Philip Morris hopes to raise volume of exports

From top: A worker at Philip Morris Korea checking with the quality of tobacco products at the factory in Yangsan, South Gyeongsang, and a packaging facility at the factory. Provided by the company

YANGSAN, South Gyeongsang - Smokers in Korea have been hit with steep tax increases, tougher bans on lighting up in public and increasing social stigma, creating pressure that is turning them away from purchasing cigarettes.

Faced with declining sales, the world’s leading tobacco manufacturer, Philip Morris, seeks to increase its Korean factory’s volume of exports.

The move came as accumulated exports from the Korean unit of the global tobacco company exceeded 10 billion cigarettes since the establishment of its manufacturing facility in Yangsan, South Gyeongsang, in 2002.

The maker of Marlboro, however, aims to export 10 billion cigarettes this year alone from the Korean factory.

In light of this ambitious goal, Philip Morris Korea conducted a two-day media tour of the establishment from Thursday.

“We face different challenges in the Korean market,” said Brian Kim, director at the Corporate Affairs division on Friday. “So, we set sights at overseas markets such as Australia and Japan.”

The director acknowledged that Philip Morris has seen a decline in tobacco sales since prices increased by 2,000 won ($1.80), starting Jan. 1, in compliance with the government’s decision to raise taxes on tobacco.

“In the first quarter, sales of our product declined by 15 percent compared to the same period last year,” Kim said.

Ever since the manufacturing facility was built, it has gradually expanded its production for exports - especially following its relocation to another area in Yangsan in 2012.

Its export volume rose from 900 million cigarettes in 2012 to 3.1 billion in 2013 and 4.5 billion in 2014, increasing fivefold in two years.

The factory takes pride in the fact that it ships cigarettes to the Japanese market, whose consumers are known for their sophisticated taste.

“The fact that we export products to Japan assures you that the products manufactured in the Korean factory is one of the best quality,” said Director Operations, Mikhail Prokopchuk.

“Our factory currently exports 45 percent of the entire production to different countries such as Russia, Australia and Southeast Asia and Japan. But we will increase the share of exports going forward.”

Not every Philip Morris factory can export to demanding markets like Japan, the Korean office said.

“Yangsan has been honored several times as the top-quality control operation among other 50 Philip Morris manufacturing facilities around the world, which is one reason why we are able to ship products to Japan,” Kim said.

The focus on exports, however, doesn’t necessarily mean that the major tobacco firm will shun the Korean market.

“The Korean market is still important to Philip Morris as it often serves as a testing ground for marketing strategy,” Kim continued.

The director said the global tobacco maker pays special attention to the reaction of Korean consumers when it launches new lines.

The cigarette maker even rolled out a flavored capsule product exclusively in Korea. Marlboro Zing Fusion, which contains 5.0 milligrams of tar and 0.4 milligrams of nicotine, retails only in Korea as part of the Marlboro brand.

“The Yangsan factory will play a key role in shipping different cigarette products abroad. And we will also seek to contribute to the local economy through employment and investment,” Kim said.

In 2012, the company invested about 200 billion won into expanding its packaging facilities and added raw-material processing facilities to the existing Yangsan plant. The new factory is capable of producing 40 billion cigarettes per year, double the manufacturing capacity of the previous factory.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]