INDUSTRY PROFILE

Global Tobacco
Reference Code: 0199-0817 Publication Date: October 2011

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EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
Market value
The global tobacco market grew by 4% in 2010 to reach a value of $720,796.9 million.

Market value forecast

In 2015, the global tobacco market is forecast to have a value of $889,275.1 million, an increase of 23.4% since 2010.

Market segmentation I
Cigarettes is the largest segment of the global tobacco market, accounting for 94.5% of the market's total value.

Market segmentation II
Asia-Pacific accounts for 50.8% of the global tobacco market value.

Market share
China National Tobacco Corporation is the leading player in the global tobacco market, generating a 36.1% share of the market's value.

Market rivalry
The global tobacco market is concentrated at the top end of the market, with the top three players collectively accounting for 59.7% of the total market value.

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CONTENTS

TABLE OF CONTENTS
EXECUTIVE SUMMARY MARKET OVERVIEW Market definition Research highlights Market analysis MARKET VALUE MARKET SEGMENTATION I MARKET SEGMENTATION II MARKET SHARE FIVE FORCES ANALYSIS Summary Buyer power Supplier power New entrants Substitutes Rivalry LEADING COMPANIES China National Tobacco Corporation Philip Morris International Inc. Japan Tobacco Inc. MARKET DISTRIBUTION MARKET FORECASTS Market value forecast APPENDIX Methodology Industry associations Related Datamonitor research Disclaimer
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CONTENTS

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CONTENTS

LIST OF TABLES
Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Global tobacco market value: $ million, 200610(e) Global tobacco market segmentation I:% share, by value, 2010(e) Global tobacco market segmentation II: % share, by value, 2010(e) Global tobacco market share: % share, by value, 2010(e) China National Tobacco Corporation: key facts Philip Morris International Inc.: key facts Philip Morris International Inc.: key financials ($) Philip Morris International Inc.: key financial ratios Japan Tobacco Inc.: key facts Japan Tobacco Inc.: key financials ($) Japan Tobacco Inc.: key financials () Japan Tobacco Inc.: key financial ratios Global tobacco market distribution: % share, by value, 2010(e) Global tobacco market value forecast: $ million, 201015 10 11 12 13 20 21 23 23 25 26 27 27 29 30

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CONTENTS

LIST OF FIGURES
Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Global tobacco market value: $ million, 200610(e) Global tobacco market segmentation I:% share, by value, 2010(e) Global tobacco market segmentation II: % share, by value, 2010(e) Global tobacco market share: % share, by value, 2010(e) Forces driving competition in the global tobacco market, 2010 Drivers of buyer power in the global tobacco market, 2010 Drivers of supplier power in the global tobacco market, 2010 Factors influencing the likelihood of new entrants in the global tobacco market, 2010 Factors influencing the threat of substitutes in the global tobacco market, 2010 Drivers of degree of rivalry in the global tobacco market, 2010 Philip Morris International Inc.: revenues & profitability Philip Morris International Inc.: assets & liabilities Japan Tobacco Inc.: revenues & profitability Japan Tobacco Inc.: assets & liabilities Global tobacco market distribution: % share, by value, 2010(e) Global tobacco market value forecast: $ million, 201015 10 11 12 13 14 15 16 17 18 19 24 24 28 28 29 30

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MARKET OVERVIEW

MARKET OVERVIEW
Market definition
The tobacco market consists of the retail sale of cigarettes, loose tobacco, chewing tobacco, and cigars and cigarillos. The market is valued according to retail selling price (RSP) and includes any applicable taxes. Any currency conversions used in the creation of this report have been calculated using constant 2010 annual average exchange rates. For the purpose of this report, the global market consists of Africa & Middle East, Americas, Europe, and Asia-Pacific. Americas comprises Argentina, Brazil, Canada, Chile, Colombia, Mexico, Venezuela, Peru, Uruguay and the US. Europe comprises Belgium, the Czech Republic, Denmark, France, Germany, Hungary, Italy, the Netherlands, Norway, Poland, Romania, Russia, Spain, Sweden, Ukraine, Turkey, Ireland, Greece, Switzerland, Austria, Portugal, Finland, Croatia, Bulgaria, Lithuania, Latvia, Slovenia, Slovakia, Estonia and the United Kingdom. Asia-Pacific comprises Australia, China, Japan, India, Singapore, South Korea, Indonesia, the Philippines, Thailand, Vietnam, New Zealand, Hong Kong, Malaysia, Pakistan and Taiwan. Africa & Middle East comprises United Arab Emirates, South Africa, Israel, Egypt, Saudi Arabia, Morocco and Nigeria.

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MARKET OVERVIEW

Research highlights
The global tobacco market generated total revenues of $720.8 billion in 2010, representing a compound annual growth rate (CAGR) of 3.8% for the period spanning 2006-2010. Cigarettes sales proved the most lucrative for the global tobacco market in 2010, generating total revenues of $681.1 billion, equivalent to 94.5% of the market's overall value. The performance of the market is forecast to accelerate, with an anticipated CAGR of 4.3% for the fiveyear period 2010-2015, which is expected to drive the market to a value of $889.3 billion by the end of 2015.

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MARKET OVERVIEW

Market analysis
The global tobacco market grew at a steady rate during the period 2006-2010, as a result of steady sales growth in the cigarettes category. Although the overall market growth is expected to accelerate in the forecast period, the annual rate of growth is set to fall from a high of 4.6% in 2014 to a low of 3.9% in 2015. The global tobacco market generated total revenues of $720.8 billion in 2010, representing a compound annual growth rate (CAGR) of 3.8% for the period spanning 2006-2010. In comparison, the Americas and Asia-Pacific markets grew with CAGRs of 2.5% and 4.9% respectively, over the same period, to reach respective values of $121 billion and $366.3 billion in 2010. Cigarettes sales proved the most lucrative for the global tobacco market in 2010, generating total revenues of $681.1 billion, equivalent to 94.5% of the market's overall value. In comparison, sales of loose tobacco generated revenues of $17.9 billion in 2010, equating to 2.5% of the market's aggregate revenues. The performance of the market is forecast to accelerate, with an anticipated CAGR of 4.3% for the fiveyear period 2010-2015, which is expected to drive the market to a value of $889.3 billion by the end of 2015. Comparatively, the Americas and Asia-Pacific markets will grow with CAGRs of 2.2% and 5.7% respectively, over the same period, to reach respective values of $134.8 billion and $482.7 billion in 2015.

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MARKET VALUE

MARKET VALUE
The global tobacco market grew by 4% in 2010 to reach a value of $720,796.9 million. The compound annual growth rate of the market in the period 200610 was 3.8%. Table 1: Year 2006 2007 2008 2009 2010(e) CAGR: 200610 Source: Datamonitor Global tobacco market value: $ million, 200610(e) $ million 622,007.1 644,154.6 666,919.2 692,944.2 720,796.9 million 468,417.6 485,096.4 502,239.8 521,838.6 542,813.7 % Growth 3.6 3.5 3.9 4.0 3.8% DATAMONITOR

Figure 1:

Global tobacco market value: $ million, 200610(e)

Source: Datamonitor

DATAMONITOR

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MARKET SEGMENTATION I

MARKET SEGMENTATION I
Cigarettes is the largest segment of the global tobacco market, accounting for 94.5% of the market's total value. The loose tobacco segment accounts for a further 2.5% of the market. Table 2: Category Cigarettes Loose tobacco Chewing tobacco Cigars and Cigarillos Total Source: Datamonitor Global tobacco market segmentation I:% share, by value, 2010(e) % Share 94.5% 2.5% 1.7% 1.3% 100% DATAMONITOR

Figure 2:

Global tobacco market segmentation I:% share, by value, 2010(e)

Source: Datamonitor

DATAMONITOR

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MARKET SEGMENTATION II

MARKET SEGMENTATION II
Asia-Pacific accounts for 50.8% of the global tobacco market value. Europe accounts for a further 30.3% of the global market. Table 3: Category Asia-Pacific Europe Americas Africa and Middle East Total Source: Datamonitor Global tobacco market segmentation II: % share, by value, 2010(e) % Share 50.8% 30.3% 16.8% 2.1% 100% DATAMONITOR

Figure 3:

Global tobacco market segmentation II: % share, by value, 2010(e)

Source: Datamonitor

DATAMONITOR

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MARKET SHARE

MARKET SHARE
China National Tobacco Corporation is the leading player in the global tobacco market, generating a 36.1% share of the market's value. Philip Morris International Inc. accounts for a further 14.2% of the market. Table 4: Company China National Tobacco Corporation Philip Morris International Inc. Japan Tobacco Inc. Others Total Source: Datamonitor Global tobacco market share: % share, by value, 2010(e) % Share 36.1% 14.2% 9.4% 40.3% 100% DATAMONITOR

Figure 4:

Global tobacco market share: % share, by value, 2010(e)

Source: Datamonitor

DATAMONITOR

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FIVE FORCES ANALYSIS

FIVE FORCES ANALYSIS

The tobacco market will be analyzed taking tobacco manufacturers as players. The key buyers will be taken as retailers, and tobacco leaf farmers and other raw material suppliers as the key suppliers.

Summary
Figure 5: Forces driving competition in the global tobacco market, 2010

Source: Datamonitor

DATAMONITOR

The global tobacco market is concentrated at the top end of the market, with the top three players collectively accounting for 59.7% of the total market value. The global tobacco market has seen relatively strong market growth, despite strengthening legislation and government regulation with regards to smoking in many markets. Due to the dominance of large players such as China National Tobacco, Japan Tobacco, and Philip Morris International, coupled with advertising restrictions in many markets, new entrants would find it increasingly difficult to establish a brand. Furthermore, because of the health implications associated with tobacco products, there are a number of benefits to consumers from using substitutes, which is why there is a moderate threat from substitute nondurable goods in this market. Rivalry in the market is boosted by the lack of product differentiation and the pressure placed on market players by the illicit cigarette trade.

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FIVE FORCES ANALYSIS

Buyer power
Figure 6: Drivers of buyer power in the global tobacco market, 2010

Source: Datamonitor

DATAMONITOR

The retailers are considered as buyers in the tobacco market. The main retailers for the global tobacco market include independent retailers, supermarkets/hypermarkets, and convenience stores. The concentration of retail outlets is relatively fragmented in the tobacco market, as there are a number of outlets where the products can be sold. In the global market, independent retailers are the most dominant distribution channel, with a total share of 17.6%. Increasing excise duties on tobacco products are likely to reduce the demand for tobacco products, which could result in retailers reducing their stocks, and in-turn increase buyer power. Furthermore, tobacco products are just one of many products sold by most retailers, which illustrates that in most cases retailers are not reliant upon tobacco sales, which increases buyer power. Customers are likely to be loyal towards certain brands, so there is potentially some pull-through of end-consumer demand on retailers, this decreases buyer power to some extent. Overall, the buyer power in this market is moderate.

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FIVE FORCES ANALYSIS

Supplier power
Figure 7: Drivers of supplier power in the global tobacco market, 2010

Source: Datamonitor

DATAMONITOR

Tobacco is an agricultural product and therefore key suppliers to the tobacco market include tobacco leaf farmers. These farmers lack power in the supply chain because of their smaller size, with many farms being family run businesses, particularly those in developing countries. Further inputs to the market include processing aids, humectants (which keep the tobacco moist and pliable), preservatives and brand-specific flavors. Companies such as Alcan Packaging, who are a leading global manufacturer of tobacco packaging, are key suppliers to the tobacco market. Alcan's inputs include in-line rotogravure printed hinge-lid blanks and soft packs. They are also the world's largest supplier of RYO (Roll Your Own) tobacco booklet covers, as well as printed OPP film (Oriented Polypropylene film), bundle wraps and tobacco pouches. Another global tobacco packaging supplier is Amcor. Due to the relative size of these suppliers, their respective influence over the market is increased. There are limited alternative raw materials in this market, so players are unlikely to switch a supplier, which increases supplier power. Overall, supplier power is moderate.

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FIVE FORCES ANALYSIS

New entrants
Figure 8: Factors influencing the likelihood of new entrants in the global tobacco market, 2010

Source: Datamonitor

DATAMONITOR

The markets for tobacco products in many countries are very concentrated, and have strong existing brands which would make it very difficult for a new player to enter. This dominance of existing brands is notable, with leading players such as Philip Morris International (whose brands include Marlboro and L&M) and Japan Tobacco (whose brands include: Camel, Winston, Silk Cut etc.), having presence in over 120 countries worldwide. Furthermore, shelf-space in retail outlets is finite and retailers may be unwilling to stock products of an entirely new, unproven brand. Legislation and government regulation with regards to smoking also continues to grow, for example, bans on smoking in public places, stricter age restrictions and pictorial health warnings have been adopted in a number of markets, which act as a further deterrent to new entrants. In countries that are part of the European Union, and Australia, cigarette packs must be labeled with statutory warning statements such as SMOKING KILLS". Current tobacco control strategies seek primarily to decrease the demand for cigarettes through measures that encourage individuals to adopt healthier behaviors, thus raising entry barriers. Despite growing regulation and the enforcement of smoking bans, there are large variations to the extent of these within specific markets. Furthermore, there are restrictions on the advertisement of tobacco products in many markets, which makes it increasingly difficult for new entrants to create brand awareness. Healthy market growth may encourage new entrants in the global market. Overall, there is a weak threat from new entrants in the global market.

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FIVE FORCES ANALYSIS

Substitutes
Figure 9: Factors influencing the threat of substitutes in the global tobacco market, 2010

Source: Datamonitor

DATAMONITOR

Substitutes in the tobacco market may include various non-durable consumer goods, for example nicotine gum, nicotine patches, and herbal cigarettes. However, there are inter-segmental substitutes apparent within this market, alternatives to cigarettes and fine cut tobacco products include smokeless tobacco, cigars and pipe tobacco. Players and consumers alike may substitute one tobacco product for another, with players who specialize in the manufacture of cigarettes diversifying into cigars for example. However, inter-segmental substitution still involves essentially the same product. The benefits of substituting tobacco products for alternate non-durable consumer goods are especially notable largely due to the health implications associated with smoking (e.g. increased risk of lung cancer, heart disease etc.). Furthermore, because of the addictive quality of nicotine present in tobacco products, many smokers who want to quit, attempt to do so by substituting tobacco products for products such as nicotine gum, or patches. These products fulfill the consumer's need for nicotine, without the harmful effects of inhaling smoke. Unlike tobacco products, which face restrictions on advertising in many markets, nicotine replacement products are highly promoted through a range of media. Overall, there is a moderate threat from substitutes in the global tobacco market.

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FIVE FORCES ANALYSIS

Rivalry
Figure 10: Drivers of degree of rivalry in the global tobacco market, 2010

Source: Datamonitor

DATAMONITOR

The global tobacco market is fairly concentrated, with the major players such as China National Tobacco, Japan Tobacco, and Philip Morris International collectively holding 59.7% of the total market value. Product differentiation is essentially limited between the core tobacco products, which include chewing tobacco, cigars and cigarillos, cigarettes and loose tobacco. Consequently, this increases rivalry. Illicit tobacco supplies impact upon players' revenues and it is estimated that over 10% of the annual global tobacco consumption (around 600 billion cigarettes) is supplied by smuggled or counterfeit trade, which will serve to boost rivalry. Market growth is relatively steady in the global market, which serves to ease rivalry between players to an extent. Overall, there is a moderate degree of rivalry in the global tobacco market.

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LEADING COMPANIES

LEADING COMPANIES
China National Tobacco Corporation
Table 5: Head office: Telephone: Fax: Website: Source: company website China National Tobacco Corporation: key facts No. 26 B. Xuwumenwai, Xi Da Jie, Xuanwu District, Beijing, 100053, CHN 86 10 6360 5000 86 10 6360 5036 www.tobacco.gov.cn DATAMONITOR

China National Tobacco Corporation (CNTC) is a state-owned company engaged in the manufacture and sale of tobacco products in the Chinese and foreign markets. The company is headquartered in Beijing, China. CNTC produces and owns a portfolio of over 900 brands, of which Hongtashan is the companys key cigarette brand. The company, through a partnership agreement with Philip Morris, produces and sells the Marlboro brand in the Chinese market. The company also markets its own brands such as RGD, Harmony and Dubliss through Philip Morris in the overseas markets including Central Europe, Eastern Europe and Latin America. CNTC also produces and markets foreign brands such as 555 (British American Tobacco plc), Kool (R.J. Reynolds Tobacco Company), Camel (R.J. Reynolds Tobacco Company) and Lucky Strike (American Tobacco Company), in the Chinese market through license agreements with the respective manufacturers. In addition, the company contracts out orders to smaller, local factories. In turn these factories fill orders and deliver them for distribution to CNTCs distribution chain. In November 2010, the company planned to reduce the no. of its cigarette operating brands to 20 in order to make them the top global brands. In December 2010, China Kangtai Cactus Biotech Inc., engaged in production and marketing of cactus based products entered into an agreement with China Tobacco Import and Export Shandong Corp., a subsidiary of China National Tobacco Corp., to manufacture cactus cigarettes under the name of "Tai Shan Sheng Chao." Key Metrics As the company is state-owned, financial information is not available.
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LEADING COMPANIES

Philip Morris International Inc.

Table 6: Philip Morris International Inc.: key facts 120 Park Avenue, New York City, New York 10017, USA 1 917 663 2000 www.philipmorrisinternational.com December PM New York DATAMONITOR

Head office: Telephone: Website: Financial year-end: Ticker: Stock exchange: Source: company website

Philip Morris International (PMI) is engaged in the manufacture and sale of cigarettes and other tobacco products. The companys products are sold in over 180 countries under various brand names that include Marlboro, Philip Morris, and Red & White. PMI is headquartered in New York City, New York. Prior to March 2008, PMI was a wholly owned subsidiary of Altria Group. In 2008, Altria Group (Altria) spun-off 100% of the shares of PMI to Altrias shareholders, transforming PMI into a publicly traded tobacco company. The company owns the trademark rights for all its principal brands, including Marlboro, in all the countries other than the US. PM USA (a subsidiary of Altria) owns the trademark rights to its brands, including Marlboro, within the US. The company operates through four business segments that are organized according to the geographic regions. These include the European Union (EU); Eastern Europe, Middle East and Africa (EEMA); Asia; and Latin America & Canada. The European Union (EU) segment is headquartered in Lausanne, Switzerland and covers all the EU countries excluding Slovenia, Bulgaria and Romania, and also comprises Switzerland, Norway and Iceland, which are linked to the EU through trade agreements. The Eastern Europe, Middle East and Africa (EEMA) segment is also headquartered in Lausanne and covers the Balkans (including Slovenia, Bulgaria and Romania), the former Soviet Union (excluding Estonia, Latvia and Lithuania), Mongolia, Turkey, the Middle East and Africa and its international duty free business.. The Asia segment is headquartered in Hong Kong and covers all the Asian countries as well as Australia, New Zealand, and the Pacific Islands.

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LEADING COMPANIES

The Latin America & Canada segment is headquartered in New York and covers the South American continent, Central America, Mexico, the Caribbean and Canada. In 2009, the company sold 103.8 million units of cigarettes in the Latin American and Canadian region. PMIs product portfolio includes a wide range of premium, mid-price, and low-priced brands that comprises both international and local brands. The companys premium-priced products are marketed under Marlboro, Merit, Parliament and Virginia Slims. Its mid-priced products are marketed under L&M and Chesterfield brand names. PMIs low-priced category products comprise Bond Street, Lark, Muratti, Next, Philip Morris and Red & White brands. PMI also owns a number of local brands such as Sampoerna A, Sampoerna Hijau and Dji Sam Soe in Indonesia; Diana in Italy; Optima and Apollo-Soyuz in Russia; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics and Number 7 in Canada; Best and Classic in Serbia; f6 in Germany; Delicados in Mexico; Assos in Greece; and Petra in the Czech Republic and Slovakia. The company owns 58 manufacturing facilities across various geographies, out of which 11 facilities are located in the European Union region, 10 facilities in the Eastern Europe, Middle East and Africa (EEMA) region, 17 facilities in the Asia region, and 20 facilities located in the Latin America and Canada region. The company witnessed a series of product launches in 2008 and 2009, some of which were Marlboro Gold Touch in Italy; Marlboro Filter Plus Extra in Romania; Marlboro Black Menthol in Japan; A Volution in Indonesia; Lark Classic Milds, Lark Mint Splash and Lark Black Label in Japan; and Marlboro Fresh in Mexico. PMI also undertook acquisitions during the year 2009. In September 2009, the company entered into a joint venture agreement with Swedish Match AB. Earlier, in July 2009, PMI entered into an agreement to acquire 100% stake in the privately-owned Colombian cigarette manufacturer, Productora Tabacalera de Colombia, Protabaco, Ltda. for $452 million. In 2010, PMI announced an agreement with Fortune Tobacco Corporation in Philippines to unite their respective business activities to form a new company called PMFTC. Key Metrics The company recorded revenues of $67.7 billion in the financial year (FY) ended December 2010, an increase of 9.1% over FY2009. The net profit of the company was $7.3 billion in FY2010, an increase of 14.5% over FY2009. During FY2010, the European Union division recorded revenues of $28.1 billion, a decrease of 1.8% over 2009.

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LEADING COMPANIES

The Eastern Europe, Middle East Africa division recorded revenues of $15.9 billion in FY2010, an increase of 14.9% over 2009. The Asia division recorded revenues of $15.2 billion in FY2010, an increase of 22.7% over 2009. The Latin America & Canada division recorded revenues of $8.5 billion in FY2010, an increase of 17.2% over 2009.

Table 7: $ million

Philip Morris International Inc.: key financials ($) 2006 48,302.0 6,130.0 26,120.0 11,853.0 74,200 2007 55,243.0 6,038.0 31,777.0 16,182.0 75,500 2008 63,640.0 6,890.0 32,972.0 25,472.0 75,600 2009 62,080.0 6,342.0 34,552.0 28,407.0 77,300 2010 67,713.0 7,259.0 35,050.0 29,929.0 78,300

Revenues Net income (loss) Total assets Total liabilities Employees Source: company filings

DATAMONITOR

Table 8: Ratio

Philip Morris International Inc.: key financial ratios 2006 12.7% 6.6% 12.9% (7.6%) 45.4% 24.9% $650,970 $82,615 2007 10.9% 14.4% 21.7% 36.5% 50.9% 20.9% $731,695 $79,974 2008 10.8% 15.2% 3.8% 57.4% 77.3% 21.3% $841,799 $91,138 2009 10.2% (2.5%) 4.8% 11.5% 82.2% 18.8% $803,105 $82,044 2010 10.7% 9.1% 1.4% 5.4% 85.4% 20.9% $864,789 $92,708

Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Revenue per employee Profit per employee Source: company filings

DATAMONITOR

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LEADING COMPANIES

Figure 11: Philip Morris International Inc.: revenues & profitability

Source: company filings

DATAMONITOR

Figure 12: Philip Morris International Inc.: assets & liabilities

Source: company filings

DATAMONITOR

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LEADING COMPANIES

Japan Tobacco Inc.

Table 9: Japan Tobacco Inc.: key facts 2-1 Toranomon 2-chome, Minato-ku, Tokyo 105 8422, JPN 81 3 3582 3111 81 3 5572 1441 www.jt.com March 2914 Tokyo DATAMONITOR

Head office: Telephone: Fax: Website: Financial year-end: Ticker: Stock exchange: Source: company website

Japan Tobacco (JT) is primarily engaged in the manufacture and sale of tobacco products in the domestic and international markets. The company is also engaged in pharmaceuticals, processed foods and beverages businesses. JT has 274 subsidiaries and has operations in Japan, the Netherlands, Canada, Switzerland, France, Germany, China, Hong Kong, Macau, Canada, Russia, the Middle East and Africa. The company operates through five business segments: domestic tobacco, international tobacco, foods, pharmaceuticals, and others. The company owns and operates 31 plants in 23 locations. The domestic tobacco segment manufactures and markets cigarette products to retail stores all over Japan. The company holds approximately two-thirds of the domestic Japanese tobacco market. The segments key brands include Mild Seven, Seven Stars, Pianissimo, Cabin, Caster, Camel, Peace and Hope. The domestic tobacco segment also includes revenues generated through its subsidiary TS Network Company. TS Network Company imports tobacco products from foreign tobacco manufacturers and markets in Japan. The international tobacco segment manufactures and sells cigarettes in the overseas market under the brands Winston, Camel and Mild Seven, Benson & Hedges, Silk Cut, LD, Sobranie and Glamour (through the acquisition of the Gallaher Group). The other key brands include Hamlet cigars, Old Holborn and Amber Leaf and Gustavus Snus. The international segment operates through the companys subsidiary JT International (JTI) and other consolidated subsidiaries of JT International Holding. The companys international tobacco segment operates in 120 countries. In Russia, JTI invested $100 million in 2007-08 to expand production facilities in its plants. The key brands in Russia include Camel, Winston, LD, Glamour, Pyotr I, Russky Stil and Troika. In 2008, the company introduced Mild Seven Impact One 100's in the Japanese market. In May 2009, the company

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LEADING COMPANIES

launched Camel Snuff in the Swedish market. In May 2010, Japan Tobacco launched smokeless cigarettes under the Zero Style brand name. The foods segment manufactures and sells processed foods, beverages and seasonings. This segment operates through the company's subsidiaries, Katokichi Co., Saint-Germain Co., Japan Beverage and Fuji Foods. In May 2010, the company launched a tea sports drink in the Japanese market under the JT brand name. The pharmaceuticals segment is engaged in the research and development, manufacture and distribution of prescription drugs. In the domestic market, JT operates through subsidiary Torii Pharmaceutical, which manufactures and sells prescription drugs using its marketing network. The others segment includes real estate business, engineering business, logistics and other operations. In May 2011, Japan Tobacco planned to scrap 23 cigarette brands in order to stabilize the supply chains disrupted by the earthquake and tsunami in northeastern Japan. In the same month the company decided to close its Hainburg factory in Austria. In July 2011, Japan Tobacco invested to start a tobacco production plant in Tajikistan. In August 2011, Japan Tobacco, Incsigned an agreement to acquire Haggar Cigarette & Tobacco Factory, Ltd, a company dealing in cigarettes and other tobacco products for $450 million. Key Metrics The company recorded revenues of $70.5 billion in the financial year (FY) ended March 2011, an increase of 1% over FY2010. The net profit of the company was $1.7 billion in FY2011, an increase of 4.7% over FY2010.

Table 10: $ million

Japan Tobacco Inc.: key financials ($) 2007 54,303.2 2,399.8 38,309.3 15,257.5 33,428 2008 72,979.8 2,717.9 57,921.9 33,389.7 47,459 2009 77,791.1 1,405.1 44,174.6 25,680.6 47,977 2010 69,848.3 1,576.3 44,092.5 24,471.6 49,665 2011 70,529.8 1,650.5 40,669.0 22,551.9 48,472

Revenues Net income (loss) Total assets Total liabilities Employees Source: company filings

DATAMONITOR

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LEADING COMPANIES

Table 11: million

Japan Tobacco Inc.: key financials () 2007 4,769,387.0 210,772.0 3,364,663.0 1,340,047.0 2008 2009 2010 2011 6,194,550.0 144,960.0 3,571,910.0 1,980,710.0

Revenues Net income (loss) Total assets Total liabilities Source: company filings

6,409,730.0 6,832,307.0 6,134,695.0 238,710.0 123,410.0 138,448.0 5,087,210.0 3,879,800.0 3,872,590.0 2,932,580.0 2,255,500.0 2,149,310.0

DATAMONITOR

Table 12: Ratio

Japan Tobacco Inc.: key financial ratios 2007 4.4% 2.8% 10.8% 10.1% 39.8% 6.6% $1,624,482 $71,790 2008 3.7% 34.4% 51.2% 118.8% 57.6% 5.6% $1,537,744 $57,268 2009 1.8% 6.6% (23.7%) (23.1%) 58.1% 2.8% $1,621,426 $29,287 2010 2.3% (10.2%) (0.2%) (4.7%) 55.5% 3.6% $1,406,389 $31,739 2011 2.3% 1.0% (7.8%) (7.8%) 55.5% 3.9% $1,455,062 $34,050

Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Revenue per employee Profit per employee Source: company filings

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LEADING COMPANIES

Figure 13: Japan Tobacco Inc.: revenues & profitability

Source: company filings

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Figure 14: Japan Tobacco Inc.: assets & liabilities

Source: company filings

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DISTRIBUTION

MARKET DISTRIBUTION
Independent Retailers form the leading distribution channel in the global tobacco market, accounting for a 17.6% share of the total market's value. Supermarkets / hypermarkets accounts for a further 14% of the market. Table 13: Channel Independent Retailers Supermarkets / hypermarkets Convenience Stores Others Total Source: Datamonitor Global tobacco market distribution: % share, by value, 2010(e) % Share 17.6% 14.0% 11.2% 57.3% 100% DATAMONITOR

Figure 15: Global tobacco market distribution: % share, by value, 2010(e)

Source: Datamonitor

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MARKET FORECASTS

MARKET FORECASTS
Market value forecast
In 2015, the global tobacco market is forecast to have a value of $889,275.1 million, an increase of 23.4% since 2010. The compound annual growth rate of the market in the period 201015 is predicted to be 4.3%. Table 14: Year 2010 2011 2012 2013 2014 2015 CAGR: 201015 Source: Datamonitor Global tobacco market value forecast: $ million, 201015 $ million 720,796.9 750,716.8 782,914.8 817,774.8 855,579.5 889,275.1 million 542,813.7 565,345.6 589,593.1 615,845.3 644,315.0 669,690.3 % Growth 4.0% 4.2% 4.3% 4.5% 4.6% 3.9% 4.3% DATAMONITOR

Figure 16: Global tobacco market value forecast: $ million, 201015

Source: Datamonitor

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APPENDIX

APPENDIX
Methodology
Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated, analyzed, cross-checked and presented in a consistent and accessible style. Review of in-house databases Created using 250,000+ industry interviews and consumer surveys and supported by analysis from industry experts using highly complex modeling & forecasting tools, Datamonitors in-house databases provide the foundation for all related industry profiles Preparatory research We also maintain extensive in-house databases of news, analyst commentary, company profiles and macroeconomic & demographic information, which enable our researchers to build an accurate market overview Definitions Market definitions are standardized to allow comparison from country to country. The parameters of each definition are carefully reviewed at the start of the research process to ensure they match the requirements of both the market and our clients Extensive secondary research activities ensure we are always fully up-to-date with the latest industry events and trends Datamonitor aggregates and analyzes a number of secondary information sources, including: National/Governmental statistics International data (official international sources) National and International trade associations Broker and analyst reports Company Annual Reports Business information libraries and databases

Modeling & forecasting tools Datamonitor has developed powerful tools that allow quantitative and qualitative data to be combined with related macroeconomic and demographic drivers to create market models and forecasts, which can then be refined according to specific competitive, regulatory and demand-related factors Continuous quality control ensures that our processes and profiles remain focused, accurate and up-to-date

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APPENDIX

Industry associations
International Tobacco Growers' Association No. 30 - A, 1 dt, 6000-081 Castelo Branco, Portugal Tel.: 351 272 325 901 Fax: 351 272 325 906 www.tobaccoleaf.org

Related Datamonitor research

Industry Profiles Tobacco in the United States Tobacco in Canada Tobacco in Mexico Tobacco in Brazil Tobacco in France Tobacco in Germany Tobacco in the United Kingdom Tobacco in Belgium Tobacco in Italy Tobacco in the Netherlands Tobacco in Spain Tobacco in the Czech Republic Tobacco in Denmark Tobacco in Hungary Tobacco in Norway Tobacco in Russia Tobacco in Poland Tobacco in Sweden Tobacco in Europe Tobacco in Australia
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APPENDIX

Tobacco in China Tobacco in India Tobacco in Japan Tobacco in Singapore Tobacco in South Korea Tobacco in Taiwan Tobacco in Asia-Pacific Tobacco in South Africa

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APPENDIX

Disclaimer
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.

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ABOUT DATAMONITOR

ABOUT DATAMONITOR
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