IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERS

Our value chains
The JT Group strives to provide products and services that exceed our consumers’ expectations, with each of its businesses demonstrating its strengths and adding value at each stage of the value chain.
Three strengths driving
our global growthSolidfinancial base

Superior
brand equity

R&D

Procurement

Manufacturing

MarketingDistribution/Sales

Diverseworkforcen8 R&D centers covering scientific research,nProcessed food businessPharmaceutical businessTobacco businesstechnology & product developmentnConsumer-driven R&D focusing on whatmatters most to consumers*nnn

with third-party playersn38 factories across our footprint, out ofintegrated operations and third parties

which six produce RRP (Reduced-RiskReliability of leaf supply regardless ofProducts)

weather or market fluctuations1

1,962 IP filings, 90+ innovation partnerships

Leaf supply diversified across verticallynFull compliance with regulations; assurance of leaf integrity and originnnn

Development of innovative drugsnn

Sales in 130+ markets

Camel, MEVIUS & LDn

Tailored RTC*2 on market-by-market

Consumers*1 at center of our offerings:

State-of-the-art equipment and manu-

We provide freedom of choice andfacturing processes

superior quality

Industry-leading quality standards for alln

our productsnStrong brand equity, notably Winston,Ability to stably manufacture high-basisn

Motivated salesforce with strong ties
with trade

Full compliance with local regulation in
all countries where we operaten

Conduct responsible detailing activitiesnTop-market-share*3 products/brands

quality pharmaceuticalsnnProprietary yeast, processing and freezingnStable, cost-competitive sourcing ofn

Management systems that ensuretechnologies

high-quality ingredients (extensivestable, efficient manufacturing of

Ability to develop high-value-added

supplier network and inspection pro-high-quality food products based on

products that meet consumer needs andgram)food safety management

preferencesnnSales force capable of proposing prod-(Sanuki Udon, Gottsu-umai)

ucts that meet consumer needs with anMarket insight based on communication

extensive product lineupwith consumers (identification of consumers’ increasingly diverse needs/
preferences, e.g. by using fan sites)*1 Adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country*2 Route to consumer*3 Fuji Keizai Co., Ltd., Foodstuff Marketing Handbook 2023: Vol. 2, 3, 2021 results

008

Japan Tobacco Inc. Integrated Report 2022

Japan Tobacco Inc. Integrated Report 2022009

MATERIALITY andSUSTAINABILITYIDENTITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERS

Our value chains
Each of the JT Group’s business is also working to further exploit its strength in the value chain, in order to increase the value it can provide to our consumers.

R&D

Pharmaceutical businessTobacco businessn

Initiatives tomaintain/
upgradestrengthsnnn

Priorities andactions toachieve them
Initiatives tomaintain/
upgradestrengths
Priorities andactions toachieve themnnnnnn

Processed food businessn oving from “site-based” teams to “outcome-based”
M
global teams
Enhancing cascading in R&D of consumers-related*data and analytics
Protecting innovation with sound Intellectual Property (IP) strategy

 s RRP (Reduced-Risk Products) industry innovation
Acycles get shorter, the JT Group is implementing
initiatives to accelerate the development of new
RRP platformsnnn

 ontinuously balancing risk mitigation and sourcing
Cflexibility
Advanced planning and inventory management for
uninterrupted manufacturingIncreasing emphasis on social and environmental
sustainability of supplyAs the JT Group exposure to RRP grows, we areadapting our device-procurement strategy to be
more resilient in case of disruptions

 dd more research themes and expedite progressADevelop proprietary drug discovery technology

Initiatives tomaintain/upgradestrengths

 evelop high-value-added products that meetDconsumer needs and preferences–Develop new products that take into accountenvironmental impact and sustainability

nnnnnnnnnnn

Priorities andactions toachieve themnImproving R&D efficiency through concentration of resources in targeted disease domains
Promoting efficient and expeditious clinical development through coordination among domestic and foreign
R&D sites
Proactively pursuing opportunities to out- and in-license compounds

 evelop new products tailored to consumer needsDbased on market/competition research and analysis
Develop new technologies and production methods through external collaborations

ManufacturingProcurementnVerifying ingredients’ safety based on quality specification certifications submitted by suppliers
Monitoring main ingredients’ pesticide residue
content and periodically inspecting ingredientproduction plants in accord with applicable laws/
regulations and our own standards
Inspecting source farms’ soil and water quality,
verifying crop conditions, checking pesticide
management practices, and inspecting livestockand fish farms

S trengthen supply chain to enable sourcing of safe,
high-quality ingredients–Building a sustainable supply chain by fosteringtransparent relationships with suppliers and taking
human rights and environment into account whensourcing ingredientsnnn

 onstantly reviewing and optimizing our manufacC
turing footprint
Ongoing capital expenditures to increase our RRP
production capacity
K aizen approach for all our manufacturing
processes

To support the Paris Agreement on global climatechange, we are accelerating the pace of ourenvironmental impact reduction initiatives

F ormulated guidelines to verify conformity
between drugs’ approved specifications and actual
manufacturing processes
Continuing annual inspections of contract manufacturing plants based on guidelines
 ontinuously monitor in compliance with laws/
Cregulations
 andatory certification of compliance with ISO
M
22000 or FSSC 22000 international food safety
standard across all JT-affiliated plants and contract
manufacturing plants globally
Verifying end products’ compliance with pesticide
content and other safety standards throughmonitoring inspections
Reducing contamination risk by establishing andcomplying with food defense guidelines

Marketingnnnnnnnnnn

 ontinued investment in GFB's (Global FlagshipCBrands) brand equity and in establishing the PloombrandNurturing consumer-centric mindset across theentire organization
Additional internal initiatives as self-regulation and
JT Group Code of Conduct
 iven growing importance, expanding ourG
capabilities in areas of digital, advanced analytics
and B2C

Distribution/Salesnnn*Route to consumernn

 anufacture safe, high-quality food products
M–Building optimal production systems that ensure
efficiency and product quality
Install energy-efficient equipment to reduce
environmental impacts–Pursuing transition to clean energynL ooking to enhance our e-commerce capabilities
in markets where it is legal for nicotine andtobacco productsF ormulated internal standards based on Guildelines for Sales Information Provision Activities for Ethical Drugs
issued by Ministry of Health, Labour and Welfare
Thoroughly complying with said standards through training of Torii Pharmaceutical’s medical sales reps

Continue above initiative
 onducting consumer-centric market analysis toC
develop product proposals that add new value
Building more brand equity through product line
expansion and effective sales promotion
Stepping up marketing/sales activities thatprioritize highly profitable productsnnnn egularly assessing entries in new markets/chanRnels considering present and future profitability
Optimizing RTC* based on evolving environment
Strengthening relationships with key distributors
and tobacconists

 ropose products and promote sales strategies inP
response to increasingly diverse consumer needs
and trends–Proposing products personalized to consumers’
individual preferences and lifestyles

nnE xpanding in-store product selection and gaining
preferential display locations through aggressivesales approach targeted primarily at supermarkets
and convenience stores
Strengthening communication with consumers
through online disclosure of product information andlabeling of products with production location, main
ingredients’ place of origin, and contact information
for consumer inquiries/feedbackImproving safety visibility through traceability ofinspection/audit results across the entire value
chain from raw material sourcing through production, processing, distribution and salesS trengthen sales capabilities and disclose information to reassure consumers–Disclosing more information, e.g. on website andproduct packaging
Stable suppply to consumers–Building an optimal logistics network that maximallyutilizes in-house logistics (in response to Japanese
government’s logistics reform initiative)*Adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country

010

Japan Tobacco Inc. Integrated Report 2022

Japan Tobacco Inc. Integrated Report 2022

011