What is Korea Tobacco doing right in its quest for tobacco

In 2023, Korea Tobacco's main selling brand "ESSE" sold 21.9 billion in the Korean market and 28.9 billion in the overseas market, which is the first time since 2015 that its sales outside of South Korea exceeded the domestic market.

As both East Asian countries, China and South Korea have extremely high similarities in culture, diet and other aspects. Through studying the changes of South Korea's cigarette market and the changes of South Korea's tobacco companies, it is of high reference value to solve the problems we are currently facing.


Internationalization strategy and overseas expansion

Through mergers and acquisitions, joint ventures and other ways, Korean tobacco companies continue to expand overseas market share, especially in Southeast Asia, CIS countries and regions to strengthen development. For example, in October 2023, a new factory will be built in Kazakhstan, mainly for exports to Eurasia, and in May 2024, two new factories will be built in Surabaya, Indonesia (with an estimated annual output of 21 billion cigarettes), which will increase sales in overseas markets and effectively hedge the shrinking pressure of its domestic market.

Product innovation and diversification

For the Korean tobacco company, "electronic cigarettes" and "heated cigarettes" have become as important as "combustible cigarettes". In 2023, Korea Tobacco Corporation will build three new e-cigarette production lines, bringing its total number of e-cigarette production lines to eight. Heated cigarette brand Lil continues its rapid growth trend by significantly improving consumer convenience.

"low coke", "light taste" + "thin branch"

Under the pressure of the shrinking of the combustible cigarette market in South Korea, Korea Tobacco Company relies on the sales growth of "light flavor" (which means reducing the residue of smoke in the mouth, fingers, and clothes) and "ultra-fine" products to achieve stable sales of "combustible cigarettes" category, especially in the cigarette market of less than 3mg and the middle and high-end market of more than 4,500 won.

The above three development strategies just provide solutions for us to meet the challenges of the future, namely "internationalization", "new tobacco products" and "low tar". Among them, the focus of "internationalization" is to hedge the decline of "domestic market" through the growth of "overseas market"; The focus of "new tobacco products" is to open up new growth points besides "combustible cigarettes"; "Low tar" is to meet the differentiated needs of consumers of a new generation of "combustible cigarettes" by "reducing tar content", "reducing smoke smell residue" and "using more environmentally friendly materials".

The "smoking rate" of domestic smokers has shown a long-term decline, but cigarette sales have remained largely stable. The logic, I think, is the stabilizing effect of "stock smokers". The "smoking rate" of cigarette consumers in the 60's and 70's is significantly higher than that in the 80's and 90's, and in the face of the foreseeable pressure of "generational replacement" in the future, it is imperative to find a "new path".