Japan Faces Great Lack of Cigarettes

Published on May 26th, 2011 13:11

Foreign cigarette producers have undertaken uncommon step of air transportation cigarettes to Japan in order to fill out the plunge in supplies, after last month’s disaster that destroyed a third of the country’s cigarette production.

British American Tobacco and Philip Morris International are trying to get round each other to import tobacco products from the US and Europe in order to satisfy the strong demand for their products, after the terrible earthquake damage to two cigarette factories of Japan Tobacco (JT), the country’s leading producer. “We have received a lot of orders what might be called as panicked orders from retailers after the disaster,” stated the representative of the BAT Japan. “Undoubtedly demand for our products has increased, since all those people who bought JT products currently choose ours,” a Philip Morris spokesman said.

Japan Tobacco

JT, which comprises 65% of the tobacco market, underwent significant damages at two cigarette facilities in northeastern Japan and has ceased all cigarette shipments in the past 10 days in order to change production to concentrate on its top-selling cigarette brands and build inventory. It will start resuming production at two factories next week and only 25% of its usual volumes will be shipped this month. In order to meet possible backlog demand, BAT has increased inventories from one to two months, while Philip Morris also stated that inventory levels had increased.

JT is also having problems with cigarette filters, after one of four filter manufacturing factories owned by an affiliated company was damaged in the disaster. The group plans to bring cigarette production back to 90% of general volumes by the end of May, when it will ship 25 of its major brands that constitute nearly 65% of its revenues. JT’s condition comes as an unforeseen random arrival for BAT and Philip Morris, whose market share in Japan constitutes nearly 11% and 20% respectively.

Japan is the fifth leading cigarettes market in the world by volume and high prices of cigarettes makes it a profitable market. Thus Japan is a very significant market for enterprises that sell tobacco products,” declared BAT.

The stimulus to profits in Japan comes as world cigarette groups suffer strong regulations in Australia, which is introducing plain packaging. Cigarettes are among the most prevalent daily goods that are still in shortage as a result of the March 11 earthquake. The disaster has underlined the role of the earthquake as an industrial base for many products that are outdated technology but nevertheless constitute an essential link in the supply of everyday goods. For instance production of bottled drinks should be cut, because of a great lack of bottle caps. Two of Japan’s top three bottle cap manufacturers were not able to restart operation at their Tohoku factories since the earthquake.

By Kevin Lawson, Staff Writer. Copyright © 2011 TobaccoPub.com. All rights reserved.

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