[Intl-tobacco] Japan Tobacco to cut global tobacco brands (fwd)

[Robert Weissman]

Japan Tobacco to cut global tobacco brands
Source: Reuters, Monday, 2/14/00
Monday February 14, 2:59 am Eastern Time

TOKYO, Feb 14 (Reuters) - Japan Tobacco Inc (JT), the world's
third-largest tobacco group, plans to cut the number of its global tobacco
brands to 139 from 197 under a five-year business restructuring, JT
President Masaru Mizuno said on Monday.

JT, which operates in some 70 countries across the globe, will also focus
on 16 core target countries: 11 mature markets and five growing markets in
Asia, Eastern Europe and Russia, Mizuno said in an interview.

On the Russian market, which accounted for about one-fifth of JT's
overseas tobacco sales in volume terms last year, Mizuno said there were
signs the market was stabilising after an unexpectedly long slump
resulting from the country's economic and currency crisis.

With last year's eye-opening $7.38 billion takeover of RJR International,
known for its Camel and Winston brands, JT became the world's
third-largest cigarette producer behind Philip Morris (NYSE:MO - news) of
the United States and U.K.-based British American Tobacco Plc (quote from
Yahoo! UK & Ireland: BATS.L) (BAT).

JT holds a 75 percent share of Japan's tobacco market -- the world's
third-largest after China and the United States -- and has a powerful
presence in Asia with its flagship Mild Seven cigarettes, but it was
little known outside the region until the buyout, the most expensive ever
by a Japanese company.

On February 1, JT unveiled a long-awaited business plan for the next five
years that aims to eliminate a total of 4,500 jobs, or 13 percent of its
global tobacco-related work force, and streamline its global tobacco
operations.

Mizuno said JT would further consolidate its 25 domestic cigarette plants
and introduce high-speed cigarette-rolling machines, but added that any
plant closures may require lengthy talks with workers and labour unions.
He gave no specific targets for domestic plant closures.

He said the company does not want to follow an overly aggressive course in
consolidating its production facilities, while the planned domestic job
cuts would largely be achieved through voluntary early retirements.

``I'm aware of the fact that Philip Morris only relies on three or four
factories for its entire domestic output...but we need to ensure a stable
tobacco supply to any region in the country,'' he said.

As for overseas operations, JT now operates 20 RJR factories in 17
countries, in addition to its previously existing factory in Manchester,
England.

Mizuno said he sees more room for consolidation in Eastern Europe,
compared with other regions such as Asia, Western Europe and Central
Europe. JT has said it will reduce its total overseas tobacco-related work
force by 2,000 from the current 13,000 by the year 2002.

To strengthen the value of its four flagship brands -- Camel, Winston,
Salem and Mild Seven -- JT plans to boost spending on overseas sales
promotion by $100 million this year. About 90 percent of that increased
amount will be used for the four brands, Mizuno said.

China was another priority area, Mizuno said.

Any business strategy in China would be crafted by JT itself, rather than
by its Geneva-based subsidiary, JT International S.A., which was set up
last October to take control of JT's overseas operations, he added.

The Chinese market has huge potential for foreign tobacco manufacturers,
especially once the country wins membership of the World Trade
Organisation (WTO), he said. ``We must pay special interest to China,
especially as regards its international trade conditions,'' said Mizuno.

Last year, JT and Shanghai Gaoyang International Tobacco Co Ltd agreed the
Chinese company would manufacture two of JT's cigarette brands. JT said
last May that the Chinese partner would manufacture 400 million cigarettes
per year to be sold in Japan and Hong Kong as well as in China.

The two partners would discuss further cooperation in technology and
product development, it said at that time.

On Monday, JT shares, viewed as a core defensive stock, ended up 0.11
percent or 1,000 yen at 901,000. JT was privatised in 1985 but is still
owned 67 percent by the government.