Base For Pacific Expansion : American Brands Inc. Targets Japan Market
American businessmen are often offended by Japanese complaints that American firms do not try hard enough to sell in Japan--but not executives of American Brands Inc. They plead guilty to the charge and say they intend to change their ways.
John T. Ludes, a vice president of the New York-based tobacco and consumer products firm and president of the Asia-Pacific division of American Brands International Corp., recently told a news conference: “To date, we have not aggressively marketed . . . our great array of products and services in this area of the world and, therefore, our position is a very modest one.”
William J. Alley, the firm’s senior vice president, added that, from now on, “we intend to be an active player in this marketplace.”
Accordingly, the company has opened an office here to help end the neglect of the Japanese market and give a base for expansion in the rest of the Asia-Pacific region. Hong Kong and Singapore will also be important targets for the Pacific marketing plunge, Alley said.
Protected Market
The tobacco market, one of the most highly protected sectors of the Japanese economy, is not one of those cited by Japanese critics of laggard sale efforts by foreign firms. Less than 2% of the cigarettes sold in Japan are foreign-made.
But even that limited segment of the market amounts to about $240 million a year, and Thomas C. Hays, an American Brands vice president, acknowledged that his firm has only a sliver of it, 1% or 2%.
American Brands’ chief competitor, Philip Morris, whose Lark brand is the best-selling foreign cigarette here, is the No. 1 foreign company.
It is not only in cigarettes, however, that American Brands has been falling short of its potential here, the firm’s executives said. Total American Brands sales here amount to $10 million a year, or less than 5% of the foreign tobacco market, Alley said.
By contrast, the company and its British subsidiary, Gallaher Ltd., sold $2.8 billion of tobacco products around the world in 1984. Overall, American Brands sales amounted to $7 billion in 1984, Alley said.
Alley said that 56% of American Brands’ revenue last year was from foreign operations, mostly in Europe. He also noted that, while one of the firm’s subsidiaries, Jim Beam, produces what he called the world’s best-selling bourbon, Jim Beam ranks only fifth in bourbon sales in Japan.
Alley said that a corporate policy of allowing each subsidiary to make its own decisions about the time and effort to be devoted to individual markets had contributed to the neglect of Japan and Asia. The subsidiaries, he said, have focused most of their overseas attention on Europe.
“While our competitors, particularly in tobacco, have committed themselves to expanding their market positions, we were committed to expanding our products and companies, and we’ve been very successful with that program,” Alley said.
He said the firm remains committed to diversification and new acquisitions but added that Edward W. Whittemore, American Brands’ chairman, decided last October to make a corporate-wide commitment to Japan and the Asian region.
Dramatic Growth Noted
“The growth of this region has been dramatic, and its future prospects are exciting,” Alley said.
On April 1, the Japan Tobacco and Salt Public Corp. is to become a semiprivate corporation, and this, Alley said, has led American Brands to take a new look at the Japanese tobacco market.
“Japan could become a major market for our tobacco products,” he said. “The current share of imported cigarettes of 2% is expected to grow to 5% in the next two or three years.”
Given the existing size of the market--$12 billion a year--such an increase would amount to about $360 million.
Hays said the American firm has signed contracts with all of the private tobacco distribution companies that will come into existence on April 1, replacing the tobacco monopoly’s distribution system.
The new Japan Tobacco Corp., which will have a monopoly on manufacturing, owns part of the shares in the new private distribution companies, but Hays said that American Brands has “been assured that they (the distribution firms) will be neutral to all companies and that we will be fairly treated.”
The American Brands executives said that, in addition to cigarettes, they see good growth potential for products manufactured by such subsidiaries as Sunshine Biscuits, Jergens Lotion, Jim Beam, Master Lock (padlocks), Swingline (staplers) and Acushnet (golf balls).
