Tobacco is here to stay in TR
Home to an extensive and diverse portfolio of brands – among them Mild Seven, Winston, Camel and Salem – the Japan Tobacco (JT) Group has long been a prime mover in the international tobacco industry. As might be expected of such a major player, the company has vibrant interests in the duty free/travel retail market, masterminded since 1999 through operating division JT International (JTI).
Based in Geneva, JTI’s Worldwide Duty Free organisation is headed by Eddie Touma and divided into three major regions (Asia, Americas, Europe/Middle East/Africa). Overseeing the organisation’s consumer and trade marketing responsibilities is Ming Lee Foo, whose conversation with Frontier reveals an operation still greatly excited by the potential of travel retail – despite the ongoing and well-documented threats to the tobacco category worldwide.
“Tobacco is here to stay in travel retail,” he says. “The key lesson learned since intra-EU abolition is that the business is getting smaller, but that it can be a profitable and sustainable business – if the right strategies are put in place.”
For JTI, an important element of these ‘right strategies’ concerns its smoking lounge and station concepts. Already rolled-out at airports in cities including Dubai, Zurich, Frankfurt, Athens, Moscow, Taipei, and in Morocco as well, they reflect a determination to keep both smokers and non-smokers satisfied. It is a timely move during a period when sensitivity about lighting up in public places is arguably at an all-time high.
“We are committed to, and excited about these projects as they enhance spaces allocated to smoking within busy airports while providing a relaxing spot for smokers to take a break between flights,” says Ming Lee. “In addition, they look good and help complement today’s modern airport environments.”
Where branding is permitted, they also provide a welcome opportunity to remind travellers of key products in the large JTI range. Clearly happy with the response to the existing smoking stations and lounges, Ming Lee says that JTI is encouraged “to continue and expand this concept to other selected locations”.
Camel Natural
In 2007, the JT Group continues to draw its strongest results from such core brands as Winston (particularly strong in Russia, Ukraine, Iran and Italy) and Camel (enjoying especially good returns in France, Italy and Spain). Nonetheless, new development work continues across the group, most recently resulting in JTI’s introduction of Camel Natural – billed as “an innovative brand extension within the Camel family”.
Available in two styles, Camel Natural benefits from 100% whole leaf tobacco, with no added flavouring. The taste is not the only thing that is special about the offer, either, as Ming Lee notes: “The packaging is unique, too – the iconic Camel motif is cut away, revealing the silver inner frame underneath. The pack’s earthy colour tones, together with the tactile smooth texture, reflect the unique taste of the cigarette.”
Away from the launch of this new brand extension, much media attention regarding JT/JTI in recent months has inevitably dwelt upon the Group’s cash offer to acquire Gallaher Group, manufacturer of brands including Benson & Hedges, Mayfair, Silk Cut and Hamlet. While the move is still subject to regulatory approvals in some markets, and the agreement of Gallaher’s shareholders, completion would pave the way to a considerable strengthening of JT’s market presence worldwide – especially in some European and former Soviet markets.
Understandably, Ming Lee declines to comment on the details of the bid, but does express confidence in its eventual resolution. “We hope to successfully conclude this acquisition in the first half of 2007, and we are confident this will happen,” he says. “If successful, this acquisition would double JT International’s volume to nearly 400 billion units, and our scale would significantly improve in a number of European and CIS markets.”
Those in search of a detailed response will need to wait for a while, then, and it should be noted that even if the acquisition is concluded successfully in the first half of the year it will not be until some time later that sector- or market-specific analyses will emerge. As Ming Lee notes: “Comments about specific markets or specific sales channels like travel retail will take place at an even later date, as time will be required to offer accurate and valid comments.”
Investing in display
Even in the event that the Gallaher brand portfolio was not added to the parent group’s interests, JTI looks set to enjoy a robustly successful 2007. Duty free/travel retail will remain an important part of the gameplan, and Ming Lee highlights the close cooperation enjoyed with retailers in this channel. “Given the popularity of JT International’s brands, we have had – and continue to have – good and productive working relationships with our partners,” he says. “We will continue to invest at the point of sale and deliver innovative product display solutions for our retail partners.”
And although unable to discuss specific plans for the year ahead, Ming Lee does hint that at least one market segment is currently under the spotlight in Geneva: “I can mention that the prestige segment in duty free is of interest to JT International.”
No one working in the tobacco industry these days can proceed productively without acknowledging the impact of the various regulatory and international pressures, but – encouraged by the vigilance of travel retailers and the relevant associations with regard to the Framework Convention on Tobacco Control (FCTC) – Ming Lee remains optimistic about the future of tobacco in our industry.
“The key is to remind regulators of the highly controlled sales environment that exists, and that has
always existed, in duty free and travel retail,” he elaborates. “In addition, it is important for governments to understand the role played by tobacco within the overall travel retail world, in terms of generation of airport revenues, traveller comfort and competitive offering.”
Equipped with a comprehensive strategy and a portfolio of brands with worldwide recognition, JTI’s prominent status in travel retail seems assured for years to come.
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