December 22, 2024

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KT&G's Esse brand cigarettes are displayed on a shelf at a shop in Indonesia. (KT&G).

KT&G, South Korea's largest tobacco company, is a leading export powerhouse, capturing a growing market share in East and Central Asia, with its conventional cigarette portfolio leading the charge.

The firm’s overseas sales achieved an all-time high of 419 billion won ($291 million) in the third quarter this year, marking a 30.5 percent on-year increase. Now almost one-third of its total cigarette sales come from overseas markets.

Appealing to local preferences

KT&G's international growth is propelled by signature brands, such as Bohem and Esse, which have gained strong market traction by resonating with local preferences.

The firm’s Esse product has provided an ultra-slim alternative to traditional local offerings in Mongolia, which became the first country where KT&G surpassed 50 percent of the market share overseas, dethroning the former dominant player, Japan Tobacco International, since 2020. The company saw a nearly eight-fold surge in cigarette exports, reaching 2.3 billion last year, up from 300 million in 2021.

Across Central Asia, the company has made a strong impact, securing market leadership in Tajikistan and ranking third in Kazakhstan.

In Taiwan, the company's Bohem brand has cultivated a strong following thanks in part to the product's cigar-like aroma, which resonates with the country's rich tea culture, an official from the firm explained.

A strategic focus on localization has also been a key factor in driving the company’s overseas growth.

Since entering the Indonesian market in 2011 through the acquisition of a local tobacco company, KT&G has solidified its position, with products like Esse Berry Pop, which is designed to appeal to Indonesian consumers' preference for clove-based cigarettes.

The company's market share in Indonesia nearly doubled, increasing from 13.4 percent in 2021 to 25.2 percent last year. Approximately 9.6 billion cigarettes were sold in Indonesia last year.

Since launching two Esse products in Romania last April, KT&G has been steadily expanding its footprint in the European market as well, with plans to enter Spain, Portugal and Andorra. As of December, the company’s cigarette products, both conventional and electronic, are available in 132 countries.

Stronger production capabilities

In an effort to tighten its grip on international markets, KT&G is expanding its global value chain by establishing new manufacturing plants and branches abroad, complementing its existing production facilities in Russia, Turkey and Indonesia.

Last October, KT&G initiated the construction of a 200,000-square-meter manufacturing plant in Almaty, Kazakhstan, set to be completed next year. The facility is poised to function as a strategic hub for the Eurasian region, supplying both conventional and electronic cigarettes.

Another manufacturing plant currently under construction is in Surabaya, Indonesia. Set to begin operations in 2026, the new 190,000-square-meter facility will expand Indonesia's role as KT&G's largest overseas manufacturing hub, increasing the existing annual production capacity of 14 billion cigarettes to a combined total of 35 billion.

In addition to its manufacturing plants, KT&G operates overseas corporate entities in Russia, Indonesia, Kazakhstan, Turkey and Taiwan, as well as branch offices overseeing Mongolia, Uzbekistan and Europe.

The overseas cigarette business is a key component of the group's three core businesses, alongside electronic cigarettes and health supplement products, according to the company official. The company has forecast a 50 percent on-year increase in operating profits from overseas sales of traditional cigarettes and electronic tobacco products this year

"We will continue to cultivate overseas markets, such as Indonesia, to become a top-tier global tobacco company," the official stated.

By No Kyung-min (minmin@heraldcorp.com)