Japan Tobacco to Launch Its Own Vape Brand Ploom Tech in 2017

London. Japan Tobacco's goal is to begin selling its Ploom Tech tobacco-based e-cigarettes in cities across Japan next year, as it competes with larger rivals like Philip Morris to meet the "growing demand for vaping products." Last Friday (23/09), Japan Tobacco, the world's third-largest tobacco company, whose top brands include Winston, Mevius, and Camel, invested heavily to expand its production capacity for Ploom Tech tobacco capsules, following supply constraints after a trial launch in the southern city of Fukuoka in March.

"While we cannot comment on the exact timing of a nationwide launch in Japan due to rapidly changing demand, our goal is to expand from urban areas, step by step, starting early next year," said Hiroshi Nakajima, Vice President of Emerging Products, at an investor meeting in London last Friday.

The company plans to quadruple its capacity by the end of this year and increase it tenfold by the end of next year.

In August, Marlboro maker Philip Morris International stated that its "heat-not-burn" tobacco product called iQOS has captured nearly 3% of the Japanese tobacco market, a country where Japan Tobacco derives 40% of its profits.

All tobacco companies face declining volumes in developed markets due to higher taxes and growing health concerns. However, Japan Tobacco's short-term growth prospects are more limited, analysts at Jefferies stated earlier this week, as its exposure in Japan and Russia, where it regularly raises prices to attract profit-seeking investors, is relatively small.

"We have tobacco stocks because they are high-quality, high-margin businesses that generate substantial cash flow and profit pools that are still growing," said Jonathan, a portfolio manager at Hawthorn Park Capital, which holds shares in Japan Tobacco.

E-cigarettes could accelerate long-term growth, but the global situation remains unclear, with regulations varying by country.

"This is currently a wait-and-see situation," he said.

The global market value for "vaping" products was approximately $8 billion in 2015, and many public health experts consider e-cigarettes a lower-risk alternative to smoking, although some question their long-term safety.

Tobacco-based e-cigarettes still represent a small part of the market, which is why Japan Tobacco executives stated they cannot predict their ultimate potential. The company has also launched liquid-based e-cigarettes in markets like the U.S. and the U.K., which together account for over half of the global e-cigarette market.

"We believe it is very, very important to handle both e-vapor and T-vapor simultaneously as a winner in this entire emerging category," Nakajima told Reuters.

The company also reported last Friday that its international business met its profit forecast of 11.4%, with operating revenue at 8.1%, and a volume growth of 2% for the year.