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Tobacco emerges as a major contributor to Korea’s exports

Tobacco emerges as a major contributor to Korea’s exports

Posted December. 02, 2016 07:13,   

Updated December. 02, 2016 07:24


KT&G is likely to achieve 700 million U.S. dollars in exports for the first time this year. If revenues of its subsidiaries in other countries are included, the amount will further increase. Despite the gradually shrinking global tobacco market, it has become a major contributor to Korea’s exports by targeting global markets such as Russia and the Middle East.

Tobacco accounts for the largest portion of Korea’s agricultural, dairy and food exports. According to the Korea Agro-fisheries & Food Trade Corporation, Korea’s tobacco exports stood at 886.8 million dollars last year, representing 14.5 percent of total exports of agricultural, dairy and food products. It topped the export list again this year with an export volume of 882.4 million dollars until Nov. 20.

KT&G’s venturing into global markets was not easy. It earned only around 270 billion won (229.3 million dollars) in 2003 when it first entered the global tobacco market dominated by three global players – Phillip Morris of the U.S., BAT of the U.K. and JTI of Japan. It first tried to win the markets only with 7.8 mm standard cigarettes, which were also the global companies’ main products.

Later, KT&G changed its strategy. At the heart of the strategy is to target the niche market and enhance its brand value. It pioneered the market with “Esse,” 5.4 mm slim cigarettes, a category that did not overlap with global tobacco companies.

The strategy worked successfully. KT&G sold more in the global markets (46.5 billion cigarettes) than in the Korean market (40.6 billion cigarettes) last year. Esse accounts for one-third of super-slim cigarettes sold in the global market. “KT&G earns over 700 billion won (594.4 million dollars) from exports every year,” said Yim Wang-seop, brand manager of KT&G's marketing division. “We will become one of the world’s top three tobacco makers through aggressive investments.”

Sung-Jin Park psjin@donga.com