Japan Tobacco Sees No Quick Output Fix for Alternative Smoking Device

The capacity constraints that have dogged the domestic launch of Japan Tobacco Inc.'s heated-tobacco device will take a while yet to resolve, according to a company executive, handing a further boost to Philip Morris International Inc. in the world's most advanced market for next-generation tobacco products.

Japan Tobacco underestimated the level of demand for its Ploom Tech device since releasing it at home in March, Yasuhiro Nakajima, vice president of emerging products, said in an interview. The cigarette maker is spending tens of billions of yen to relieve the capacity constraints that are preventing it from selling Ploom Tech nationwide.

"We are improving the Ploom Tech supply situation but to be honest it is taking some time," Nakajima said by phone. "I cannot tell you that we can resolve the issue very quickly."

The misstep has left Japan Tobacco a frustrated bystander as Philip Morris has scooped up 5.5 percent of the country's cigarette market with a smoking alternative called iQOS since releasing it nationwide in April. British American Tobacco PLC's device Glo is also set to provide fresh competition.

Smokers in Japan are on the decline, with only a fifth of the adult population regularly lighting up, according to health ministry data. That's down from 26 percent in 2005. The sale of e-cigarettes and alternative vapor devices is heavily regulated in Japan, meaning it is now the foremost global battleground for heated tobacco products.

Ploom Tech is a pen-shaped, battery-powered device that uses vapor from heated liquid to deliver the taste of granulated tobacco leaves in a capsule. In March, Japan Tobacco began selling the device in about 900 convenience stores and retail outlets in Fukuoka Prefecture as well as via an online store. E-commerce sales are doing "pretty well," Nakajima said.

Japan Tobacco aims to lead the domestic vapor market in three to five years, Hideki Miyazaki, the executive deputy president, said in October. The company is scheduled to report its full-year results on Monday.