Tobacco in Japan

Heated tobacco shows potential future of the tobacco industry

The Japanese tobacco market witnessed ongoing contraction in 2017. However, heated tobacco proved to be a bright spot in terms of growth, maintaining its dynamic expansion as it benefited from smokers migrating from cigarettes to a category that it is perceived to be less harmful to health than other areas of tobacco.

Pressure to shift focus within tobacco products

Heated tobacco is set to reshape demand in the Japanese tobacco market and have a particularly prominent impact in terms of value, especially as consumers upgrade their devices. As a result, Japan Tobacco’s sluggishness in developing its presence in heated tobacco threatens to undermine its dominant status in the tobacco market as a whole, which is founded on its strength in the large but contracting cigarettes category.

Intensified competition in heated tobacco development

The top three players remained dominant in the Japanese tobacco market in 2017, though the year saw a notable intensification of competition between them in the heated tobacco category. Indeed, the last year of the review period represented a key moment in the development of the competitive landscape in heated tobacco, as British American Tobacco took glo nationwide to compete on more level terms with Philip Morris’s market-leading IQOS, and Japan Tobacco began distributing its Ploom Tech products in Tokyo prefecture, with plans to extend its distribution nationwide by September 2018.

Convenience stores continued to take its lead as a distribution channel

Convenience stores continued to dominate distribution of cigarettes in Japan in 2017, as busy consumers appreciated being able to pick up products, along with other purchases, at convenient locations in the course of their hectic everyday lives. However, no other tobacco category has managed to establish a significant presence in outlets such as convenience stores and supermarkets, and tobacco specialists remained the primary distribution channel in cigars and cigarillos, smoking tobacco, and smokeless tobacco and vapour products at the end of the review period.

Heated tobacco to remain a key category in the forecast period

The Japanese tobacco market is expected to continue to see significant decline in both volume and constant value terms over the forecast period. Increasing consumer health-consciousness, rising taxation and increasingly strict legislative restrictions, bolstered by preparations for the 2020 Olympics in Tokyo, are all set to drive down sales in the dominant category, cigarettes.

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