KT&G sides with public as others raise prices

KT&G announced yesterday that it will maintain its cigarette prices as public discontent brews over foreign brands’ recent moves to discreetly raise their prices here.

The nation’s largest tobacco company stressed in a statement that it has no plan of charging customers more money considering the impact such a move would have on lower-income earners in this era of rampant domestic inflation.

As a result, its popular Raison brand will continue to retail for 2,500 won ($2.25) for a packet of 20, it said.

This comes after foreign tobacco company Philip Morris Korea said on Monday that it will increase the prices of its cigarettes citing rising raw material and labor costs. In further justifying the move, the company said it has not raised its prices in 10 years.

Starting from tomorrow, a packet of 20 Marlboro cigarettes will cost 2,700 won, marking an increase of 200 won. Two other Philip Morris brands, Parliament and Lark, will also be raised by the same amount, while its Virginia Slim brand will be sold at 2,900 won, up from 2,800 won.

The hike announcement came as something of a shock to the industry and consumers as Philip Morris Korea capitalized on similar moves by its rivals recently to become the No. 1 foreign tobacco company in the country.

Furthermore, a similar price hike by McDonald’s last week on some of its most popular burgers generated much resentment by the public, as expressed on online portals.

Philip Morris Korea controls 17 percent of the Korean market, second only to KT&G, which owns a whopping 57 percent.

In April, British American Tobacco (BAT) Korea, which sells the luxury British men’s brand Dunhill, as well as Kent, its largest premium brand globally, raised the prices of its products citing similar reasons. Japan Tobacco Inc (JTI) immediately followed suit, much to the annoyance of local Mild Seven smokers.

Both became subjects of public censure last year following their respective moves as the Korean government has been battling to fight rising inflationary pressure with a number of, at times, seemingly desperate measures, including re-codifying the consumer price index.

According to Statistics Korea, consumer prices this month will inch up 0.01 percentage points as a direct result of Philip Morris Korea’s hike. The price hikes by BAT and JTI had a similar impact last summer. Korean cigarettes account for 0.5 percent of the nation’s consumer price index, while foreign cigarettes make up 0.35 percent.

By Lee Ho-jeong [ojlee82@joongang.co.kr]