Japan Tobacco takes Heated Sticks Overseas in $2bn Push

Cigarette maker to debut Ploom X tobacco product in 20 countries by end of 2024

Japan Tobacco will spend 300 billion yen ($2.25 billion) over the next three years to boost its heated tobacco stick products, with 200 billion yen pegged for marketing the sticks outside of Japan.

"Last year, we couldn't make the investment because there were not enough [heated tobacco] devices due to the semiconductor shortage," Japan Tobacco President Masamichi Terabatake told Nikkei during an interview. "For 2023, we are back on track for procurements, and we are able to secure more than twice Japan's supply volume compared to last year."

Terabatake said "most of the 300 billion yen will be the initial costs of rollout into new countries."

Japan Tobacco has not disclosed investments in heated tobacco products for 2020 through 2022, but it appears that JT's new spending will surpass the outlays over those three years.

Heated tobacco systems, which produce vapors instead of smoke, come in low temperature and high temperature varieties. JT's flagship Ploom X uses a high temperature device, and the experience approaches that of a cigarette.

JT sells Ploom X only in Japan and the U.K., though the product will launch in Italy this month. The company plans to roll out Ploom X in more than 10 countries this year, reaching at least 20 new countries by the end of 2024.

To gain name recognition, JT will invest in pop-up shops and digital sales. It will develop flavors that match the tastes of each market.

In the U.S., Japan Tobacco formed a joint venture with cigarette giant Altria Group. The partners look to apply to the Food and Drug Administration for approval of Ploom by early 2025.

The heated tobacco segment is currently in the red due to the forward investments, but JT anticipates turning a profit in 2028 on overseas growth.

JT also will spend on research and development, looking to develop the second and third generation of Ploom X devices.

However, "heated tobacco is still in its infancy," Terabatake said. "Improvements will probably continue for several more generations."

Global sales volume for cigarettes shrank 1.5% last year, Japan Tobacco said. But heated tobacco has gained ground: The global market last year grew 17% to $33.4 billion, U.K. research group Euromonitor International reports.