BAT's Glo Roll-Out In Japan Sets Up Three-Way War For Smokers
British American Tobacco is expanding sales of its heated tobacco device next month to Tokyo, just as former cigarette monopoly Japan Tobacco Inc. introduces its Ploom product there in a fight to gain market share from Philip Morris International Inc.
Both companies’ electronic heat-not-burn smokers are jumping into a market where Philip Morris has established an early lead with iQOS, the only such device currently available nationwide. BAT will also expand sales of glo on July 3 to Osaka, as well as Miyagi Prefecture along the coast northeast of Tokyo, to 13,000 stores, the company told reporters Tuesday. The London-based cigarette maker also plans to introduce glo in South Korea as soon as this summer, BAT Japan President Roberta Palazzetti said in an interview.
The plans pit BAT against Japan Tobacco and Phillip Morris in a key region and in the only tobacco category that’s growing as rising taxes and awareness of health risks erodes demand for conventional cigarettes. BAT also said it is on track to sell glo nationwide in Japan by year-end, and in July will open flagship stores and pop-ups in Tokyo and Osaka for consumers to try and buy the product.
“Japan in terms of tobacco-heating products is by far the most important market,” Palazzetti. “So all the dynamics and the development that we see in Japan is fundamental for the future development of tobacco-heating products.”
Japan Tobacco, which which introduced a limited quantity of its Ploom device in specific regional markets and online last year, plans to debut it in Tokyo on June 29.
BAT is also planning a summer introduction of glo in South Korea, where it will challenge iQOS, which is set to began sales in June.
“If you look at the fundamentals from a consumer standpoint, South Korea is very similar to Japan in the sense that people are very much for innovation,” Palazzetti said. “So in the long run, I think the development can be very similar.”
Japan, where sales of e-cigarettes that use liquid nicotine are blocked by government rules, has emerged as a breakout market for heat-not-burn devices, which deliver nicotine from processed tobacco users load into battery-powered devices like glo, iQOS and Ploom. The early success with smokers bodes well for glo’s introduction, said Michael Lavery, an analyst at Piper Jaffray.
“iQOS’s current momentum in Japan helps pave the way for glo’s launch, and also that the glo launch is likely to further interest in heat-not-burn products generally,” Lavery wrote in a note to investors last week.
Philip Morris’s iQOS scooped up a 7.1 percent share of Japan’s entire tobacco market in the first quarter of 2017, leaving BAT and Japan Tobacco scrambling to catch up. BAT started selling glo in Sendai in December, and said one out of five smokers in the Japanese city has purchased a device.
Some analysts have said demand for heat-not-burn will be bigger in Japan than in other markets given the popularity of gadgets in that country and its ban on electronic cigarettes, which are gaining momentum in other markets. BAT has said it expects Japan will make up as much as half of the world’s heat-not-burn market.