By Marsel Paraev
Eddy Pirard is the CEO of the world’s third largest tobacco producer, Eddy Pirard is the most powerful Belgian in the industry. Marsel Paraev interviewed him from his office, located in Geneva, near Lake Leman.
JTI (Japan Tobacco International) was established in 1999 following the acquisition of the non-US operations of RJ Reynolds by the JT Group. 2021 marked the company’s 23rd consecutive year of sustainable profit generation at constant currency. On a reported basis, JTI generated over USD 13 billion in core revenue (up 10.6% since 2020), and USD 4.1 billion in adjusted operating profit (up 29.6% over the same period). In January 2022, the JT Group implemented a structural change by consolidating its Japanese Domestic and International tobacco businesses into a single business segment, under the same management team and with the JTI name. As a result, the JT Group is now divided into three businesses: Tobacco, Food, and Pharmaceutical. The tobacco business, which represents over 90% of the Group’s revenue, employs 48,000 people from nearly 120 different nationalities, working in 425 offices and 8 R&D centers across more than 70 countries. Today, its products are available in over 130 markets. JTI, headquartered in Geneva, Switzerland, is the Group’s profit growth driver with its global footprint, strong brand equity, and people. The company has been awarded Global Top Employer nine times in a row and was one of the first companies in the world to receive EY’s new Global Equality Standard certificate, which measures equal opportunities and equal pay in the workplace. The Company has over one hundred brands worldwide, including some of the world’s best known tobacco brands, such as Winston, Camel, Mevius and LD – its global flagship brands. JTI’s reduced-risk products (RRP), which are products with the potential to reduce the risks associated with smoking, include its heated tobacco sticks (HTS) under the Ploom brand, range of Logic e-cigarettes, and Nordic Spirit nicotine pouches.
Today, JTI has over 48,000 employees in more than 70 countries. It owns 39 cigarette production factories and tobacco processing centers, with 8 R&D centers. Would you like to expand further abroad?
Eddy Pirard: We are ambitious as a company and want to continue growing, both in terms of our product offering and our global footprint. Thanks to the hard-working and dedicated JTI family around the world, our brands are already available in more than 130 markets. Our success comes because we always put our consumers at the heart of everything we do. Leveraging our long, rich history, and our three key strengths – a solid financial base, superior brand equity, and a diverse workforce – we continue to expand organically in existing markets, to enter into new markets to enhance our global presence, and leverage M&A opportunities, to realize long-term sustainable growth.
What is your growth strategy?
Predicting the future is always a challenge in any industry; this is also true for tobacco. That said, we’ve always believed that the best way to navigate the future is to provide our adult consumers with a wide range of quality products to choose from, including those with the potential to reduce risk, as well as all the necessary information for them to make an informed choice. Based on what our consumers are demanding, we see combustibles (i.e., cigarettes and fine cut), heated tobacco sticks (HTS), and other RRP coexisting for the foreseeable future. Our three-year business plan, which we set out in 2022, focuses on our continuing pursuit of sustainable profit growth and shareholder returns. Key to achieving this are the investments we are making. Within the wider RRP category, HTS offers the largest potential as anticipated demand increases. In the coming three years we are investing JPY 300 billion in our flagship brand, Ploom, and to increase our consumer base. This is JPY 100 billion more than the investments made over the last three years. Our newest HTS device, Ploom X, was launched in 2021 in Japan and initial consumer feedback has been positive; we are now planning to roll it out to more international markets, following the rollout in the UK near the end of 2022. Our e-cigarette brand, Logic, remains popular with consumers in key markets, including the UK, and our range of tobacco-free nicotine pouches, Nordic Spirit, has seen remarkable growth in a short amount of time, including in the UK, Switzerland, and Sweden. As the main profit generator of our tobacco business, and as part of our mission to ensure that our consumers have the freedom to choose to use the products they want, we will continue investing in combustibles, where necessary, to drive returns.
What is your turnover?
In 2021, JT Group’s Full Year tobacco revenue was JPY 2,002 billion.
At a time when ESG is becoming more important for many companies, whilst the criteria are also being increasingly scrutinized, how do you reflect this as the CEO of a tobacco company?
As CEO, I very much believe that a key part of my role is to set the standard for all that we do as a company. Businesses around the world are looking at their values and practices through the lens of ESG. I have always felt that selling tobacco products does not remove us from our obligations as a company to operate responsibly and sustainably, minimizing our environmental impact, and contributing positively to the communities in which we operate. Since taking the lead at JTI in 2017, I have been inspired by the commitment shown by colleagues across the business. So much incredible work has been done already, resulting in transformational and positive change internally and within the communities where we operate. Delivering on our ESG commitments makes good business sense, and it is the right thing to do. However, the job’s not done, and we continue to find ways to improve the way we work.
How do ESG standards fit within the company?
Consumers, investors, and society are increasingly interested in environment, social, and governance issues, and the topic of sustainability more broadly. To ensure we are playing our part, we have set 12 sustainability targets, which span from social to environmental issues, to minimize our impact. These include our greenhouse gas emissions, as well as our use of water and waste, and forestry. We have been recognized for our efforts by the Dow Jones Sustainability Asia Pacific Index, as well as by CDP, for our work around climate change and water security. Equally important are the social values to which we hold ourselves. As head of JTI, I expect us to be a place where everyone receives support and compassion, no matter who they are. It is non-negotiable for me. Freedom is at the heart of everything we believe in: the freedom to choose, freedom of thought and expression, and the freedom to be yourself. Our new global family leave policy is a perfect illustration of our values and is a great milestone in our diversity and equality journey. It supports all families, regardless of who they are and how they become parents. The policy gives parents across the world equal opportunity to spend a minimum of 20 weeks’ fully paid leave with their children. How we conduct ourselves around the world is highly important to us. Our Human Rights Report outlines our initiatives and goals in this key area. One example is our ARISE program which is a core part of our work to eliminate child labor and is active in countries where we source many of our tobacco leaves. It has directly helped educate over 64,000 children to date. We also partner with charities to support community investment initiatives across the world. Since 2015, we have invested over USD 400 million, and over 164,000 hours volunteer hours. As a custodian of JTI, I look ahead with optimism. Not only are we brimming with talent, but we have, collectively, chartered a sustainable course. RRP are part of our continuing evolution, and together, with the investments we are making, I am confident about the future of our business.
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As head of JTI, I expect us to be a place where everyone receives support and compassion, no matter who they are. It is non-negotiable for me.