Japan Tobacco Inc <2914.T> is set to slash prices on its heated tobacco products early next week after a similar move by bigger rival Philip Morris International Inc <PM.N>, signaling increased competition in Japanâs nascent market for alternative cigarettes.
Japan, where regular e-cigarettes with nicotine-laced liquid are effectively banned, has become the main market for âheat not burnâ (HNB) products which emit less smoke and smell less than conventional cigarettes. The country accounts for over 90 percent of the $5 billionÂ HNBÂ market, according to Euromonitor.
Tobacco makers initially struggled to keep up with strong demand as they began introducingÂ HNBproducts in limited Japanese markets a few years ago. But they have since ramped up production, with investors now worried about slowing growth.
Japan Tobacco said it would cut the price of its PloomÂ TECHÂ device to 3,000 yen (20.7 pounds) from 4,000 yen, timed with the official start of nationwide sales on Monday.
âWe are finally prepared and confident that we can reverse our position and go on the offensive,â said Chito Sasaki, president of the companyâs domestic tobacco business, told Reuters.
The company, while a dominant player in Japanâs cigarette market with a 60 percent share, has been lagging rivals in theÂ HNBÂ category. Philip Morris, which was first to start sellingÂ HNBÂ products in Japan in 2014, claims iQOS has a 16.8 percent share in Japanâs overall tobacco market, including conventional cigarettes.
Philip Morris has said it will cut the price of its tobacco-heating device iQOS by about 30 percent to 7,980 yen from Friday. It said the move was designed to encourage more smokers who are considering switching from conventional cigarettes.
British American TobaccoÂ PLCÂ (BAT) <BATS.L> started to sell its âgloâ device at 2,980 yen earlier this month, from 5,980 yen as a time-limited offer through late December.
The cuts come as analysts said the industry may need catalysts for more growth after an initial surge in sales to those eager to try outÂ HNBÂ products.
Philip Morris in April reported weaker-than-expected growth of iQOS devices in Japan in the first quarter, prompting a dive in companyâs share price.
Industry officials, however, still see strong growth ahead, with Japan Tobacco forecastingÂ HNBÂ products accounting for 23 percent of Japanâs overall tobacco market in 2018, nearly double last yearâs 12 percent.
A Reuters investigation in December described irregularities in the clinical trials that supported Philip Morrisâ iQOS application to the U.S. Food and Drug Administration.
Japan Tobacco, a former state monopoly, is still one-third owned by the government.
Japanâs tobacco regulation is among the least strict among developed economies. Cigarettes command prime spots at cash registers at the countryâs ubiquitous convenience stores while glossy packaging carries health warnings but no graphic photos.
The government is trying to introduce an indoor smoking ban but critics say it has been watered down due to opposition from small restaurant and bar owners.
(Reporting by Taiga Uranaka; Additional reporting by Thomas Wilson)