Japan Tobacco Inc. (JT) has released a series of updates on the effects the recent calamitous earthquake, tsunami and nuclear disaster continue to have on its domestic product and distribution networks. The company has announced that it is limiting the number of products supplied and the shipment volume for the time being.

On March 11, JT established a Crisis Management Headquarters, headed by its c.e.o., to undertake recovery support, collect information and evaluate countermeasures. By March 23, JT was able to offer the following assessment of the damage inflicted on its infrastructure in the affected areas.

“While Morioka, Sendai, Mito and Utsunomiya sales offices have recovered their functions, three offices which report to these sales offices, namely Kamaishi, Ishinomaki and Iwaki, are not functioning. Further, we have now set up a temporary order processing center in Tokyo in lieu of the Sendai order processing center which is not functioning because of its damaged building,” JT announced. 

Distribution depots in Aomori, Morioka and Utsunomiya that belong to TS Network Co., Ltd., a JT group company, have repaired the damage to their buildings, but two depots located in Sendai and Mito are not functioning following damage to their buildings. These depots are nevertheless all being affected by the deteriorating distribution conditions. 

Cigarette manufacturing lines at Kita-Kanto factory, located in Utsunomiya, and Koriyama factory are not functioning because of damaged buildings and equipment. Tomobe factory, located in Kasamam, which produces expanded tobacco, and the East-Japan Regional Leaf Tobacco Headquarters, located in Sukagawa, a producer of cut rolled expanded stems, are also not operating because of damaged buildings and equipment. Production of expanded tobacco is being replaced by Hiratsuka Factory, while alternative sourcing of expanded tobacco and of cut rolled expanded stems from outside Japan is currently being planned. 

Entry into Tagajo factory, which belongs to Japan Filter Technology, Ltd., another JT group company, is not allowed following the earthquake. Alternative production in the company’s other factories located in Hamura (Tokyo), Tsubata (Ishikawa) and Tagawa (Fukuoka) is now in preparation.

Recovery at Kita-Kanto factory is affected by scheduled blackouts. Further, while there is no damage, scheduled blackouts are affecting the operation of Hiratsuka factory and Japan Filter Technology, Ltd.’s Hamura factory. Although Fuji Flavor Co., Ltd., also a JT group company, is located in an area affected by blackouts, the operation is not disrupted because the company has its own electrical power facility.

“Since the earthquake, our Japanese Domestic Tobacco Business has been doing everything it can to secure product supply,” according to JT. “However, transportation of our products has been affected by the current fuel shortages and deteriorating distribution conditions. As a result, in certain places in Japan, our products are now out of stock. In the meantime, transportation of semi-finished products and non-tobacco-materials are being affected by the deteriorated distribution conditions. Also, some of our suppliers of non-tobacco materials are being affected by damaged facilities and scheduled blackouts that are hampering stable supply for the time being. Further, we are projecting that the manufacture of some of our products will be disrupted, given the required recovery timeframe for some of the factories of our group which have been damaged. In light of the circumstances, we are now exploring alternative sourcing of semi-finished products and non-tobacco materials, and evaluating our stable product supply system to minimize the effect of the earthquake. Further announcements will be made as soon as a decision on these measures has been made.”

By April 11, JT had resumed domestic shipments but limited the number of products to seven. It started the shipments of nine additional products including Mild Seven Lights and Caster Mild on April 25, for a total of 16 products. 

By May 9, it expects to add another nine products, including Hope and Peace Lights Box, to provide consumers with a choice of its 25 key products. 

Since April 11, JT has begun to conduct test runs of some of the production lines in the Kita-Kanto and the Koriyama factories, the two damaged manufacturing facilities, gradually resuming manufacturing from the lines capable of operating normally. 

“As a result, we are announcing that two products, Pianissimo One and Pianissimo Super Slims Menthol One, are now scheduled to be shipped out from June 6,” JT said on April 27. “As soon as we know the timing, we will be making separate announcements about additional products which we will begin to ship out.”

The company stressed that the situation in Japan is not related to the activities of Japan Tobacco International (JTI) where worldwide operations continue as usual. 

“We are planning to report the effects of damage and our near-term measure following the earthquake in our financial performance announcement of May 12,” JT said in a statement. “We are of the view that the amount of loss associated with our fixed assets and inventory assets damaged by the earthquake is limited at this time. Further, the damage is covered by earthquake insurance.”

Meanwhile, JT’s thoughts and concerns continue to dwell on the suffering of the victims and families affected by the triple catastrophe. 

“JT would like to express first and foremost our deepest sympathies to all those who have been affected by the Great East Japan Earthquake,” JT announced. “We hope that recovery will proceed quickly. We have been unable to confirm the safety of three JT Group employees, we are continuing our effort to confirm their safety.”