Japan: Japan Tobacco Inc announces exit from beverage business

Japan Tobacco Inc (JT), a manufacturer of cigarettes and grocery products, has announced that it has decided to end production and sale of all beverages by the end of September 2015 due to severe market competition and lack of scale.

JT entered the beverage business in 1988 and is especially known for its Roots brand of  RTD coffee and flavoured bottled water in Japan. The company is the 10th largest in the Japanese beverage industry, accounting for 1.6 % of sales volumes, Reuters reports.

In a written statement, the manufacturer said that it would be hard for its beverage unit to make a profitable contribution to the JT Group as the “operating environment of the beverage business in Japan has become increasingly challenging” and “expanding business scale through active sales promotion and constantly developing unique quality products within a short time frame have become indispensable to establish a sustainable profit platform”.

While JT’s beverage division brought in roughly 50 billion yen ($425.68 million) for the financial year ending March 2014, the company said it would now focus its efforts on other areas. The tobacco businesses would be “the priority of the Company’s resource allocation” and the company added that it would “steadily invest in the pharmaceutical and the processed food businesses focusing on building a foundation that would allow them to contribute to the Group’s profit”.

A spokesman for JT reportedly said that the company had not yet decided on whether to maintain its beverage vending machine business or sell it to a competitor, adding that it "would like to consider various possibilities".

Source: Japan Tobacco / Reuters