KT&G, PMI extend partnership for e-cigarette presence in global markets

All News 11:08 January 30, 2023

SEOUL, Jan. 30 (Yonhap) -- KT&G Corp., South Korea's dominant tobacco company, said Monday it has extended its partnership with Philip Morris International Inc. (PMI) to strengthen its presence in global e-cigarette markets.

KT&G and PMI have signed a 15-year supply contract, in which the former will distribute its e-cigarette product line Iil through the latter's sales networks in global markets, except for Korea, the company said in a statement.

The long-term deal is the extension of their partnership signed for three years that began in January 2020.

The partnership will help strengthen KT&G's smoke-free products in overseas markets and establish a basis for stable growth of its global business through the extension of the strategic deal with PMI, KT&G Chief Executive Baek Bok-in said in a press conference.

"Smoke-free products of the two companies will play a complementary role to each other, providing a more innovative product portfolio to more consumers," PMI CEO Jacek Olczak said.

The products include three existing heat-not-burn tobacco products launched in Korea -- lil Solid, lil Hybrid and lil Aible devices -- and their dedicated sticks, which are Fiit, Miix and Aiim, respectively, the company said in a statement.

The partnership also includes other "innovative" products to be launched later, it said.

KT&G aims to earn over half of its sales from overseas businesses in 2027 as part of its expansion strategy.

It is targeting to achieve sales of 10 trillion won (US$8.1 billion) in 2027, compared with estimated annual sales of 5.9 trillion won for the year of 2022.

While focusing on the conventional cigarette business, the company said it will reinforce its next-generation product (NGP) businesses that include HN products, and the health functional food product business.

HNB products are electronic devices that, unlike e-cigarettes, contain tobacco. The tobacco is heated to a high temperature without setting it alight and creating smoke that the user inhales.

KT&G has exported its HNB products to more than 30 countries since 2020 through the sales networks of the New York-based PMI.

The company earns 90 percent of its overall sales from the cigarette business division and the remaining 10 percent from the HNB division.

KT&G has four tobacco manufacturing plants, one each in South Korea, Russia, Turkey and Indonesia, whose combined capacity amounts to 13.6 billion cigarettes a year.