Japan Tobacco Inc. · TSE:2914

Japan Tobacco — Tobacco Investor Conference 2023

54 slides from Japan Tobacco's conference presentation, May 8, 2023

Slide 2: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements. These statements appear in a number of places in this document and include statements regarding the intent, belief, or current and future expectations of our management with respect to our business, financial condition
Slide 3: Agenda
Agenda Time (CET) Session Speakers 12:00 Conference starts A purpose and a strategy fit for the future Eddy Pirard Funding our RRP expansion Vassilis Vovos Consumer centricity at the core Natasa Milosevic Growing in RRP Takehiko Tsutsui 13:30 Q&A N. Kato, E. Pirard, V. Vovos, N. Milosevic, T. Tsutsu
Slide 5: A new purpose to guide JT's tobacco business long-term
A new purpose to guide JT’s tobacco business long-term Creating fulfilling moments. Creating a better future. © Copyright JT 2023 Tobacco Investor Conference 5
Slide 6: Clear growth opportunities across both categories
Clear growth opportunities across both categories Industry net revenues Combustibles RRP Variance 2022-35 +$17Bn +$48Bn CAGR 2022-35 +1% +8% © Copyright JT 2023 Note: Based on internal forecasts. Industry net revenues excluding China Tobacco Investor Conference 6
Slide 7: Combustibles to remain the largest category
Combustibles to remain the largest category Industry volume, trillion units CAGR CAGR 3.0 -1% 22-35 2.9 2.7 2.6 5% 7% 12% 16% +8% 88% 85% 79% 74% -2.5% 2022 2025 2030 2035 Combustibles HTS E-Vapor Oral © Copyright JT 2023 Note: Based on internal forecasts. Industry volume excluding China Tobacco Inv
Slide 8: Within the growing nicotine revenue pool, HTS forecasted to outpace combustibles
Within the growing nicotine revenue pool, HTS forecasted to outpace combustibles in future value creation… Industry net revenues, $Bn Variance 22-35 CAGR 200 +3% 174 151 135 22% +$33Bn 17% 11% 9% 75% 69% 62% +$17Bn 79% 2022 2025 2030 2035 Combustibles HTS E-Vapor Oral © Copyright JT 2023 Note: Based
Slide 9: …with significant opportunities and differences by cluster
…with significant opportunities and differences by cluster 2035 industry net revenues, % 1) EMA Asia Western Europe Combustibles HTS E-Vapor Oral © Copyright JT 2023 Note: Based on internal forecasts Tobacco Investor Conference 9 1) Eastern Europe, Middle East, Africa & Americas (EMA)
Slide 10: Our purpose and industry view shape our strategy…
Our purpose and industry view shape our strategy… Creating fulfilling moments Creating a better future COMBUSTIBLES RRP Maximize top-line and ROI Prioritize investments in HTS  Sustained share gains  Ploom X geographic expansion  Capitalize on pricing opportunities  Enhanced capabilities  Disci
Slide 11: …and requires a targeted consumer-centric product portfolio
…and requires a targeted consumer-centric product portfolio Combustibles HTS Other RRPs E-vapor Oral Infused © Copyright JT 2023 Note: This slide is not intended to promote sales of tobacco or nicotine containing products or encourage smoking or using nicotine containing products Tobacco Investor Co
Slide 12: Combustibles: Proven track record & ongoing momentum
Combustibles: Proven track record & ongoing momentum Top-30 SoM1), % Tobacco AOP2), % +4.2pp Average +10.1% 2018 2019 2020 2021 2022 2022 2018 2019 2020 2021 2022 • Competitive and well positioned brand portfolio • Historical delivery on the high-end of Group’s target • Ongoing investments in GFB •
Slide 13: RRP: Targeted investments fueling HTS growth
RRP: Targeted investments fueling HTS growth HTS SoS in Japan, % RRP Volume, BnU 9.3% 7.9 6.9 7.1 7.7% 5.8 4.7 4.5% 2.8% 1.1% 2018 2019 2020 2021 2022 Q1 23 2018 2019 2020 2021 2022 • Invest towards HTS • Innovations to strengthen HTS and other RRP portfolio • Ploom X expansion in Japan • Build capa
Slide 14: RRP: Ambition to outperform HTS segment growth
RRP: Ambition to outperform HTS segment growth HTS share of industry volume HTS share of JT volume 2x >6x 2022 2028 2022 2028 Mid-teens SoS in HTS1) © Copyright JT 2023 Note: Internal forecasts 1) In key markets, including Japan and Italy Tobacco Investor Conference 14
Slide 15: RRP: Going beyond organic to drive growth and accelerate learnings
RRP: Going beyond organic to drive growth and accelerate learnings • Joint venture with Altria to market and commercialize HTS products in the US with Ploom branded devices and Marlboro branded consumables • On track to submit PMTA for the latest version of Ploom HTS products in the first half of 20
Slide 17: Consistently delivering solid performance
Consistently delivering solid performance 2018–2022 average annual growth1) Core Volume AOP Revenue +1% +6% +10% © Copyright JT 2023 Note: FY17-21 equal to the sum of international and domestic tobacco businesses for illustration purposes Tobacco Investor Conference 17 1) Tobacco business Core Reven
Slide 18: Business Plan 2023: building the foundation for growth
Business Plan 2023: building the foundation for growth 2023 – 2025 • Ploom X expansion supported by significant investment over the next three years Volume Stable • Quality topline growth and increasing combustibles return on investment will provide funding for RRP • Continued efficiency initiatives
Slide 19: Continue to drive quality top-line growth
Continue to drive quality top-line growth 2023 - 2025 Price / mix, % of Core Revenue1) Average 6.4% SoM growth Industry volume -2% CAGR 2018 2019 2020 2021 2022 © Copyright JT 2023 Note: 1) Price / mix contribution to core revenue growth at constant FX Tobacco Investor Conference 19 FY18-21 price/mi
Slide 20: Clear market roles to maximize combustibles ROI
Clear market roles to maximize combustibles ROI Market strategic roles guiding decision-making towards sustainable growth Market role EARNINGS EARNINGS & SoM SoM Balance sustainable Build consumer base for Prioritize sustainable Focus earnings and share mid- to long-term earnings performance perform
Slide 21: Strengthen our competitive cost base…
Strengthen our competitive cost base… Next generation Efficiency focus Global Business through our Services kaizen mindset Transformation ¥20Bn initiatives supply chain delivering over efficiencies by ¥50Bn by 2023 2024 © Copyright JT 2023 Tobacco Investor Conference 21
Slide 23: Focused RRP investment…
Focused RRP investment… RRP investment composition • Invest over ¥300 billion in RRP between 2023-2025 8% • Main area of focus is HTS • Support geo-expansion and share gains 24% • Investment set aside for exploratory RRP segments 67% • Leverage our commercial organization and trade relationships in
Slide 24: …towards 2028 RRP breakeven
…towards 2028 RRP breakeven Building scale through geo-expansion Enhancing the positive revenue & margin mix1) >6x >1.5x >1.6x >3x 2022 2025 2028 Cigarette HTS Cigarette HTS HTS volume Revenue per unit Gross margin per unit © Copyright JT 2023 Note: 1) Revenue / GM per unit based on the first wave o
Slide 25: Intact growth algorithm
Intact growth algorithm Foundation for future profit generation Competitive cost base Focus on return on Focused RRP and continued Quality topline growth investment in investment towards capability combustibles profitability growth enhancement Mid to high single digit AOP growth1) © Copyright JT 202
Slide 27: Consumer centricity powers our strategy
Consumer centricity powers our strategy CONSUMER TRENDS CONSUMER USAGE MOMENTS Daily Routine & Other occasions CLOSE START EVENTS & OF DAY OF DAY RELAXING Better World Wellbeing Smarter Living In control Authentic Experience+ PARTIES MOMENTS EVENING / COMMUTE CONSUMER SEGMENTATION LOUNGING TIME REWA
Slide 28: The Marketing & Sales strategic framework
The Marketing & Sales strategic framework JTI PURPOSE M&S MISSION CREATING FULFILLING MOMENTS CREATING A BETTER FUTURE Creating leading power Brands & Experiences for the modern world STARTING POINT COMBUSTIBLES COMBUSTIBLES RRP RRP Global Flagship Brands Think Consumer Maximize Profitable Growth Bu
Slide 29: Combustibles: Maximize Profitable Growth
Combustibles Maximize Profitable Growth © Copyright JT 2023 Note: This slide is not intended to promote sales of tobacco or nicotine containing products or encourage smoking or using nicotine containing products
Slide 30: Proven combustibles strategy fuels growth
Proven combustibles strategy fuels growth FOCUS ON GLOBAL FLAGSHIP BRANDS Profitable SoM growth powered by GFB Two of the Top 3 cigarette brands in the world Top-30 SoM1) , % GFB as % of total volume Brand SoM2) , % 35.0% 35.6% 69% 7.6% 33.6% 32.9% 31.4% 3.5% +7pp vs. 2018 1.9% 1.9% 2018 2019 2020 2
Slide 31: Consumer centric portfolio to maximize potential
Consumer centric portfolio to maximize potential TARGETED CONSUMER PORTFOLIO PORTFOLIO STRATEGY PORTFOLIO OPTIMIZATION Portfolio Complementary Simplification Consumer Map Brands Positioning Principles PREMIUM EXPERIENCE Focus LEADING GLOBAL 1 on GFBs PORTFOLIO ICON Rationalize 2 “tail brands” MODERN
Slide 32: Build a Global Power Brand
Build a Global Power Brand © Copyright JT 2023 Presentation title in footer 32 Note: This slide is not intended to promote sales of tobacco or nicotine containing products or encourage smoking or using nicotine containing products
Slide 33: Rapidly growing consumer base
Rapidly growing consumer base Ploom User Ploom HTS Ploom X Growth Share of Segment Awareness2) Robust adoption despite highly competitive market High regular and exclusive usage1) 1.2MM Doubled +30% +45% YoY 2022 vs 2020 Jan’23 vs Nov’21 Growing awareness with high potential © Copyright JT 2023 Note
Slide 34: Effective consumer targeting
Effective consumer targeting Core Adult Target Audience Source of Business and Late Adopters Data-driven segmentation to identify core audience Explorers Confidents Responsibles Conscious Economizers Socializers Prioritizing most progressive consumers that are open to RRP Interest in trends and new
Slide 35: Ploom: creating modern pleasure
Ploom: creating modern pleasure Our mission Establishing a premium brand image Achieved brand image attributes Designing the future of mindful pleasure, for Powerful the modern consumer Imagery Stylish Fulfilling Credible Moments Innovation Advanced © Copyright JT 2023 Note: This slide is not intend
Slide 36: Consumer-centric strategy
Consumer-centric strategy 1 2 3 Power Brand Connected Omnichannel & Ecosystem Consumer Journey Activation Discover Consider Buy Live Advocate Build Ploom brand, supported Handholding consumers Always-on activation by premium line of products across the whole transition journey for a superior brand e
Slide 37: Maximizing acquisition and brand loyalty
Maximizing acquisition and brand loyalty Discover Consider Buy Live Advocate Building strong Awareness Acquisition Brand loyalty awareness Digital marketing | OOH1) | Press Offline and Online retail | Referral Loyalty Club | Events Seamless route to consumer Qualitative consumer acquisition Activati
Slide 38: Brand Expression & Brand Experience
Immersive retail experiences Flagship Store Brand Store High FLAGSHIP STORE The ultimate brand experience Brand Expression & Brand Experience BRAND STORE The full brand experience POP-UP STORE To provide curiosity SHOP-IN-SHOP Pop-up Stores Shop-in-shop Bring the brand to life CONVENT IONAL RETAIL L
Slide 39: Personalized digital experiences powered by data
Personalized digital experiences powered by data Driving Awareness, Acquisition and Retention Club Club Social Implementing Global Digital Ecosystem Media Connecting offline with online Consumer Care Personalized with A.I. Ploom website eCRM1) 3rd-party E- Own Retail Com © Copyright JT 2023 Note: Th
Slide 40: Ploom Club: growing community of loyal users
Ploom Club: growing community of loyal users Maximizing brand loyalty Enter the Club 416K members Building relationship & by end 2022 brand top-of-mind relevance Facilitating efficient and qualitative consumer acquisition +72% ‘22 vs ‘21 Earn and Spend Invite friends © Copyright JT 2023 Note: This s
Slide 41: Best in class consumer care
Best in class consumer care Consumer-centricity in action Global Platform Model Face of the brand and the Globally Aiming for 24/7 company, connecting with consumers consistent availability Go beyond expectations handholding consumers along journey Best-in-class Agile & platform Scalable Multi-chann
Slide 42: Ready for global expansion
Ready for global expansion Building an aspirational brand New mindset & capabilities (on & offline) Powerful launches Superior omnichannel consumer experience Building on Accelerating success in Focusing on consumer retention market Japan Preparing roll-outs US launch Constantly bringing product inn
Slide 43: Ploom video
Ploom video VIDEO © Copyright JT 2023 Tobacco Investor Conference 43 This video was prepared for JT Group Tobacco Investor Conference May 8, 2023. This video is not intended to promote sales of tobacco or nicotine containing products or encourage smoking or using nicotine containing products.
Slide 45: Ploom X: step-change evolution in HTS
Ploom X: step-change evolution in HTS Gen 2 (2020) Gen 3 (2021) • Critical features of the device and tobacco sticks improved: • Heating engine, heating profile and temperature for longer duration & consistency • Design & aesthetics, in a smaller size • Seamless user experience and interaction Ploom
Slide 46: Ploom X: significant improvement in consumer metrics
Ploom X: significant improvement in consumer metrics Consumer satisfaction Consumer retention Consumer engagement C-SAT 1) Retention rate 2) Net Promoter Score 3) +14% +50% +10pp Ploom S 2.0 Ploom X Ploom S 2.0 Ploom X Ploom S 2.0 Ploom X Note: 1) Consumer Satisfaction score (index): # of users who
Slide 47: Ploom X: improving performance in Japan
Ploom X: improving performance in Japan Share in HTS MEVIUS relaunch in Mar’23 10 9.3% 9 8 7 relaunch 6 (Mar’23) 5 4 3 4.0% 2 1 launch (Jul’21) 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2021 2022 2023 © Copyright JT 2023 Note: This slide is not intended to promote sales of tobacco or nicotine containing products or
Slide 48: Ploom X: accelerating global expansion
Ploom X: accelerating global expansion # of markets to launch Ploom X 2022 Global HTS volume market coverage 59% 77% 28 14 May 10 4 Present 2023 2024 Total © Copyright JT 2023 Tobacco Investor Conference 48
Slide 49: Ploom X: consistent execution in new market launches
Ploom X: consistent execution in new market launches UK / London Italy / Milan Lithuania / Vilnius © Copyright JT 2023 Note: This slide is not intended to promote sales of tobacco or nicotine containing products or encourage smoking or using nicotine containing products Tobacco Investor Conference 4
Slide 50: HTS: product improvement and innovation
HTS: product improvement and innovation 2019 2020 2021 2022 2023 Ploom X 3) Gen 3 • Improved sensorial delivery • More constant vapor intensity Ploom S 2.0 1) Ploom model S 2) • 5’00” session time Gen 2 • 25” heat-up time • Improved sensorial delivery • Smaller size • 20 sticks per charge • Improved
Slide 51: Exploratory RRP: innovation & consumer learnings continue
Exploratory RRP: innovation & consumer learnings continue Infused tobacco Nicotine pouches E-vapor NEXT GENERATION PRODUCT UPGRADE PRODUCT UPGRADE © Copyright JT 2023 Note: This slide is not intended to promote sales of tobacco or nicotine containing products or encourage smoking or using nicotine c
Slide 52: Innovation initiatives: endeavors for the future pipelines
Innovation initiatives: endeavors for the future pipelines Technology / research initiatives RRP patent filings 1) Recognition by EPO 2) 90+ TOP 100 TOP 50 TOP 50 Projects on-going All RRPs Exploratory HTS 2016 2017 2018 2019 2020 2021 2022 © Copyright JT 2023 Note: 1) # of 1st (priority) applicatio
Slide 53: Science: at the center of our reduced risk efforts
Science: at the center of our reduced risk efforts Reduced risk efforts 1) • Holistic approach from fundamental scientific research to product performance assessments • Addressing reduced risk as one of the key consumer drivers • Readiness for potential future regulatory requirements • Active stakeh

Japan Tobacco — Tobacco Investor Conference 2023 on 6ix

Japan Tobacco — Tobacco Investor Conference 2023

Slide 1: Tobacco Investor Conference JT Group

Slide 2: Forward-looking statements

Slide 3: Agenda

Slide 4: A Purpose and a Strategy Fit for the Future

Slide 5: A new purpose to guide JT's tobacco business long-term

Slide 6: Clear growth opportunities across both categories

Slide 7: Combustibles to remain the largest category

Slide 8: Within the growing nicotine revenue pool, HTS forecasted to outpace combustibles

Slide 9: …with significant opportunities and differences by cluster

Slide 10: Our purpose and industry view shape our strategy…

Slide 11: …and requires a targeted consumer-centric product portfolio

Slide 12: Combustibles: Proven track record & ongoing momentum

Slide 13: RRP: Targeted investments fueling HTS growth

Slide 14: RRP: Ambition to outperform HTS segment growth

Slide 15: RRP: Going beyond organic to drive growth and accelerate learnings

Slide 16: Funding Our RRP Expansion

Slide 17: Consistently delivering solid performance

Slide 18: Business Plan 2023: building the foundation for growth

Slide 19: Continue to drive quality top-line growth

Slide 20: Clear market roles to maximize combustibles ROI

Slide 21: Strengthen our competitive cost base…

Slide 22: …while enhancing strategic capabilities

Slide 23: Focused RRP investment…

Slide 24: …towards 2028 RRP breakeven

Slide 25: Intact growth algorithm

Slide 26: Consumer Centricity at the Core

Slide 27: Consumer centricity powers our strategy

Slide 28: The Marketing & Sales strategic framework

Slide 29: Combustibles: Maximize Profitable Growth

Slide 30: Proven combustibles strategy fuels growth

Slide 31: Consumer centric portfolio to maximize potential

Slide 32: Build a Global Power Brand

Slide 33: Rapidly growing consumer base

Slide 34: Effective consumer targeting

Slide 35: Ploom: creating modern pleasure

Slide 36: Consumer-centric strategy

Slide 37: Maximizing acquisition and brand loyalty

Slide 38: Brand Expression & Brand Experience

Slide 39: Personalized digital experiences powered by data

Slide 40: Ploom Club: growing community of loyal users

Slide 41: Best in class consumer care

Slide 42: Ready for global expansion

Slide 43: Ploom video

Slide 44: Growing in RRP

Slide 45: Ploom X: step-change evolution in HTS

Slide 46: Ploom X: significant improvement in consumer metrics

Slide 47: Ploom X: improving performance in Japan

Slide 48: Ploom X: accelerating global expansion

Slide 49: Ploom X: consistent execution in new market launches

Slide 50: HTS: product improvement and innovation

Slide 51: Exploratory RRP: innovation & consumer learnings continue

Slide 52: Innovation initiatives: endeavors for the future pipelines

Slide 53: Science: at the center of our reduced risk efforts

Slide 54: Questions and Answers