Issue link: https://read.dmtmag.com/i/550325
32 tobaccoasia / Issue 3, 2015 (July/August) Together with the current 8% VAT rate on the retail price of a standard pack, the average total tax burden pans out at approximately ¥276.73 per pack. This translates to approximately 64.36% of the retail price as TIOJ puts the average price for a pack of 20 cigarettes sold in FY2014 at approximately ¥430. Consequently, the average remaining margin of ¥153.27 not only must cover raw material, manufactur- ing, and distribution costs but also the net profits of both manufacturers and retailers. (See Table 4 for average cigarette pack price.) To put this into perspective, the Euromonitor report offers an average cigarette pack price break- down based on selected brand examples in the premium, mid-range and economy segments (deviations from the above figures are the result of sometimes considerable price differences across brands): New Brands and Existing Brands in Broader Variety Brand diversification, the introduction of new brands, as well as re-brandings (e.g. as it happened with Japan Tobacco's Mild Seven in 2013; see side box) appear to be the most effective measures manufacturers currently have in order to shore up their customer bases and defend their market shares. A minor shift has seemingly occurred in the current fiscal year, though, as the Seven Stars brand moved to the number one spot of the company's best-selling brands, dethroning Mevius (the previous Mild Seven), although its sub brands Mevius One 100's Box, Mevius Super Lights, Mevius Lights, and Mevius Extra Lights all occupy consecutive follow-up places in the company's top five. P Premium (%) P Mid-Range (%) P Economy (%) Sample: Marlboro (PMI) Sample: Mevius (JT) Sample: Golden (BAT) Manufacturer 70.8 16.1 60.7 14.8 20.0 10.0 Retailer 29.9 6.8 23.6 5.8 11.8 5.9 Retained 100.8 22.9 84.5 20.6 31.8 15.9 Specific Tax 176.9 40.2 174.3 42.5 94.4 47.2 Ad Volerem 96.8 22.0 90.2 22.0 44.0 22.0 VAT 65.6 14.9 61.1 14.9 29.8 14.9 TOTAL Tax 339.2 77.1 325.5 79.4 168.2 84.1 End Price 440.0 100.0 410.0 100.0 200.0 100.0 Table 4. Average Cigarette Pack Price Breakdown *P = price point in yen (JPY) Source: Euromonitor International; from trade interviews Furthermore, JTI announced the launch in late July 2015 of two new products in the Pianissimo brand range – Pianissmimo Precia Temore 6 and Pianissimo Precia Temore One, which will be the first-ever non-menthol Pianissimo and will be sold exclusively in Tokyo, Aichi, and Toyama prefectures. In response to intensifying competition, JTI this year also will start to operate under a new organiza- tional structure. "We will re-arrange our sales organization to strengthen consumer and trade marketing capabilities, and consolidate manufacturing facilities in pursuit of cost competitiveness," said Sugata. "With these initiatives, [our] Japanese domestic tobacco business will be able to develop insight into FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Mild Seven/MEVIUS 32.3 32.1 31.8 29.5 31.2 32.7 32.1 Seven Stars* 1 9.4 9.9 9.4 7.4 7.7 7.7 7.7 Pianissimo* 2 3.3 3.4 3.6 2.6 3.2 3.1 3.1 Caster 5.9 5.7 5.4 4.2 4.6 4.7 4.6 Cabin 3.8 3.9 3.5 2.7 2.9 2.8 2.8 Peace 2.8 2.7 2.5 1.8 2.0 2.0 2.0 Hope 2.0 2.0 1.9 1.4 1.5 1.5 1.5 Other Brands 4.4 4.1 5.0 5.1 6.3 6.5 6.6 Table 5. Brand Shares (in %) within the Tobacco Japan Inc. Product Family 2008-2014 Source: Japan Tobacco Inc. *1 Retrospective of figures for "Alaska" which was integrated into the Seven Stars family in October 2011. *2 Retrospective of figures for "icene" and "Lucia" which were integrated into the Pianissimo family in January 2010. Marlboro Gold KS Box Japan Tobacco's best-selling Mevius One Another JT bestseller, Seven Stars Charcoal Filter