Katsuhiko Honda

President, Japan Tobacco

Nationality: Japanese.

Born: In Japan.

Education: Tokyo University, 1965.

Career: Japan Tobacco, 1994–1995, executive director, personnel and labor relations; 1995–1996, executive director, tobacco headquarters; 1996–1998, executive vice president; 1998–2000, senior executive vice president; 2000–, president and chief executive officer; 2001–, representative director.

Address: 2-1, Toranomon 2-chome, Minato-ku, Tokyo, 105-8422, Japan; http://www.jti.com.

■ Katsuhiko Honda became president of Japan Tobacco when the once small cigarette manufacturer known only in Japan was positioning itself to become an international competitor. The company also was about to lose one of its main sources of income—rights to produce and sell the Marlboro brand of cigarettes. Honda, a quick-thinking executive, immediately began working with Japan Tobacco to keep the company afloat, to make it more widely known, and to move it in an international direction. As of 2004 he was successful in reaching these goals.

RISING THROUGH THE RANKS OF JAPAN TOBACCO

Honda was graduated from Tokyo University in 1965. He joined Japan Tobacco in 1994 as the executive director of personnel and labor relations and then became the executive director of the tobacco headquarters. In 1996 Honda was promoted to executive vice president, and in 1998 he became senior executive vice president. In 2000 Honda was promoted to president and chief executive officer, and in 2001 his title expanded to president, chief executive officer, and representative director.

When Honda took over the company, Japan Tobacco was the third-largest tobacco company in the world. It had bought the non-U.S. business of RJR Nabisco, which meant Japan

Tobacco could sell the Camel, Winston, and Salem brands outside the United States. Japan Tobacco also made Mild Seven cigarettes, a popular brand in Japan and elsewhere. Honda, however, was interested in expanding Japan Tobacco's outside-market base. In 2000 Honda began making alliances with small tobacco companies in Europe that were suffering the effects of being in a highly competitive market.

Approximately 60 percent of Japan Tobacco was government owned, a condition Honda disapproved of because the government, having the major share, could make or veto most decisions. In 2001 Honda asked the government to sell back some of its stake in the company. He wanted Japan Tobacco to become completely private so that management would have a freer hand in running the company. The Japanese government promised to give the matter some thought.

END OF THE PHILIP MORRIS AGREEMENT

In 2002 Honda announced that Japan Tobacco would launch premium brands of cigarettes, including Lucia Citrus Fresh Menthol, Fuji Renaissance, and Lucia reduced-odor cigarettes. Development of these brands was possible because of the impending termination of a licensing agreement between Japan Tobacco and Philip Morris & Company by which Japan Tobacco sold Marlboro cigarettes in Japan. The agreement had been made in 1972, had been renewed in 1986, and was due to end in April 2005. When the two companies first made the deal, Japan Tobacco owned nothing else and was not viewed as competition by the tobacco giant. By 2002, however, Japan Tobacco owned several brands that competed with the Philip Morris brands, and Honda deemed it no longer suitable to renew the license. The effect of the termination of the licensing agreement was that Japan Tobacco would lose the profits from the Philip Morris cigarettes and would begin competing with the company in Japan and abroad.

In preparation for the break with Philip Morris, Japan Tobacco prepared to close eight factories and reduce its workforce by March 2006. In 2003 Japan Tobacco asked four thousand employees to agree to early retirement. The company also stated the cuts were being made because of declining sales and because the government, which owned two-thirds of the company, was finally preparing to decrease its share to one-half. According to the Financial Times (July 5, 2002), Honda said the company needed to restructure "to strengthen the company's efficiency and competitiveness through well planned restructuring measures of our own initiative."

BOOSTING SALES ABROAD

As part of his organizational planning Honda had Japan Tobacco cut existing cigarette brands from 99 to 60, eliminating unpopular brands and focusing on popular ones. As of 2004 the company was set to release 20 new brands—a major change in the company's strategy. The former practice had been to flood the market with many brands regardless of the sales of the individual brands as long as some sales were made. The company was interested in meeting every customer need and niche no matter how much it cost. With Honda in charge Japan Tobacco was interested in branding a few types of cigarettes so that they were strong, solid competitors in the international marketplace. The company also was working on developing cigarettes with less tar and that produced less odor, features researchers believed would be popular in the new market.

While organizing business at home, Honda made plans to boost overseas sales and cut costs—moves made in reaction to a three-year decline in sales in Japan. The decrease in sales was attributed to demographic changes, increases in cigarette prices due in large part to an increase in cigarette taxes, and a weak economy. Japan Tobacco also was dealing with a net loss due to pension-related issues. Always looking for ways to expand business as the cigarette business decreased, Japan Tobacco entered the food and pharmaceuticals businesses. "We will target the development of drugs that can be accepted worldwide. We plan to make the food business a cash-flow generator. If the … food business needs to be augmented we will pursue alliances or acquisitions," Honda was quoted as having said in the Financial Times (Kipphoff 2003).

See also entry on Japan Tobacco Inc. in International Directory of Company Histories.

sources for further information

"A Bit of a Drag," Financial Times, August 8, 2003.

"Honda Katsuhiko," 2003, http://www.weforum.org/site/knowledgenavigator.nsf/Content/Honda%20Katsuhiko.

"In the Hot Seat," Asia Africa Intelligence Wire, April 30, 2004.

"Japan Tobacco Chief Calls for Full Privatization," AsiaPulse News, March 1, 2001.

"Japan Tobacco Inc.," 2004, http://www.hoovers.com/japantobacco/—ID__52305—/free-co-factsheet.xhtml.

"Japan Tobacco Inc. to Cut 4,000 Jobs, Close One-Third of Factories," Knight-Ridder/Tribune Business News, August 6, 2003.

"Japan Tobacco Looks for European Hookups," The Seattle Times, June 16, 2000.

"Japan Tobacco Looks to Boost Overseas Sales," Financial Times, April 9, 2002.

"Japan Tobacco Profits Surge," Financial Times, November 7, 2002.

"Japan Tobacco Slashes Profit Forecast as High Costs Bite," Evening News, February 5, 2002.

"Japan Tobacco Slips into Red on One-Off Pension Cost," Europe Intelligence Wire, October 30, 2003.

"Japan Tobacco to Close Factories," Financial Times, July 5, 2002.

"Japan Tobacco to Stop Selling Marlboros, Cut Jobs," August 6, 2003, http://quote.bloomberg.com/apps/news?pid=10000101&sid=aCAZ07Tdwwek&refer=japan.

"JT Eyes European Market," Financial Times, October 9, 2000.

"JT Giving Up Marlboro," World Tobacco, September 2003, p. 8.

"JT Plans to Revamp Cigarette Lineup," Asia Africa Intelligence Wire, December 3, 2003.

Kageyama, Yuri, "Gov't to Sell Japan Tobacco Stake Soon," Seattle Times, May 10, 2004.

Kipphoff, John, and Bayan Rahman, "Marlboro's Licence Deal in Japan Is Stubbed Out: The Move by Japan Tobacco Will Put Philip Morris at a Disadvantage," Financial Times, August 7, 2003.

"Peace Pipe," Financial Times, August 11, 2003.

"Prices Rise as Takeovers Reach Clean-Up Stage," World Tobacco, September 2003, p. 13.

Turner, Clive, "Snakes and Ladders: Japan Tobacco Matures," March 2001, http://www.tobaccoreporter.com/backissues/Mar2001/story4.asp.

—Catherine Victoria Donaldson