Tobacco giants throughout the world are feeling the burn of a global drop in cigarette sales. As a result, Japan Tobacco just announced a drop in forecasted earnings for 2018. They cited “market contraction” which are now forcing tobacco manufacturers to diversify.
Japan Tobacco, the main cigarette producer in the Asian market, initially had projected earnings of 394 billion yen for 2018. Now, however, the projection has dropped to 377 billion yen (2.9 billion Euros), almost a 4% drop compared to last year’s earnings.
Japan Tobacco is a historic figure in the tobacco industry, as the company distributes Camel and Winston cigarettes outside of the American markets. The drop in sales is proof of the decline of cigarette consumption throughout the world, a trend that may get worse for cigarette manufacturers in the coming months.
A significant delay for the electronic cigarette
The company has said it has offset the drop in cigarette sales by making new investments in the last few months. The company has made multiple acquisitions that have allowed Japan Tobacco to enter into the sector of electronic cigarettes. The diversification of products should help the company withstand the latest decline in revenue.
On the Japanese market, the company’s cigarette sales have dropped by over 12% in just one year. For this reason, the company is trying to make up for some of its losses by investing in new products. Ploom Tech, which has been on the market since June, is a new tobacco-heating device that the company hopes will bring in new revenue.
For Big Tobacco, becoming involved in the electronic cigarette market is an essential strategy if it hopes to remain relevant. The biggest tobacco manufacturers have been taken aback by the rapid decline in global cigarette consumption. To offset the decline in traditional cigarette sales, strategies focused on the e-cigarette market are set to increase in the future.