JT Expects Near Normal Tobacco Supplies In May; Shortage Fears Loom

Source from:  Fox Business 03/31/2011

TOKYO -(Dow Jones)- Japan Tobacco Inc. (2914.TO) said Tuesday that tobacco supplies will approach normal levels in May after the suspension of domestic tobacco shipments by the company leads to a sharp drop in supplies in April. However, some stores even far away from the quake-hit areas have started limiting tobacco purchases by customers on fears that tobacco inventories are running out. Two of JT's six domestic plants in northern Tokyo that turn out one third of its overall domestic tobacco output were damaged by the massive earthquake, and there is no information yet on when operations will resume at the plants. In addition, JT's distribution network in northern Japan, especially in the quake-stricken area, has been damaged. The world's third-largest tobacco company by sales volume after Philip Morris International Inc. and British American Tobacco PLC said last week a shortage of filters and other supplies will force it to halt shipments of all 97 cigarette brands between March 30 and April 10. During the period, the remaining plants will raise production of certain key brands to boost the product inventories. JT will then resume shipments gradually from April 11 with a limited number of major brands, totaling 25, by the middle of May. A spokesman at the company said "the amount of tobacco supplies will be extremely limited," as the company expects a 75% tumble in April, when compared with the level in February. But he said such a steep decline is only temporary and expects a 10% lower level of domestic supplies in May, compared with February. JT doesn't have estimates for March. JT has already been experiencing a falloff in sales after the Oct. 1 tobacco price hike--about 40% on average more per pack. JT had already anticipated weakness in post-tax hike sales, estimating that its domestic sales of tobacco by volume would fall by at least 25% over the 12 months through Sept. 30. "We do not see much confusion compared with what we saw prior to the tobacco tax hike last year," said convenience store operator Lawson Inc. (2651.TO) spokesman Jun Miyazaki. Tobacco sales at Lawson surged 5-6 times in September as customers scrambled to stockpile tobacco before the steep tobacco tax hike was implemented on October 1. While customers seem calmer this time, some Lawson outlets with relatively small stocks are limiting purchases of tobacco by each customer to one package, he added. "Customers can buy tobacco at our stores now," said a spokesman at Seven & i Holdings Co. (3382.TO), which runs 7-Eleven convenience stores and Ito-Yokado supermarkets nationwide. But he said some of these stores limit tobacco purchase per customer to two packages or so. "Considering JT's planned shipment halt, the situation (surrounding tobacco supplies) may become even tougher," he said. JT said its international tobacco activities outside Japan, which have production facilities of their own, won't be affected by the latest shipment halt at home. Enditem