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Japan Tobacco’s huge FDI can’t find footing in Bangladesh
ECONOMY
Abbas Uddin Noyon & Shawkat Ali
05 July, 2021, 10:55 pm
Last modified: 05 July, 2021, 11:21 pm
www.tbsnews.net
It alleges it has faced unequal competition from British American Tobacco
Japan Tobacco International came to Bangladesh with the highest-ever investment in the country's history, but it failed to fare well because of what its officials claim was the dominance and anti-competitive activities of British American Tobacco.
They have also blamed the government's tax policy.
But other tobacco companies say Japan Tobacco's allegations are not true – it failed to understand the Bangladesh market and could not maintain a smooth supply chain when Covid-19 broke out last year, they say.
Japan Tobacco launched in the Bangladesh market with a Tk12,400 crore investment after acquiring Akij Group's Dhaka Tobacco in 2018. Its market share was 19.8% at the time, which has now come down to 12.6%.
Its cigarette sales also fell significantly in this period.
Experts blame Japan Tobacco's hiring of foreigners in top positions who could not produce and market products in line with the taste of local consumers.
Policy Research Institute Executive Director Ahsan H Mansur says a company first needs to understand a market and the taste of local consumers if it wants to occupy it.
"It also needs to employ locals in top positions. Japan Tobacco did not do that. They should think about it," he told The Business Standard.
The Japan-based multinational company recently wrote to the Bangladesh Competition Commission, expressing concern about its survival. It claimed to have faced unequal competition from British American Tobacco.
Early this year, the Japanese ambassador to Bangladesh wrote to Finance Minister AHM Mustafa Kamal, raising similar allegations. He also questioned Bangladesh's tax structure and warned that these issues might hinder other Japanese investments in Bangladesh in the future.
Shezami Khalil, head of corporate communications at Japan Tobacco, said they had filed the complaint with the competition commission as they had faced anti-competitive activities and dominant behaviour from a leading market player.
She also said they were unable to proactively divulge any more information about this due to the sensitive nature of the complaint and to maintain confidentiality.
Bangladesh Competition Commission Chairman Md Mofizul Islam said they were looking into Japan Tobacco's complaint.
He said they would hold a hearing in the presence of both parties after the probe was over and then would decide on a verdict.
Action may be taken against British American Tobacco if it is found guilty, he added.
But British American Tobacco has denied the allegation and blamed Japan Tobacco's management and marketing policy for the decline in its business. It says Japan Tobacco has lagged behind due to the lack of a proper marketing policy and changing cigarette flavours without understanding the taste of Bangladeshi consumers.
Golam Mainuddin, chairman of British American Tobacco, told The Business Standard that they had taken Japan Tobacco's complaint seriously and high officials of both companies had discussed it.
He said all the allegations against his company had been proven false.
"We also offered them help so that their complaint does not hinder foreign direct investment inflow to Bangladesh in the future," he added.
British American Tobacco's financial reports show the company, with a market share of over 70%, had been growing steadily even before Japan Tobacco came to Bangladesh. Compared to 2019, it sold over 500 crore more cigarette sticks in 2020, which mainly included mid-priced brands.
In 2019, its sales rose by 100 crore sticks compared to the previous year. In the first quarter of this year, it registered more than 10% growth in sales.
In the three years since 2018, its turnover increased from Tk23,000 crore to Tk28,000 crore.
A top official of the company said they had been enjoying more than 10% growth even before Japan Tobacco hit the Bangladesh market.
He said their business was growing as their marketing policies were in tune with the local market. "We are not occupying other companies' market share."
After acquiring Dhaka Tobacco, Japan Tobacco changed the size of the Navy cigarettes, a brand that was Dhaka Tobacco's highest-selling cigarette. At the time, British American Tobacco and Abul Khair Tobacco sales rose.
British American Tobacco, which operates in 180 countries, recently celebrated 110 years of business in Bangladesh.
Japan Tobacco has operations in 130 countries and employs about 60,000 people. It markets Winston, Camel, Mevius and LD cigarettes, which are well-known brands in different countries.
Like the British American Tobacco, Japan Tobacco also markets e-cigarettes. The Japanese government has a 33.35% stake in Japan Tobacco International.
Japan Tobacco currently sells cigarettes of several brands, including LD, Navy, Sheikh, K2, and Real.
British American Tobacco brands include Gold Leaf, Benson, Capstan, Star, Royals, Derby, Pilot, and Hollywood.
ECONOMY
Abbas Uddin Noyon & Shawkat Ali
05 July, 2021, 10:55 pm
Last modified: 05 July, 2021, 11:21 pm
Japan Tobacco’s huge FDI can’t find footing in Bangladesh
It alleges it has faced unequal competition from British American Tobacco
Japan Tobacco International came to Bangladesh with the highest-ever investment in the country's history, but it failed to fare well because of what its officials claim was the dominance and anti-competitive activities of British American Tobacco.
They have also blamed the government's tax policy.
But other tobacco companies say Japan Tobacco's allegations are not true – it failed to understand the Bangladesh market and could not maintain a smooth supply chain when Covid-19 broke out last year, they say.
Japan Tobacco launched in the Bangladesh market with a Tk12,400 crore investment after acquiring Akij Group's Dhaka Tobacco in 2018. Its market share was 19.8% at the time, which has now come down to 12.6%.
Its cigarette sales also fell significantly in this period.
Experts blame Japan Tobacco's hiring of foreigners in top positions who could not produce and market products in line with the taste of local consumers.
Policy Research Institute Executive Director Ahsan H Mansur says a company first needs to understand a market and the taste of local consumers if it wants to occupy it.
"It also needs to employ locals in top positions. Japan Tobacco did not do that. They should think about it," he told The Business Standard.
The Japan-based multinational company recently wrote to the Bangladesh Competition Commission, expressing concern about its survival. It claimed to have faced unequal competition from British American Tobacco.
Early this year, the Japanese ambassador to Bangladesh wrote to Finance Minister AHM Mustafa Kamal, raising similar allegations. He also questioned Bangladesh's tax structure and warned that these issues might hinder other Japanese investments in Bangladesh in the future.
Shezami Khalil, head of corporate communications at Japan Tobacco, said they had filed the complaint with the competition commission as they had faced anti-competitive activities and dominant behaviour from a leading market player.
She also said they were unable to proactively divulge any more information about this due to the sensitive nature of the complaint and to maintain confidentiality.
Bangladesh Competition Commission Chairman Md Mofizul Islam said they were looking into Japan Tobacco's complaint.
He said they would hold a hearing in the presence of both parties after the probe was over and then would decide on a verdict.
Action may be taken against British American Tobacco if it is found guilty, he added.
But British American Tobacco has denied the allegation and blamed Japan Tobacco's management and marketing policy for the decline in its business. It says Japan Tobacco has lagged behind due to the lack of a proper marketing policy and changing cigarette flavours without understanding the taste of Bangladeshi consumers.
Golam Mainuddin, chairman of British American Tobacco, told The Business Standard that they had taken Japan Tobacco's complaint seriously and high officials of both companies had discussed it.
He said all the allegations against his company had been proven false.
"We also offered them help so that their complaint does not hinder foreign direct investment inflow to Bangladesh in the future," he added.
British American Tobacco's financial reports show the company, with a market share of over 70%, had been growing steadily even before Japan Tobacco came to Bangladesh. Compared to 2019, it sold over 500 crore more cigarette sticks in 2020, which mainly included mid-priced brands.
In 2019, its sales rose by 100 crore sticks compared to the previous year. In the first quarter of this year, it registered more than 10% growth in sales.
In the three years since 2018, its turnover increased from Tk23,000 crore to Tk28,000 crore.
A top official of the company said they had been enjoying more than 10% growth even before Japan Tobacco hit the Bangladesh market.
He said their business was growing as their marketing policies were in tune with the local market. "We are not occupying other companies' market share."
After acquiring Dhaka Tobacco, Japan Tobacco changed the size of the Navy cigarettes, a brand that was Dhaka Tobacco's highest-selling cigarette. At the time, British American Tobacco and Abul Khair Tobacco sales rose.
British American Tobacco, which operates in 180 countries, recently celebrated 110 years of business in Bangladesh.
Japan Tobacco has operations in 130 countries and employs about 60,000 people. It markets Winston, Camel, Mevius and LD cigarettes, which are well-known brands in different countries.
Like the British American Tobacco, Japan Tobacco also markets e-cigarettes. The Japanese government has a 33.35% stake in Japan Tobacco International.
Japan Tobacco currently sells cigarettes of several brands, including LD, Navy, Sheikh, K2, and Real.
British American Tobacco brands include Gold Leaf, Benson, Capstan, Star, Royals, Derby, Pilot, and Hollywood.
