CORPORATE PROFILE
The JT Group is a leading global tobacco company operating in over 70 markets, and our products are sold in over 130 markets.
To provide an overview of the Group, this section discusses the Group management principle
and vision that form its foundation for value
creation, outlines its businesses, and presents
key financial and non-financial performanceindicators. The section also has a special section
featuring a message from the CEO explaining
initiatives the Group is undertaking to continuously deliver value.

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Our management principle

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Message from the CEO

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At a glance014

Key performance indicators• Financial performance review• Non-financial performance review

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Our management principle

Management principle

VISIONTo pursue the 4S model

To continue to be a growing global company that provides diverse value, unique to the JT Group.
Shareholders

Under the 4S model, we strive to fulfill our responsibilities toour valued consumers, shareholders, employees and thewider society, carefully considering the respective interestsof these four key stakeholder groups and exceeding their
expectations wherever we can.
By pursuing the 4S model, we aim to achieve sustainableprofit growth over the mid to long term. We firmly believethat pursuing the 4S model is the best approach to continuously grow our corporate value and serve our four stakeholder constituencies’ common interests.

Based on our 4S model, our vision is to continue to bea growing global company that provides diverse value,unique to the JT Group.
Our long, rich history has endowed us with three key
strengths: a solid financial base, superior brand equity
and a diverse workforce. To realize our vision, we plan toConsumers

Employees

Societyleverage these strengths as sources of competitiveness inour business activities. We will create a variety of products
and services that meet the needs of our consumers andsociety, enhance the corporate value of the JT Group, andcreate social value that contributes to the development of asustainable society.

The JT Group MISSION
To create, develop and nurture our unique brands to
win consumer trust, while understanding and respecting
the environment, and the diversity of societies andindividuals.

Consumers

Shareholders

We provide exceptional products and services that deliver
value beyond fulfillment of diverse needs and preferences.
To keep doing so, we will upgrade our innovation capabilities by leveraging our Group’s diversity.

We aim to enhance shareholder returns by realizing themid- to long-term profit growth, placing priority on striking
a balance between profit growth through business investments and shareholder returns.

The JT Group WAY
n

n

n

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Employees

Society

We aim to be an appealing, highly-esteemed company forwhich our employees are proud to work. While evaluating
employees fairly and transparently and supporting theirpersonal growth, we aim to foster a corporate culture that
respects and embraces diverse values.

In order to fulfill our responsibility as a member of society
and contribute to the sustainable development of society
through our business, we will work with a wide range ofstakeholders and strive to resolve various issues together.

Japan Tobacco Inc.

Act with integrity, always putting the consumer first.
 ontinue to evolve while remaining committed toCquality in all its aspects.
Harness the power of diversity across the JT Group.

Our mission is to create, develop and nurture our uniquebrands to win consumer trust, while understanding andrespecting the environment, and the diversity of societies
and individuals through the 4S model. Our Code of Conduct
and values guide the way in which every employee should
act on a daily basis. We have codified these into three statements we call the JT Group WAY.
The world in which we live encompasses diverse naturalenvironments, societies and peoples. By embracing suchdiversity, we believe we can create brands that offer value toour consumers.

We define a brand as all of the products, services andactions trusted by consumers and believe it is the key toforming deep bonds of trust between us and our consumers. Setting our brands as our most valuable management
resource, we will continue to create, develop, and refine
distinctive brands that win consumers’ trust.
In order to achieve our mission, each and every one of us
at the JT Group practices the JT Group WAY as a personalphilosophy.

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Message from the CEO

Driving changes on our own initiative
Since its inception, the JT Group has grown by keeping its focus on the future, anticipating challenges and adapting swiftly to change. I am convinced this proactive
approach will continue to lead the JT Group towards more sustainable mid- to longterm growth, further supported by organizational reforms and cultivating a working environment where each and every employee can initiate changes on their own.

Knowing the business environment
The JT Group’s business environment remains difficult topredict because of changes in the international politicalsituation, and risks related to exchange-rate fluctuations,as well as the persistent impact of the pandemic and thesubsequent changes in consumer behavior and operations
by businesses around the world.
It is undeniable that all our business segments currently
face, and will continue to face, increasingly challenging environments. The tobacco business continues to experiencetighter regulations and higher taxes, combined with increasing demand for reduced-risk products (RRP), especiallyheated tobacco sticks (HTS). Meanwhile, the pharmaceuticalbusiness is facing higher hurdles for new drug approval andgrowing pressure to lower prices, while the processed foodbusiness is facing rising costs for personnel, distribution and
raw materials.
In addition, digital technology is constantly progressing,consumer preferences and behaviors are evolving withincreasing awareness of sustainability and ESG priorities, andthe needs and expectations among our shareholders, as well

as society at large, are changing. Amid these major, rapid
global trends, it is vital that we drive initiatives proactively
rather than react passively.
2022 is also marked by the unprecedented crisis of the war
in Ukraine. I would like to express my sincere condolences tothose who have tragically lost loved ones in the war, and tothe many others who have had to face devastating difficulties, such as having to leave everything behind in order toseek safety. I sincerely hope that peace will return soon.
While the JT Group’s first priority is the safety and securityof our employees and their families, we are also working
hand in hand with international and local aid organizations
to establish relief programs and provide immediate help tothose affected. We will continue to closely monitor the situation and prioritize our employees and their families’ safety,
while extending all possible support to those in need, taking
all necessary decisions to address the changing situation inaccordance with our Group’s management principle, whichis to pursue the 4S model.

Masamichi Terabatake
Representative Director and President,
Chief Executive Officer

Note: The word, consumers, used in the context of the tobacco business means adult consumers. Minimum legal age for smoking varies in accordance with the legislationin each country.

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Message from the CEO

Driving changes on our own initiative
The JT Group has always marked its growth by taking
matters in its own hands, adapting swiftly and implementing strategic initiatives. An example of such growth
is represented by our tobacco business, where we madelarge-scale acquisitions, like those of RJRI and Gallaher;
expanded geographically into emerging markets; enhanced
equity, mainly for global flagship brands; and continuously
allocated resources to increase presence in the expanding
RRP category.
More recently, based on the anticipated, long-term businessenvironment, and in order to increase profitability andstrengthen our competitiveness in the tobacco business,
we announced in February 2021 that we had refined ourinvestment prioritization to two key categories – HTS andcombustibles – and were introducing initiatives to strengthen the tobacco business operating model, including those
aimed at combining the existing tobacco businesses andstrengthening competitiveness in the Japanese market.
The road leading to the combination of the tobacco
businesses took many steps. In the tobacco business, weformerly ran our Japanese-domestic and international
tobacco businesses separately, which presented challenges
for us when formulating and executing a globally uniform
strategy, as well as when striving to ensure effective allocation of global resources. These challenges were especiallyapparent in the circumstances we faced to strengthen competitiveness in the RRP category. I believed it was urgent toestablish an operating structure without divisional borders

sites, implementing a voluntary retirement program, andreducing the total domestic tobacco cultivation area.
between Japanese-domestic and international operations,or between JT and JTI, to allow speedy decision-making
under unified management. Additionally, for the JT Groupto follow through on its customer-first policy and maintainsustainable growth, we needed a structure enabling us toeffectively and efficiently offer products and services thatexceeded consumer needs and expectations.
Faced with these challenges, after taking charge as CEO, I
worked to unify teams for R&D initiatives and RRP management both in Japan and abroad, led the transformation of
our international tobacco business, and relocated the JT
head office building in Tokyo. Through these initiatives, theGroup has been reinforcing our foundation and sharpening
our global competitiveness.
As a result of these initiatives, we kicked off January 2022with our new operating model, built around a unified,
global tobacco business, for the JT Group to further growand evolve into a truly global company. With this step, thetobacco business headquarter function has been consolidated at the headquarters in Geneva, creating a simpler
business operation structure, optimal for accelerating speed
through efficient, effective decision-making. I firmly believethat this will enable us to strengthen our competitiveness in
the growing RRP category, mainly in HTS, by leveraging andallocating global resources in a prioritized and timely manner with a global perspective, as well as building a system
to maximize the value we offer our consumers. Furthermore,going forward, we also plan to share and deploy bestpractices on a global basis in a more energized and timely
manner. In respect to the Japanese market, operations willcontinue under the global operating model, with Japan set
as one of our key markets.
In preparation for the global tobacco business, in theJapanese market we determined that it is imperative that we
increase competitiveness to further enhance value to ourconsumers in an environment where overall business volume has shrunk amidst growing uncertainty. As a result, wehave executed initiatives conducive to overcoming anticipated challenges identified in this changing environment.
Over the past few years, we have undertaken a number of
initiatives, sometimes requiring difficult decisions, such asreforming the sales organization, closing some production

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Leaving no stone unturned, we also reorganized the
Corporate function. In addition to fulfilling an administrativerole, this institution acts to identify and address mid- tolong-term management issues. It is designed to be anorganization facilitating inter-division collaboration without
the constraints of divisional walls, generating high-quality
output that addresses issues identified by the JT Group.
The most important factors in these kinds of reformare for each employee to understand the goals, andcorrespondingly change their awareness and behavior to become the ones initiating change. Consequently, every member of the Board of Directors, including myself, is actively
communicating with employees about the background andintent of the reform initiatives we have been undertaking,so that this knowledge permeates our workforce. By helping
each employee become more adaptive to change throughthese initiatives, we are in turn strengthening the JT Groupas an organization. Just as we have been initiating change
and overcoming challenges promptly through our strong
leadership, we will promote behavioral changes and securesustainable mid- to long-term growth.

Business Plan 2022
As announced in February 2022, Business Plan 2022, ourthree-year business plan, marks the continuation of our
fundamental pursuit of sustainable mid- to long-term profit
growth. More specifically, we remain committed to achieving mid to high single digit average annual growth in adjusted operating profit at constant FX over the mid to long term.
We also expect to steadily grow both profit and shareholder
returns in line with our shareholder-return policy.
The key to achieving these objectives lies in growth of thetobacco business, which is the core driver of the JT Group’s
profit growth. Consequently, we will continue to focus on
investing our management resources intensively for top-line
growth and increasing profitability, designating HTS andcombustibles as our top-priority categories. We see that the
HTS segment provides the largest potential for sustainableprofit growth within the RRP category, which we expect,with anticipated demand increases in this category, tobecome a strong pillar for our future growth. While the RRP
category is our top investment priority in terms of futuresustainability of the JT Group, we project nonetheless that
combustibles will remain the tobacco industry’s biggest
category through the coming decade. Therefore, we will
also support efforts to continue increasing combustibles’
top-line contribution, while enhancing their profitability
through lower costs and higher efficiency.
Moving on to our mid-term projections and goal, we projectthat HTS share in the tobacco industry as a whole will
increase from the current 15% to about 20% by the end of

2027. Within this environment, the JT Group announced, inFebruary 2022, its ambition to achieve HTS segment sharein the mid-teens across our key markets by the end of 2027,
and by doing so, reach break-even in the RRP business.
Having said this, in considering developments in the war in
Ukraine, we have decided to suspend the launch of Ploom X in
the Russian market, which was planned for 2022, and are reviewing our global launch plans to optimize the future developmentof Ploom X by being flexible and ensuring a state of readiness.
Needless to say, it is clear that RRP will be of significancein the industry; we expect that they will continue to gainincreased attention and traction with consumers as theseproducts have the potential to reduce the health risks
associated with smoking by offering solutions that do not
involve burning tobacco and produce no smoke and lessodor. They thus significantly reduce not only the potentiallyharmful constituents in smoke generated from burning
tobacco leaves, but also the inconvenience to non-smokers.
However, all in all, we believe that tobacco consumer needs
are diverse and require a broad range of choices, ensuringthat every consumer can find a product offering a highlevel of satisfaction. To that end, the JT Group continues toexpand product categories to meet global changes andimprove the product value of all tobacco products.
Moving on to the pharmaceutical and processed foodbusinesses, while they will continue to face a challenging
business environment, their role of supplementing profit

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Message from the CEO

growth for the JT Group remains unchanged. In the pharmaceutical business, we will continue to enhance the valueof products already introduced and still in development,
as well as cultivating in- and out-licensing opportunities toreinforce our business foundation. In the processed foodbusiness, we will follow through on existing initiatives,
such as allocating more resources to high-value-added andhigh-priced products, mainly in our core frozen and ambient
food business, in order to promote a high-quality top-line
increase leading to sustainable profit growth.

Lastly, we will continue allocating management resources
to, and prioritizing investment in, businesses delivering
sustainable profit growth, particularly the tobacco business,the core driver of the JT Group. We will also aim to increase
returns to shareholders through mid- to long-term profit
growth while maintaining a target payout ratio of about
75%*, and to achieve that objective, we will continue ourefforts to grow adjusted operating profit at constant FX.

environmental initiatives thus far, and contribute to the shift
to a decarbonized society, the JT Group has revised its goals
for energy consumption and greenhouse gas emissions in
our Environment Plan 2030. We will further enhance andexpand our initiatives to achieve carbon neutrality by 2030,
and net zero for the entire value chain by 2050.
Concerning our responsibility to society, we have been

conducting human rights due diligence assessments toovercome challenges across our supply chain. Furthermore,
we have published the Group’s first Human Rights Report.
Our social initiatives are multifaceted, including a newGroup goal to increase our proportion of women in
management to 25% by 2030, while recognizing that it isdesirable that this should eventually come to exceed 40%.

*To be in the range of approximately ±5%.

Conclusion
Toward mid- to long-term growthPursuing the 4S model to provide higher value tostakeholders
Change in the social and business environments is accelerating, notably in terms of awareness of sustainable businesspractices as part of ESG considerations. I believe that aproactive and committed contribution to the developmentof society, through operations based on pursuing the 4S
model, is essential to the long-term growth of the JT Group.
To realize this ambition, we have identified, based on the 4S
model, a set of priority issues (materiality) for our businessand a wide range of stakeholders, and used these to focus
our sustainability strategy.

Sustainability at the JT GroupIn 2021, we continued to actively undertake initiatives basedon our sustainability strategy. With ESG interest growing
every year in the business world, we understand it is particularly important to reinforce the foundation of ESG, whichis governance. To that end, we reflect our efforts to evolve
corporate governance not only in our dialogue with stakeholders, including the capital markets, but also in appropriate responses to social demands related to governance, andanalysis of the assessment of Board effectiveness, among
other factors. What we have learned from these processes isreported to the management team and Board of Directors,
whereupon, after conducting the necessary discussions, it
has led to measures for improvement. Examples include a

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We made it standard practice to involve the Board of
Directors, and myself as CEO, in setting the goals for oursustainability strategy, and discussing and managing specific measures for achieving those goals, which we are firmly
committed to deliver on. Since 2020, we have been holding
regular Sustainability Advisory Forums, chaired by our CSO
and involving representatives of JT Group businesses andfunctions, to discuss sustainability issues. Additionally, as we
believe our proactive participation in the sustainability management process is essential, we made the Sustainability
Management Division independent of other Corporategroups in January 2022, when we also reorganized ourCorporate function.

Amid a business environment in which we are experiencing
major, rapid global change, I believe it is important for us totake a fresh look at the value the JT Group offers to society,the reason for our existence, and the essence that has been,
and will continue to be, at our core. In 2020, we created
D-Lab within the Corporate research and development
division, to explore opportunities beyond the existing scopeof business. Today, D-Lab has various projects underway tostrengthen our business portfolio, including new businesses.

As such, we will keep striving to demonstrate to our consumers, shareholders and wider society they can entrust the
JT Group to deliver “moments of pleasure” in the 20 to 30
years to come.
Lastly, I would like to stress my commitment to assuring the
growth of the RRP category as top priority on my agenda,
and I look forward to continuing to update you on what the
future holds for the JT Group.

revision of the director tenure policy and the disclosure of
information related to our integrated report.
We are also reviewing the KPI related to executive remuneration in order to strengthen the commitment frommanagement to deliver sustainable profit growth for the JT
Group, and to reflect a multifaceted performance scorecard
using not only financial indicators, which measure current
business performance, but non-financial indicators as well.
Going forward, we will continue to enhance corporate governance based on dialogue with all our stakeholders, as laidout in our management principle of pursuing the 4S model.
As for the environment, climate change is a pressing challenge requiring worldwide attention. To further enhance ourIntegrated Report 2021

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VALUE CREATIONThe JT Group enhances corporate value by providing a wide range of products and services
that meet the needs of consumers and society.
At the same time, the Group creates social valuethat contributes to the sustainable development of society.
This section illustrates the value-creation process that the JT Group has been pursuing byenhancing the value chain based on strengths
honed over its entire history.

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020

Our history

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Our value creation process024

Our value chains

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Our history
The JT Group has achieved sustainable growth by globalizing and diversifying its businesses through both organic growth and M&A.

The three strengths underpinned by our history and accomplishments
Solid financial base

Superior brand equity

Diverse workforce

Profit338.5BNJPY• Sustainable profit growth backed by
combination of organic growth andM&A• Ability to generate stable cash flows
underpinned by profit growth1949	Japan Tobacco andSalt Public Corporation founded1957 HOPE launched
1969 Seven Stars launched
1977 MILD SEVEN launched• High brand equity through continuous
investment in MEVIUS, our leading brand inJapan, as well as in Winston, Camel, LD andother global brands acquired through M&A• Strong R&D and innovative product development capabilities

1985	Japan Tobacco Inc. established1985	Food and pharmaceutical businesses
established1993	Central Pharmaceutical ResearchInstitute established• Corporate culture that respects diversity and leverages it into value creation
process•G roup that maximizes synergies
generated from diversity

1994	JT goes public on Tokyo Stock2007	JT acquires Gallaher Group Plc (U.K.)

Exchange

1999	JT acquires RJR Nabisco Inc.’s non-U.S.
tobacco business2016	JT acquires Natural American Spirit’s
2008	JT acquires majority stake in KatokichiCo., Ltd. (currently TableMark Co., Ltd.)and Fuji Foods Corporation

non-U.S. tobacco business2016	Ploom TECH (Infused*) launched	2016 JT conducts tobacco business acquisi| tions, notably in the Philippines,
2018
Indonesia, Russia and Bangladesh

2019	Ploom TECH+ (Infused*) and Ploom S

1999	JT acquires Asahi Kasei Corporation’s
food business, including Asahi Foods
and seven other subsidiaries

2021	Ploom X (HTS) launched

Technology Development LLC

1998	JT acquires majority stake in Torii
Pharmaceutical Co., Ltd.

2015	JT acquires E-Vapor company, Logic(HTS*) launched2013	MILD SEVEN is renamed MEVIUS

2022	JT starts new business operating
model by combining former Japanese-domestic and International
tobacco businesses

2021–
1970s and earlier

1985–

1994–

2007–

2015–

Origins of the modern Japanese
tobacco industry

Privatizing and creating the baseof the current business portfolio

Stock listing and challenges for
globalization

Strengthening our position as a
global tobacco company

Japan Tobacco and Salt Public Corporation, under the authority of the Ministryof Finance, lays the foundation of theJapanese tobacco industry.

The public corporation privatizes under
the name Japan Tobacco Inc., founding
the tobacco, pharmaceutical andprocessed food businesses, which
persist to this day.

JT goes public aiming to be a multilateral and international company withtobacco business at its core.

By accelerating our global expansion,
JT obtains a diverse workforce andfoster its financial base.

Providing new value by addressing increasingly diverse consumer
needs and preferences

Through M&A, JT obtains the world’s
leading brands and a global businessfoundation and grows to become thethird largest global tobacco company.

JT strengthens the international tobacco
business through both geographicalexpansion driven by M&A and organic
growth in the existing markets, andprovides a wide range of product choices, including RRP (Reduced-Risk Products).

Redefining our investment
prioritization among tobacco
categories and strengthening
business operating model
JT allocates management resources
especially towards HTS* and Combustibles to strengthen its competitivenessand profitability aiming for its sustainable growth. By utilizing global resources at large with the combined tobacco
business, JT endeavors to globallyprovide products and services exceeding consumer needs and preferences.

* Infused: infused tobacco capsules, HTS: heated tobacco sticks

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BUSINESS andSUSTAINABILITYVALUE CREATIONGOVERNANCE

FINANCIAL INFORMATION /OTHERSOur value creation process
Our management principle pursues the 4S model. This principle guides our efforts to achieve our vision by enhancing corporate value and creating social value. We provide a wide range of products
and services through business activities leveraging our three strengths: a solid financial base, superior brand equity and a diverse workforce.

Our core capital

Our business activities and growth strategies

Financial capital• Adjusted operating profit at constant FX . . . . . . . . . ¥598.4 billion• Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,886.1 billion• FCF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥482.0 billion (2021)

Achieve quality top-line growthIntellectual capitalStrengthen cost competitiveness

Strong R&D Capabilities
We possess a diverse portfolio of competitive
brands and robust brand equity rooted in our ability
to deliver high-quality, innovative products.
(Tobacco Science Research Center, Central Pharmaceutical Research Institute, D-LAB, etc.)

Pro
cu
re
D
m
R& Three strengths driving
our global growth

Human capitalten

Our corporate culture respects diverse values
and generates synergy from a diverse workforce.
• Number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,381

Pharmaceutical BusinessSolidfinancial base

Superior
brand equity

in gSocial and relationship capital
We have global business operations anda wide collaborative network spanning the value chain.

Diverseworkforcec tur• Certified as a Top Employer in . . . . . . . . . . . . . . . . . 66 countries (2021)

Developing new, original drugs to savepeople around the world from diseaseufa• Employee nationalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over 100

M

s

an

ale

Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over 76,000 (2021)

SocietyM a r k e ti n g

Manufacturing capital

Our optimal manufacturing system and active
capital investment ensure superior quality and productivity.
Our system provides markets with products
in an efficient and timely manner.
• Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . ¥100.9 billion (2021)• Tobacco manufacturing bases . . . . . . . 39 factories (29 countries)• Processed food manufacturing bases . . . . . . . . . . . . . . . . . 28 factories• Three key therapeutic areas– Cardiovascular, Renal and Metabolism (CVRM)– Immunology– Neuroscience

By realizing sustainable profit
growth over the mid to long term
through business investments

Social value
Contributing to the sustainable
development of society throughour business activities
We contribute most significantly tothe following nine SDGs by achieving
specific targets in each business’ s focus areas,such as providing products and services
that exceed consumer expectations,investing in our people and building
a sustainable supply chain.

VISION
To continue to be a
growing global company
that provides diverse
value, unique to
the JT Group.

Processed Food Business

Sustainability Strategy
The JT Group’s three absolute requirements(all factories have achieved ISO22000 or FSSC22000 certification except
one that began operation in 2020)

Natural capital

Mid to high single digit annual average
growth of adjusted operating profit atconstant FX over the mid to long term

Improving shareholder returns• We own three of the top 10 highest-selling combustible brands in the world.

• Markets where our products are sold . . . . . . . . . . . . . . . . . Over 130• Markets where we operate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over 70• Directly contracted tobacco leaf growers and tobacco leaf merchants

Consumers

Achieving consolidated profit targets• Combustibles– Cigarettes– Fine cut tobacco (FCT)• Reduced-Risk Products (RRP)– Heated tobacco products (HTP)– E-Vapor, etc.

• R&D expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥65.0 billion (2021)

n/S

Shareholders

Corporate value

Enhance business foundation

D is t ri b u ti o

We strive to fulfill our
responsibilities to our valued
consumers, shareholders,
employees and the wider society,carefully considering
the respective interests ofthese four key stakeholder
groups, continuously working to
exceed their expectations.

Expanding our product portfolio tosatisfy increasingly diverse consumer*needs and preferences

Business strategy(+22.9% year on year change)

To pursue the 4S model

The value we create

Tobacco Business

Sustainable profit growth and stable cash flows arebacked by a combination of organic growth and M&A.

Our management
principle

Our products and services

Realizing the future of dining in Japanthrough businesses that support our diet

Respect for human rights
An improved social and environmental impact

The natural environment is vital to our sustainable growth.
• Water resources . . . 9,856 thousand m3 of water withdrawal (2021)• Forest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Planted 9 million trees
Our measures to improve our environmental impact  P. 76

Good governance and business standards• Frozen and ambient foods• Seasonings• Bakery products

Corporate governance supporting all of these processes  P. 88

The external environment surrounding the JT Group  P. 80*Adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country.

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FINANCIAL INFORMATION /OTHERSOur value chains
R&D

Procurement

Manufacturing

MarketingDistribution/Sales• 5 R&D centers covering scientific research, technology &product development•C onsumer-driven R&D focusing on what matters most to
consumers*• 1,364 IP filings, 90+ innovation partnerships with third-party
players• Leaf supply diversified across vertically integrated operations
and third parties• Reliability of leaf supply regardless of weather or market
fluctuations• Full compliance with regulations; assurance of leaf integrity
and origin• 39 factories across our footprint, out of which
six produce RRP• State-of-the-art equipment and manufacturing processes• Industry-leading quality standards for all our
products• Strong brand equity, notably Winston, Camel,
MEVIUS & LD
• Consumers* at center of our offerings: we provide
freedom of choice and superior quality• Full compliance with local regulation in all
countries where we operate• Sales in 130+ markets• Tailored RTC* on market-by-market basis• Motivated salesforce with strong ties with trade• Moving from “site-based” teams to “outcome-based” global teams• Continuously balancing risk mitigation and sourcing flexibility• Advanced planning and inventory management for uninterrupted manufacturing• Increasing emphasis on social and environmental sustainabilityof supply• Constantly reviewing and optimizing ourmanufacturing footprint• Ongoing capital expenditures to increase our
RRP production capacity• K aizen approach for all our manufacturing
processes• Continued investments behind our GFB and inbuilding Ploom brand• Nurturing consumer-centricity mindset acrossentire organization• Additional internal initiatives as self-regulation
and Code of Conduct•R egularly assessing entries in new markets / channels considering present and future profitability• Optimizing RTC* based on evolving environment• Strengthening relationships with key distributors
and tobacconists• To support the Paris Agreement on global
climate change, we are accelerating the paceof our environmental impact reduction
initiatives• Given growing importance, expanding ourcapabilities in areas of digital, advanced analytics
and B2C• L ooking to enhance our e-commerce capabilities
in markets where it is legal for nicotine andtobacco products• Ability to stably manufacture high-quality
pharmaceuticals• Conduct responsible detailing activities

Initiatives to • Improving R&D efficiency through concentration of resources in targeted disease domains•P romoting efficient and expeditious clinical development through coordination among domestic and foreign R&D sites
maintain/•P roactively pursuing opportunities to out- and in-license compounds
upgradestrengths• Formulated guidelines to verify conformity
between drugs’ approved specifications andactual manufacturing processes• Continuing annual inspections of contract
manufacturing plants based on guidelines• Formulated internal standards based on guidelines on ethical drug detailing activity issued by Ministry of
Health, Labour and Welfare• Thoroughly complying with said standards through training of Torii Pharmaceutical’s medical sales reps

Priorities and • A dd more research themes and expedite progressactions to • D evelop proprietary drug-discovery technologies
address them

• Continuously monitor in compliance withlaws/regulations• Continue above initiative• Management systems that ensure stable,
efficient (low-cost) manufacturing of
high-quality food products based on foodsafety management• Top-market-share* products/brands (Sanuki Udon,
Gottsu-umai)

Tobacco Business

Strengths

Initiatives to • E nhancing cascading in R&D of consumers* related data andanalytics
maintain/• Protecting innovation with sound Intellectual Property (IP) stratupgradeegystrengths

Pharmaceutical Business s RRP (Reduced-Risk Products) industry innovation cycles get
Priorities and • Ashorter, JTG is implementing initiatives to accelerate theactions todevelopment of new RRP platforms
achieve themStrengths• As JTG exposure to RRP grows, we are adapting our device-procurement strategy to be more resilient in case of
disruptions• Develop of innovative drugs•P roprietary yeast, processing and freezing technologies•A bility to develop high-value-added products that meet
consumer needs and preferences• Stable, cost-competitive sourcing of high-quality ingredients(extensive supplier network and inspection program)Strengths*Fuji Keizai Co., Ltd.
Foodstuff Marketing Handbook 2022: Vol. 2, 3

*Route to consumer*Route to consumer• Sales force capable of proposing products thatmeet consumer needs with an extensive productlineup2020 results

Processed Food Business• Market insight based on communication with
consumers (identification of consumers’ increasingly
diverse needs/preferences, e.g. by using fan sites.)•D evelop new products tailored to consumer needs based onmarket/competition research and analysis•D evelop new technologies and production methods throughexternal collaborations• Verifying ingredients’ safety based on quality specification
certifications submitted by suppliers• Monitoring main ingredients’ pesticide residue content andperiodically inspecting ingredient production plants in accord
with applicable laws/regulations and our own standards• Inspecting source farms’ soil and water quality, verifying cropconditions, checking pesticide management practices, andinspecting livestock and fish farms• Mandatory certification of compliance withISO 22000 or FSSC 22000 international foodsafety standard across all JT-affiliated plants
and contract manufacturing plants globally• Verifying end products’ compliance with pesticide content and other safety standards
through monitoring inspections• Reducing contamination risk by establishingand complying with food defense guidelines• Conducting consumer-centric market analysis todevelop 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 products• Expanding in-store product selection and gaining
preferential display locations through aggressive
sales approach targeted primarily at supermarkets
and convenience stores• Strengthening communication with consumers
through online disclosure of product informationand labeling 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 throughproduction, processing, distribution and sales•D evelop high-value-added products that meet consumer
needs and preferences–Develop new products that take into account environmental
Priorities and impact and sustainability• Strengthen supply chain to enable sourcing of safe,
high-quality ingredients–Building a sustainable supply chain by fostering transparent
relationships with suppliers and taking human rights andenvironment into account when sourcing ingredients• Manufacture safe, high-quality food products–Building optimal production systems that
ensure efficiency and product quality• Install energy-efficient equipment to reduce
environmental impacts–Pursuing transition to clean energy• Propose products and promote sales strategies in
response to increasingly diverse consumer needs
and trends–Proposing products personalized to consumers’
individual preferences and lifestyles• Strengthen sales capabilities and disclose information to reassure consumers–Disclosing more information, e.g. on website andproduct packaging• Stably supply consumers–Building an optimal logistics network that maximally utilizes in-house logistics (in response to Japanese government’s logistics-reform initiative)

Initiatives tomaintain/
upgradestrengths

actions toachieve them

*Adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country.

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Japan Tobacco Inc.

Integrated Report 2021

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