KT&G’s overseas sales hit record

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KT&G’s overseas sales hit record

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Tobacco company KT&G’s overseas sales reached a record $812 million last year, thanks to robust demand in emerging markets.

The number of individual cigarettes sold in 2016 was 48.7 billion, a 4.7 percent increase from the previous year. That corresponded to a 13 percent increase in revenue from abroad.

Fourth-quarter sales, including overseas and domestic, rose 27 percent year on year to 1.1 trillion won ($939 million), according to the company’s most recent regulatory filing on Thursday. Operating profit grew 15.6 percent to 305 billion won, and net profit expanded 150.2 percent to 406 billion won.

The uplift came mostly from emerging markets in Asia, Africa and Latin America, where KT&G has been expanding distribution channels.

During last year’s first quarter, the company saw a 48 percent increase in sales from these three regions. “Such outcomes are meaningful for us because we had to compete in a market already taken up by other global tobacco makers,” a company spokesman said.

KT&G’s main export is the slim cigarette brand Esse, which makes up half of the company’s products sold abroad. It already dominates the Korean market with a share slightly below 25 percent and is currently sold in 50 countries in Europe, Asia and the Middle East. The brand accounts for a third of the global market for slim cigarettes, which has high demand thanks to their low tar content.

Esse is a steady seller in Russia and the Middle East, markets where KT&G began its global expansion in 2001. Other popular brands abroad include Time, which sold best in the United States, and Pine, a product specially developed for the Latin American market. In Taiwan, where consumers value trendiness, the playfully named Bohem Cigar is the most popular.

KT&G’s global business is run by a subsidiary with regional offices in the United States, Russia, Indonesia, Iran and Turkey. Since 2015, the company’s global sales have been outnumbering domestic sales.

Market analysts assess KT&G’s efforts to expand abroad as a smart move, especially since Korea’s tobacco market has reached maturity, meaning there is not much room left for growth.

Kim Yun-oh of Shinyoung Securities said KT&G’s corporate value is slowly catching up to global tobacco brands. “The gap in product quality has shortened, and they’re still working on expanding their product portfolio and sales network, so there’s plenty of room for potential.”


BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]

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