0
–9.6
+0.2
–4.2
+0.4
–13.2
–12.0–14.0 –10.0 –6.0–8.0 –4.0 –2.0 0.0
FY3/2011 Business Performance Summary
Net sales in FY3/2011 grew driven by the strong performance of Torii Pharmaceutical Co., Ltd. and from milestone revenue of out-licensed compounds while profits declined due to an up-front payment by Torii Pharmaceutical in respect of a license agreement, among others.
Torii Pharmaceutical Co., Ltd. posted a rise in net sales and a decline in profits.
Sales of REMITCH CAPSULES, an anti-pruritus drug for hemodialysis patients, and sales of anti-HIV drug Truvada grew.
An up-front fee following the signing of an agreement with ALK-Abelló A/S of Denmark on the exclusive right to develop and sell in Japan house dust mite allergy immunotherapy products to treat and diagnose asthma and allergic rhinitis.
Net sales
¥ 46.9 billion
Up ¥2.9 billion
EBITDA
¥ –13.2 billion
Down ¥3.6 billion
Operating loss
¥ –17.4 billion
Down ¥3.8 billion
Pharmaceutical Business
R&D Status
Increased and advance compounds in late phase of clinical trials and enhance R&D pipeline toward the final year of JT-11.
JTS-653 a drug for pain and overactive bladder and JTT-751 for treatment of hyperphosphatemia advanced to Phase 2 and Phase 3, respectively, in Japan as well as Type 2 diabetes mellitus drug JTT-851 advanced to the clinical development stage in Japan.
FY3/2010
Torii Pharmaceutical Co., Ltd. (non-consolidated)
Royalty income, etc.
FY3/2011
FY3/2010
R&D expenses (non-consolidated)
Royalty income, etc.
Operating income of Torii Pharmaceutical Co., Ltd. (non-consolidated)
FY3/2011
page 026JAPAN TOBACCO INC. Annual Report 2011
page 027JAPAN TOBACCO INC. Annual Report 2011
In the pharmaceutical business, JT will continue to build world-class,
unique R&D capabilities and reinforce its market presence through innova-
tive drugs by devoting efforts to increasing and advancing compounds in a
late phase of clinical trial and enhancing the R&D pipeline, so that it can
pursue a high-value added business based on the development of world-
class innovative drugs.
Noriaki OkuboPresident, Pharmaceutical Business
Strategies and Specific Measures
Enhance clinic development capabilities, particularly for com-
pounds in late-stage clinical trials
• To strengthen the capability for clinical development in order to keep
up with the progress in clinical development
Further Strengthen R&D pipeline
• To continue concentrating R&D resources on the following four areas:
glucose and lipid metabolism; virus research; immune disorders and
inflammation; and bone metabolism
Enhance licensing activities and strengthen relationships with
partners
• To continue exploring opportunities for out-licensing
• To engage in in-licensing activity with emphasis on early market launch
CLINICAL DEvELOPMENT (AS OF MAY 12, 2011)Code Key indication Stage Rights
JTT-705 (oral) Dyslipidemia Phase 2 (Japan)Roche (Switzerland) obtained the rights to develop and commercialize the compound worldwide, with the exception of Japan. (Development stage by Roche: Phase 3)
JTK-303 (oral) HIV infection Phase 1 (Japan)Gilead Sciences (uS) obtained the rights to develop and commercialize this compound worldwide, with the exception of Japan. (Development stage by Gilead Sciences: Phase 3)
JTT-302 (oral) Dyslipidemia Phase 2 (Overseas)
JTT-305 (oral) Osteoporosis Phase 2 (Japan)Merck (uS) obtained the rights to develop and commercialize this compound world-wide, with the exception of Japan.
JTT-751 (oral) Hyperphosphatemia Phase 3 (Japan)JT obtained the rights to develop and commercialize this compound in Japan from Keryx Biopharmaceuticals (uS). (Developed jointly with Torii)
JTK-853 (oral) Hepatitis C Phase 1 (Overseas)
JTT-851 (oral) Type 2 diabetes mellitus Phase 1 (Japan)
Further develop Torii Pharmaceutical’s expertise in its areas of
strength
• Developing expertise in the field of HIV, renal disease and hemodialy-
sis, among others
• Acquisition of new products for marketing and development
• Expand R&D in the allergen area (cedar pollen allergies)
Business &
History
page 026JAPAN TOBACCO INC. Annual Report 2011
page 027JAPAN TOBACCO INC. Annual Report 2011
14.4
+1.0
+1.7
+0.1
17.2
13.5 14.0 14.5 15.0 15.5 16.0 16.5 17.517.0
394.6
+6.2
–25.9
375.0
370 375 380 385 390 395 400 405
FY3/2010FY3/2010
Beverage business
Processed food business, etc.
Overhead costs
Processed food business, etc.
FY3/2011 FY3/2011
Beverage business
FY3/2011 Business Performance Summary
Factors behind the net sales decline
Net sales for the overall food business declined. Net sales for the beverage business increased due to the
favorable effects of the summer heat waves and the robust sales of the Roots brand.
Net sales for the processed food business declined due to the closure of the rice wholesale business and the exclusion of some subsidiaries from the consolidated results as well as a decline in sales of products for restaurants.
Net sales
¥ 375.0 billion
Down ¥19.6 billion
EBITDA
¥ 17.2 billion
Up ¥2.7 billion
Operating loss
¥ –9.4 billion
Up ¥4.2 billion
Food Business – EBITDA(Billions of yen)
Food Business – Net Sales(Billions of yen)
Food Business
Factors behind the EBITDA growth
EBITDA for the overall food business increased. EBITDA for the beverages business increased due to the
favorable effect from the summer heat waves and the robust sales of the Roots brand.
EBITDA for the processed foods business grew due to the absence of the one-time factor in the fishery product business in the previous year.
One-time factor: Recording of loss provisions related to delays in the collection of some accounts receivable and valuation losses due to a steep drop in the market prices of some products.
Factors behind the operating income growth
The operating income growth was led by the increased EBITDA.
page 028JAPAN TOBACCO INC. Annual Report 2011
page 029JAPAN TOBACCO INC. Annual Report 2011
100,000
200,000
300,000
2010 2011200920082007
250,500 257,000 254,000 257,000 265,000
Number of Vending Machines(Years ended March 31)(Machines)
In the food business, we are striving to
provide delicious foods that people can
consume safely while wishing to “provide
products that your loved ones want to
eat.” We will continue to devote our
efforts to the three business areas of bev-
erages, processed foods and seasonings,
aiming to retain the trust of customers by
serving the people’s daily lives through our
offering of food products.
Miyoharu HinoPresident & CEO TableMark Co., Ltd.
Strategies and Specific Measures
In the food business, we are devoting our efforts to the three business areas of beverages, processed foods and seasonings, implementing measures to establish the highest standard of food safety management and striving to further strengthen our busi-ness foundation for future growth.
BEvERAgES BUSINESS
• To strengthen the Roots flagship brand, which is
acclaimed for its authentic coffee taste created
by JT’s original technology, so as to enhance
brand equity.
• To enhance our sales net-
works led by Japan Bever-
age Inc., a JT subsidiary
responsible for operating
vending machines, and to
strive to provide conscien-
tious services.
• To strengthen the profit
base by pursuing efficiency
in all business operations.
PROCESSED FOODS BUSINESS, ETC.
• To expand the business volume and strengthen
profitability by strategic concentration in staple
food products (frozen noodles, frozen and packed
cooked rice and frozen bread) and yeast products
in seasonings, for which we can make maximal
use of acquired technology and product develop-
ment power in the TableMark group.
• To establish a strong business foundation by continuing efforts to
strengthen the value chain in the whole business process, from pro-
curement, to manufacturing, and production of sales.
• To strengthen cost competitiveness by further pursuing efficiency in
all business operations.
FOOD SAFETY CONTROL
I. Actions for reducing risks
• Promoting the acquisition of ISO 22000 certification for food safety
management systems as well as efforts to ensure food defense against
external purposeful attack.
II. Improving consumer response
• Collecting customer feedback on a 365-days-a-year basis and respond-
ing to the feedback quickly and appropriately by using JT’s own food
safety management system to strengthen cooperation between relevant
business divisions.
III. Strengthening the institutional capability
• Promoting a group-wide food safety initiative by establishing a food
safety management section at each of the beverages, processed foods
and seasonings businesses as the entity responsible for overseeing food
safety and analyzing raw materials and products of the beverages
business at TableMark’s Tokyo Quality Control Center.
• Actively incorporating diverse knowledge and viewpoints into food safety
control by seeking assessment and advice from outside experts appointed
as food safety advisers, and reflecting these in business activities.
Ryoko NagataHead of Soft Drink Business Division
Business &
History
page 028JAPAN TOBACCO INC. Annual Report 2011
page 029JAPAN TOBACCO INC. Annual Report 2011
History of the JT Group
History in Japan from the early 20th century to 1984, when the Japan Tobacco Inc. Law was enacted.Our history in Japan dates back to 1898, when the government formed a monopoly bureau to undertake the exclusive sale of domes-tic leaf tobacco. In the early 1900s, the government extended this
JT is a joint stock corporation that was incorpo-rated in April 1985 under the Commercial Code
of Japan, pursuant to the Japan Tobacco Inc. Law, or the JT Law.
JT’s history in Japan dates back to 1898, when the government formed a monopoly bureau to operate the exclusive sale of domestic tobacco leaf.
The JT Group’s overseas history began with the founding of Austria Tabak in 1784. Roughly 70 years later, Tom Gallaher started out in business in
Before 1985
1784 1857
1891 1898
1949
19641957
1981
1954
1977
Northern Ireland, laying the foundations for Gallaher Group. Meanwhile, R.J Reynolds Tobacco Co. (RJR), which would subsequently create the Camel and Winston brands, was established in 1874 in the US.
In this manner, the current JT Group can trace its origins to many different countries and regions such as Austria, Northern Ireland, the US and Japan. The JT Group has a long history and extensive experience in the tobacco business.
monopoly to all tobacco products in Japan and to the domestic salt business. On June 1, 1949, the bureau was established and duly named the Japan Tobacco and Salt Public Corporation, or JTS. This corpo-ration helped to ensure the stable supply of tobacco and secure fiscal revenues for the government.
l Austria Tabak is founded by Emperor Joseph II.
l HOPE (10) is launched as Japan’s first domestically produced filter cigarettes. l Silk Cut is launched.
l Tom Gallaher sets up his business (Londonderry, Northern Ireland).
l The Moscow-based Ducat factory is founded. l The Japanese Monopoly Bureau is established for the sale of domestic leaf tobacco.
l The Monopoly Bureau becomes the Japan Tobacco and Salt Public Corporation. l Winston is launched.
l Mild Seven is launched (Japan). l Mild Seven is launched internationally.
page 030JAPAN TOBACCO INC. Annual Report 2011
page 031JAPAN TOBACCO INC. Annual Report 2011
18791874
1913 1931
1955 1956
The growth in demand for cigarettes in Japan began to slow in the mid-1970s as a result of demographic trends and growing concern about health risks associated with smoking. This trend continued, such that growth in industry sales essentially stopped. In addition to the structural change, the domestic tobacco market opened up sub-stantially to foreign suppliers, triggering competition between domestic and foreign tobacco products in Japan. Foreign countries stepped up pressure on Japan to take further measures to open the market that were difficult to implement within the framework of the monopoly tobacco sales system. Amid such pressure as well as moves toward the reform of government-run public corporations, a govern-ment panel was established in March 1981 to conduct research on the public corporation system. In its third report (July 30, 1982), the panel proposed drastic reform of the monopoly and public corpora-tion systems. In response to this proposal, the government conducted a comprehensive review of these systems and drafted bills to:
l Abolish the tobacco monopoly law to liberalize tobacco imports and establish a tobacco business law to make necessary adjust-ments related to the tobacco business.
l Abolish the JTS law, reorganize JTS as a joint stock corporation so as to enable it to pursue rational corporate management as much as possible and establish the Japan Tobacco Inc. Law, which provides for a necessary minimum level of regulation in light of the corporation’s need to compete with foreign tobacco companies on an equal footing in the domestic market follow-ing the liberalization of tobacco imports.
These bills were enacted on August 3, 1984 in the 101st session of the Diet and promulgated on August 10 of the same year. In April 1985, JT was founded as an entity that took over the whole of the business operations and assets of JTS.
l Sobranie is registered in London, to become one of the oldest cigarette brands in the world.
l Camel is launched.
l Gallaher is acquired by the American Tobacco Company.
l Cellophane is introduced by RJR in order to preserve the freshness of tobacco.
l RJR is founded by Richard Joshua Reynolds in Winston, North Carolina.
l Benson & Hedges is acquired by Gallaher. l Salem is launched.
l Japan Tobacco Inc. Law is enacted.
l Seven Stars is launched, featuring Japan’s first domestically produced charcoal filter.
1968
1984
1969
Business &
History
page 030JAPAN TOBACCO INC. Annual Report 2011
page 031JAPAN TOBACCO INC. Annual Report 2011
The corporate history of JT is summarized in the table below. As for the international tobacco business, the history before JT’s acquisitions of RJR Nabisco’s non-US tobacco operations and Gallaher is included.
The operating environment for JT changed drastically in just two years after the foundation of the company, with the yen’s strong apprecia-tion following the Plaza Accord in 1985, a tobacco tax hike in 1986 and the abolition of tariffs on imported cigarettes in 1987. Amid the yen’s upsurge, a price increase for JT products due to the tobacco tax hike coupled with price cuts for imported cigarettes attributable to the tariff
In and After 1985
1985 19881987
1995
2001
l Acquisition of Liggett-Ducat (Russia).
2000
1997
2003
1996
20072006 2008
abolition eliminated the price advantage of JT products over imported products, which had stood at around ¥60 to ¥80 when JT was founded in 1985. As a result, competition between JT and foreign tobacco makers intensified in the Japanese market, leading to a decline in JT’s market share from 97.6% in fiscal 1985 to 90.2% in fiscal 1987. To cope with the rapid deterioration of the operating environment, JT implemented ratio-nalization measures to enhance its cost-competitiveness and pursued diversification while taking measures to strengthen its marketing capabil-ity. In the 1990s, JT’s competition with foreign rivals in the Japanese
April l Japan Tobacco Inc. is established. (Japanese tobacco market opened to foreign
tobacco manufacturers.) l The Business Development Division is established
to promote new businesses. l The Business Development Division is later
reorganized into operational divisions engaged in the food and pharmaceutical businesses, finishing in July 1990.
October l “JT” communication name is introduced.
April l Import tariffs on imported cigarettes are abolished.
May l Head office is moved back to Minato-ku from
Shinagawa-ku following completion of new head office building.
l Peter I is launched (Russia).
June l Government releases second tranche of outstand-
ing JT shares (272,390 shares offered at 815,000 yen apiece).
l Acquisition of Tanzanian tobacco production facility.
April l JT ends its salt monopoly business in line with
abolition of the salt monopoly system. l The Tobacco Mutual Aid Pension scheme is
integrated into the Employees’ Pension scheme.
l American Brands spins off Gallaher which becomes Gallaher Group Plc and is listed on the London and New York stock exchanges.
l Acquisition of Austria Tabak. October l JT repurchases 45,800 of its own shares to
increase its management options.
April l JT implements a five-for-one stock split in order to
expand the investor base, effective April 1, 2006. May l Acquisition of AD Duvanska Industrija Senta in Serbia.
January l JT acquires a majority stake in Katokichi Co., Ltd.
through a tender offer. April l JT acquires a majority stake in Fuji Foods
Corporation. July l JT concentrates its processed food operations,
including frozen food operations and seasonings operations, at the Katokichi Group.
April l JT acquires all outstanding shares of Gallaher
Group Plc.
page 032JAPAN TOBACCO INC. Annual Report 2011
page 033JAPAN TOBACCO INC. Annual Report 2011
1992 1993 1994
19991998
2004 2005
Note: l Main topics of the JT Group. l Main topics of RJR Nabisco’s non-US operations before participating in the JT Group. l Main topics of Gallaher before participating in the JT Group.
market intensified further. Furthermore, overall cigarette demand in Japan peaked out in the latter half of the 1990s due to a contraction of the adult population and growing concerns with health problems associated with smoking. Amid the increasingly difficult operating environment for the domestic tobacco business, JT took additional rationalization steps, pursued consolidation of operations in its areas of business diversification and expanded the international tobacco business, thereby strengthening its business foundation. JT significantly strengthened the international tobacco business by acquiring RJR Nabisco’s non-US tobacco operations
in 1999 and Gallaher in 2007. With its international sales volume exceed-ing its domestic sales volume, the JT Group continues to grow as a global tobacco company. The international tobacco business is the engine of the JT Group’s profit growth through its comprehensive brand portfolio which includes Winston, Camel and Mild Seven as well as Benson & Hedges, Silk Cut, LD, Sobranie and Glamour.
October l Government releases first tranche of outstanding
JT shares for initial public offering (394,276 shares offered at 1,438,000 yen apiece).
l JT stock is listed on the first sections of stock exchanges in Tokyo, Osaka and Nagoya.
November l JT stock is listed on stock exchanges in Kyoto,
Hiroshima, Fukuoka, Niigata and Sapporo.
l Acquisition of Yelets (Russia).
September l The Central Pharmaceutical Research Institute is
established to enhance in-house research capabilities.
l Acquisition of Manchester Tobacco Company Ltd.
l Acquisition of AS-Petro (Russia).
May l JT acquires the non-U.S. tobacco business of RJR Nabisco Inc. July l JT acquires the food business of Asahi Kasei Corporation, including Asahi Foods and seven other subsidiaries. October l Under a business tie-up between JT and Torii Pharmaceutical Co., Ltd., the two companies’ R&D operations
related to medical pharmaceuticals are concentrated at JT, while their promotion operations are combined at Torii Pharmaceutical.
l LD launched (Russia).
April l JT signs an agreement with Unimat Corporation
(currently, Japan Beverage Inc.) on a tie-up regard-ing beverage business.
l JT later acquires a majority stake in Unimat. December l JT acquires a majority stake in Torii Pharmaceutical
Co., Ltd. through a tender offer.
June l Government releases third tranche of outstanding
JT shares (289,334 shares offered at 843,000 yen a piece), reducing its stake in JT to the minimum level allowed under law.
November–March 2005 l JT repurchases 38,184 of its own shares to
increase its management options.
April l JT terminates a licensing contract under which it had exclusive rights to produce and sell Marlboro brand products
in Japan and use the Marlboro trademark in the country. June l Acquisition of CRES Neva Ltd. (Russia).
l Glamour is launched (Russia, Ukraine, Kazakhstan).
May l JTI celebrates its 10th anniversary. June l JTI Leaf Services (US) LLC is established. October l Acquisition of leaf suppliers Kannenberg & Cia.
