Japan Tobacco to Launch Its Ploom Tech Vaping Brand Across Japanese Cities in 2017

London. Japan Tobacco aims to begin selling its Ploom Tech tobacco-based e-cigarettes in cities across Japan next year, it announced last Friday (September 23), as it competes with larger rival Philip Morris to meet the "growing demand for vaping products."

Japan Tobacco, the world's third-largest tobacco company, whose top brands include Winston, Mevius, and Camel, has invested heavily to expand its production capacity for Ploom Tech tobacco capsules after hitting supply constraints following 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 reported that its "heat-not-burn" tobacco product called iQOS captured nearly 3% of the Japanese tobacco market, 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 said earlier this week, as its exposure in Japan and Russia, where it regularly raises prices to attract profit-seeking investors, is relatively small.

“We own tobacco stocks because they are high-quality, high-margin businesses that generate significant cash flow and profit pools that are still growing,” said Jonathan Downing, 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 as regulations vary by country.

“This is really a wait-and-see situation,” he said.

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

Tobacco-derived e-cigarettes still represent a small portion of the market, and for this reason, Japan Tobacco executives have 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 more than half of the global e-cigarette market.

“We believe it is very, very important to handle both e-vapor and T-vapor simultaneously as winners 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.