BAT opens local e-cigarette plant

BAT Korea, the local operation of British American Tobacco, said Monday it had completed construction of two manufacturing lines that will make electronic cigarette sticks at its Sacheon plant in South Gyeongsang.

The factory will produce Neostiks, tobacco-filled sticks that work with the company’s electronic cigarette marketed as “glo,” which will be released in the local market in August. The extra lines are expected to also boost the annual production volume of BAT Korea’s conventional cigarettes to 40 billion, according to the company. It produced 17 billion in 2015.

Although BAT Korea did not disclose how many Neostiks it expects to make in the factory, the company did say the plant would manufacture the entire volume of Neostiks to be exported to Japan. Before the facility in Korea was expanded, Neostiks were only manufactured in Russia, according to the company.

Once glo launches in Korea, the Sacheon factory will also manufacture Neostiks for domestic distribution.

BAT Korea invested 200 billion won ($179 million) in building the second and third lines at its Sacheon factory and expects them to help expand the company’s export market. Currently, products manufactured at the factory are shipped to 13 countries. The company estimates the portion of production for export will double this year from 43 percent in 2015.

“BAT Korea’s Sacheon factory is expected to not only take up the role of an export hub of Asia but also a global manufacturing hub of specially designed tobacco Neostiks made exclusively for our Tobacco Heating Products,” Tony Hayward, CEO of BAT Korea, said in a statement. “BAT Korea is committed to launching glo in Korea and offering ‘Made in Korea’ products to local adult smokers interested in Tobacco Heating Products.”

BAT’s glo is an electronic cigarette that heats tobacco at a lower temperature than conventional cigarettes and produces vapor instead of smoke. These smoke-free electronic cigarettes have gaining popularity in Korea, especially after Philip Morris launched its electronic cigarette, iQOS, in Korea last month. Manufacturers claim electronic cigarettes produce fewer toxic chemicals like tar because they heat tobacco leaves rather than burn them. But since they use actual tobacco leaves, the flavor produced is similar to that of conventional cigarettes.

British American Tobacco’s first launched glo in the city of Sendai in Japan last December. In just six months, the electronic cigarette took up 7 percent of the region’s market share. BAT plans to bring the product to Tokyo, Osaka and Miyagi by July.

Korean tobacco manufacturer KT&G is also poised to jump into the burgeoning market. The company said it established a special task force last year to conduct research into electronic cigarettes and monitor the market.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]