Tag: KT&G

  • Global Synergy

    Global Synergy

    Photos: KTI

    Stuart Buchanan discusses KT International’s partnership with KT&G.

    By Marissa Dean

    As the tobacco industry changes and evolves, companies are adapting in different ways. Recently, KT International (KTI) and KT&G entered into a manufacturing license agreement, allowing KTI to manufacture and distribute KT&G’s products in Europe.

    KT&G is a leading tobacco manufacturer in South Korea and the fifth largest in the world by sales volume, with an annual sales revenue of approximately KRW6 trillion ($4.5 billion). KTI, established in 2008, has built its reputation as one of Europe’s fastest-growing independent tobacco companies. The company has also earned recognition for its strong and credible footprint across Europe along with world-class production facilities within the European Union.

    The agreement between the two companies was signed on Oct. 20, 2023. Under the terms of the deal, KTI received exclusive rights to manufacture and distribute KT&G’s products within the EU region for three years. The two companies have agreed to a market entry plan aimed at expanding into strategic markets within the Western European region, with a specific focus on KT&G’s Esse products. Esse, a flagship brand of KT&G, is renowned for its premium quality and holds the distinction of being the world’s bestselling super-slim cigarette brand. While the two companies will initially focus on Esse products, the product range expansion will be discussed and announced in due course.

    Tobacco Reporter recently discussed the arrangement with Stuart Buchanan, chief commercial officer of KTI.

    KTI is one of only a few companies that uses a single facility for all its production needs.

    Tobacco Reporter: Your company, KTI, entered into a partnership agreement with KT&G, one of the world’s largest cigarette producers. Why was KTI chosen as a partner of KT&G?

    Stuart Buchanan

    Stuart Buchanan: After three years of collaborative efforts leading to the signing of this agreement, we have developed a strong cultural fit between our two companies in terms of people and commercial objectives. We expect the synergy between our complementary brand portfolios to strengthen the market position of both companies. A significant amount of time has been taken to structure a competitive business model and to develop an innovative and consumer-relevant product portfolio that is consistent to the global objectives and standards of KT&G.

    What necessitated this synergy?

    The KT&G partnership is certainly our most significant and strategic partnership; however, we have other partnerships with large global players, and in most cases, these synergistic partnerships have developed through taking time upfront to understand each other’s strengths and weaknesses. This in itself is a process as it takes time to develop trust and a collaborative working environment that is open and transparent, particularly in cases where we are competitors in other parts of the world.

    Why do you think more global players are forming partnerships with KTI?

    When we started our international expansion, we were an unknown company, and we found it very difficult to find importers and distributors in strategic markets. From the outset in our first three proper international markets, Spain, France and the Czech Republic, we committed to working with credible world-class importers and giving them the level of service they would expect from a major multinational. By maintaining our business standards and building our corporate reputation, we now work with some of the world’s best partners, like KT&G, and new business is self-generating as we are the first point of call for credible, reliable partners.

    Our corporate reputation extends beyond just how we operate externally in our markets but also how we operate internally through things like properly vetting our supplier base, health and safety for our employees and most recently our environmental and sustainability strategy where we have installed a 5 MW photovoltaic solar park to be sustainably self-sufficient for over 40 percent of our energy needs.

    This is probably also our biggest learning; in building our corporate reputation by doing things properly from how we manage our business partners, our brand and product development, our people development, through to our investment strategy, sometimes takes longer, but the payback is significantly higher.

    What is most important in your business? What is the strategic potential of your company and the key to your success?

    First and foremost, our people. In both our production and commercial business units, we have prided ourselves on building a world-class organization with locally developed talent.

    Operating across 70 countries, our commercial teams have developed not only the commercial acumen to compete with the world’s best, but we have embedded a culture where we understand and respect cultural differences. This applies not only to the professionalism with which our teams engage with many different countries and cultures but also in how we deploy our brand portfolio by being flexible to the consumer needs of different markets and consumer segments.

    Secondly, our production capabilities. We have one of the world’s most modern factories and service these 70 countries from one factory. We are one of the few global companies across any category that services their total demand from one production facility. Whilst creating a highly complex production environment, it provides for global brand consistency and quality standards and a single point of business contact, which is seen as a significant benefit to our partners.

    This is particularly relevant to European partnerships as we have a core production strength in being able to operate across this highly complex environment with multiple EU-driven product registration processes. This applies not only to physical production but also to logistics, product development, commercial contracts and market implementation.

    What is your outlook for the future of the tobacco industry?

    As a company, we fully respect and support sensible regulation for what is an adult category of choice. We do, however, recognize the role and growth of next-generation products (NGPs) and reduced-risk products and believe these will continue to become an integral part of a broadening category. We also support the recent moves across Europe to regulate these products along similar lines to traditional tobacco with regards to excise, legal age and product registration as it will provide higher levels of consumer protection against cheap, low-quality imports, particularly in the disposable vaping category.

    Now that, in general, across Europe there is a much clearer regulatory outlook, we have recently launched our own NGP range under our brand in Spain and Bulgaria and aim to follow across major European markets, including Germany, the U.K., France, Czech and Italy, where we have a strong presence in our traditional cigarette brands.

    Looking at the longer term horizon on the future of the category, I personally believe a natural consumer-driven balance will develop between cigars, pipe tobacco, rolling products, traditional cigarettes and NGPs, where each will have a place in the consumer repertoire.

    How is KTI adapting to changing markets and consumer needs?

    Tobacco and nicotine alternatives are a highly regulated category, and as such, it is difficult to provide the same level of consumer interaction as other categories, and to a large extent, price and brand value provide the key consumer drivers. That being said, in our traditional business, we have always believed in providing different and innovative formats that go beyond the traditional brand, price, value equation in driving purchase. It is one of the key reasons for our growth.

    Does KTI have any plans to expand into reduced-risk products or other types of tobacco products aside from cigarettes and traditional leaf tobacco?

    2023 saw the launch of our LIV brand, which is our noncombustible brand. We have launched a range of travel-friendly nicotine pouches as our first step into the noncombustible category.  

  • KT&G Reports Growth in Second Quarter

    KT&G Reports Growth in Second Quarter

    Photo: Taco Tuinstra

    KT&G Corp. reported consolidated revenue of KRW1.42 trillion ($1.03 billion) and operating profit of KRW321.5 billion for its second quarter of 2024, marking a year-over-year growth rate of 6.6 percent and 30.6 percent, respectively.

    The company attributed the growth to robust performance in its overseas cigarette business, which achieved growth in all key metrics, including revenue, operating profit and sales volume. Revenue reached an all-time high of KRW359.1 billion, reflecting a growth rate of 35.3 percent. Operating profit soared 139.1 percent year-over-year.

    KT&G’s domestic next-generation product business also grew in in all three key metrics: revenue increased by 10.8 percent, operating profit by 42.8 percent and sales volume by 7.7 percent year-over-year. The overseas business continued to improve its profitability, driven by an increased proportion of stick sales volume, which is the key growth driver of the business.

    During an earnings call, KT&G said it intends to accelerate progress toward its goal of becoming “a global top-tier company” by strengthening fundamental competitiveness and structural reforms. To that end, the company in July announced an agreement with Philip Morris International under which the partners will collaborate on premarket tobacco product application submissions for KT&G’s new next-generation products in the United States.

    KT&G also updated its full-year outlook during the earnings conference call. The company projects the annual consolidated revenue to grow between 2.5 percent and 3 percent, with operating profit expected to remain flat, reflecting changes in the business environment in the company’s health functional food and real estate sectors.

    “We achieved growth in both revenue and operating profit in the second quarter by expanding our overseas business, which delivered solid performance in our core growth areas. We will continue to maximize corporate value by strengthening the competitiveness of our core growth businesses and enhance shareholder value through our best-in-class shareholder return policy,” KT&G wrote in a press release.

  • PMI and KT&G to Partner on Submissions

    PMI and KT&G to Partner on Submissions

    Photo: KT&G

    Philip Morris International and KT&G will collaborate on regulatory submissions for KT&G heat-not-burn products in the United States. The companies have signed a memorandum of understanding.

    On Jan. 30, 2023, PMI obtained exclusive rights to commercialize KT&G’s smoke-free products outside South Korea.

    KT&G’s new platform products are expected to be launched first outside the U.S. Thereafter, the partners plan to work on a premarket tobacco product application submission for review by the U.S. Food and Drug Administration.

    “We want every adult smoker who does not quit smoking to switch to a science-backed, better alternative for the benefit of their own and public health,” said PMI CEO Jacek Olczak in a statement.

    “The heat-not-burn category, with different tiers of FDA-authorized products, has a pivotal role to play in making cigarettes obsolete in the U.S.”

    KT&G “is currently pursuing global expansion and structural transformation centered on its three core businesses—next-generation products, overseas cigarettes, and health supplements,” said KT&G President Bang Kyung-man in a statement.

    “We will do our utmost to achieve our future vision of becoming global top-tier by leveraging innovative NGP products and scientific R&D capabilities that will be introduced to overseas markets.”

  • KT&G Volunteers Help With Harvest

    KT&G Volunteers Help With Harvest

    Photo: KT&G

    KT&G volunteers assisted Boeun County tobacco farmers with their tobacco harvest on July 19.

    Farmers in South Korea have been facing labor shortages due to the ongoing decline in rural populations and aging demographics. The situation is particularly critical during the tobacco harvest season in July and August, which is labor intensive and largely unmechanized.

    To alleviate the burden, KT&G volunteers have been visiting tobacco farms annually since 2007. After assisting with transplanting tobacco seedlings in the spring, the employees also contribute to the tobacco leaf harvest.

    Additionally, KT&G has been carrying out welfare improvement projects for tobacco farmers. In June, the company provided KRW420 million ($303,829.67) to support tobacco farmers with health checkup costs, children’s education fees and fuel-saving curing devices. Since 2013, the company has provided KRW4.27 billion, benefiting 15,212 farmers.

    “The company annually conducts employee volunteer activities to support stable farming operations for tobacco farmers facing labor shortages,” said Jung-Ho Kim, head of KT&G’s SCM division, in a statement. “We will continue our support for mutual prosperity with farmers.”

  • KT&G Investor Wants New CEO Pay Structure

    KT&G Investor Wants New CEO Pay Structure

    Photo: bong

    KT&G shareholder Flashlight Capital Partners has demanded a revision of CEO compensation plan to normalize stock price.

    “In the recent past, KT&G’s former CEO was awarded a significant amount of compensation despite a 21 percent drop in KT&G’s stock price, while the KOSPI [The Korea Composite Stock Price Index] surged by 27 percent,” said Flashlight Managing Partner Capital Sanghyun Lee in a statement. “In March 2024, we urged the KT&G board to link the CEO compensation to stock performance, but no action has been taken so far,” Lee added.

    Under the plan proposed by Flashlight Capital, the CEO will receive a base annual pay of KRW100 million ($72,199) and be granted shares based on stock price milestones over the next three years. For instance, if the stock price doubles, the CEO will be awarded shares worth KRW10 billion.

    “Many of the current KT&G board members are under police investigation for potential bribe charges,” Lee highlighted. “Given that KT&G’s stock price is over a 50 percent discount compared to industry peers, we believe doubling the stock price is highly achievable, provided the board act promptly and decisively.”

    Flashlight Capital has proposed an extraordinary general meeting for shareholder approval and requested a response from the KT&G board by the end of July.

  • KTI to Make and Distribute KT&G Products in Europe

    KTI to Make and Distribute KT&G Products in Europe

    Photo: KTI/KT&G

    KT International (KTI) will be manufacturing and distributing KT&G’s products in Europe.

    Under the terms of an Oct. 20, 2023, agreement, KTI will have exclusive rights to manufacture and distribute KT&G’s products within the EU for three years. KT&G and KTI have agreed to a market entry plan aimed at expanding into strategic markets within the Western European region, with an initial focus on KT&G’s flagship Esse brand, which is the world’s bestselling super-slim cigarette.

    “We are delighted to join hands with KTI, a company with a robust footprint across Europe. Having already established a strong market presence in Asia, AMEA and Latin America, we believe that the agreement with KTI will serve as a pivotal step in accelerating our footprint across Europe,” said Chad Sul, general manager of KT&G’s Europe office.

    “After three years of collaborative efforts leading to the signing of this agreement, we see a strong cultural fit between our two companies. Also, we expect the synergy between our complementary brand portfolios to strengthen the market position of both companies. A significant amount of time had been taken to structure a competitive business model and to develop an innovative and consumer relevant product portfolio that is consistent to the global objectives and standards of KT&G. We thus look forward to a long and fruitful partnership between our companies,” said Stuart Buchanan, chief commercial officer of KTI.

    KT&G is a leading tobacco manufacturer in South Korea and the fifth-largest in the world by sales volume, with an annual sales revenue of approximately KRW6 trillion ($4.34 billion). Established in 2008, KTI is one of Europe’s fastest growing independent tobacco companies.

  • KT&G Supports Farmers

    KT&G Supports Farmers

    Photo: KT&G

    KT&G delivered welfare improvement support funds amounting to approximately KRW420 million ($303,020) to tobacco farmers.

    This year’s support funds will be used for health checkup fees, child scholarships and the purchase of fuel-saving devices for drying facilities targeting leaf tobacco growers.

    KT&G has been delivering welfare improvement support funds to leaf tobacco farmers annually since 2013, reaching a total of KRW4.28 billion this year. During the same period, the cumulative number of benefiting growers reached 15,212.

    Korean tobacco farmers have been struggling to secure labor due to the declining and aging rural population. Tobacco cultivation is difficult to mechanize, which makes it imperative to look after growers’ health, according to KT&G.

    The fuel-saving device recirculates the heat discharged during tobacco drying. Since 2022, KT&G has provided 214 units.

    The company also assists its farmers by purchasing all domestic leaf tobacco every year and dispatching employee volunteer groups to assist during the planting and harvesting seasons.

    “We continue to support the welfare improvement projects for farmers to alleviate their difficulties and provide practical help,” said Kim Jeong-ho, head of KT&G SCM headquarters, in a statement.

    “We will continue to provide consistent support to improve the health and economic conditions of leaf tobacco farmers.”

  • KT&G Reports Robust Overseas Performance

    KT&G Reports Robust Overseas Performance

    Photo: KT&G

    KT&G Corp. reported consolidated revenue of KRW1.29 trillion ($942.27 million) and operating profit of KRW236.6 billion for the first quarter ended March 31, 2024.

    The South Korean cigarette manufacturer’s overseas and domestic next-generation product (NGP) and overseas cigarette sectors sustained robust performances in the quarter, extending their trend from the previous year.

    Overseas NGP stick volume grew by 14.7 percent, reaching 2.11 billion sticks.

    KT&G also achieved its third consecutive quarters of revenue growth in the overseas cigarette business, driven by strategic pricing in core growth markets such as Indonesia. KT&G’s first-quarter overseas cigarette revenue recorded KRW291.8 billion, up 10.1 percent from the comparable 2023 quarter.

    While the company delivered notable results in core business areas, its consolidated revenue and operating profit for the first quarter decreased compared to the same period last year. This downturn was mainly driven by rising manufacturing costs, the completion of large-scale real estate development projects and reduced revenue from the health functional food sector amid lower consumer spending.

    “KT&G is committed to strengthening its competitiveness in core business areas and driving a business transformation aimed at making a significant leap forward to become a ‘global top-tier company,’” KT&G wrote in a press release.

    “Despite a number of headwinds, such as inflation-driven manufacturing cost pressure and economic recession, KT&G is striving to achieve a business turnaround in the second half of the year by strengthening global competitiveness and pursuing operational efficiency optimization.”

  • KT&G Provides Water Filters to Uganda

    KT&G Provides Water Filters to Uganda

    Photo: KT&G

    KT&G is providing 400 environmentally friendly water purification devices worth KRW110 million ($81,406) to 94 primary schools in Uganda. Park Hyeon-seok, KT&G’s Tanzania materials branch manager, attended a distribution ceremony on April 30 in Hoima City, at the heart of Uganda’s tobacco-growing area.

    Out of approximately 49.9 million nationals, 9.2 million lack access to safe drinking water, according to According to Uganda’s Water Environment Authority. This contributes to the spread of waterborne diseases such as cholera, and typhoid fever, leading to high infant mortality rates and social issues.

    The gravity-fed filtration devices supplied by KT&G will not only address Uganda’s drinking water hygiene issues but also replace the traditional water purification methods that involve boiling water using wood and charcoal, thereby saving the equivalent of up to 3,500 tons annually in carbon emissions.

    Exporting to more than 130 countries, KT&G says its tries to help solve various social issues in countries where it operates, especially in developing nations. In 2021, KT&G also supported a Tanzanian primary school by providing 1,300 water purification units. Additionally, the company has implemented CSR activities tailored to the specific conditions of various countries. These initiatives include supporting vocational training centers in Indonesia, establishing agroforestry education centers in Mongolia, and constructing schools in Laos.

    “We hope that this water purification support will help improve the sanitary conditions in Uganda,” said Shim Young-Ah, director of KT&G’s ESG management office, in a statement. “As a global corporate citizen, we will continue to focus on and fulfill our social responsibilities to countries in need.”

  • KT&G Expands in Indonesia

    KT&G Expands in Indonesia

    Photo: KT&G

    KT&G CEO Kyung-man Bang participated in groundbreaking ceremonies for the South Korean tobacco company’s second and third factories in Surabaya, Indonesia, on April 26.

    According to a company press release, Bang also visited KT&G’s Asia-Pacific headquarters in Jakarta during his trip, which was his first visit to an overseas business operation since assuming the top position at KT&G.

    Spanning approximately 190,000 square meters, KT&G’s second and third factories in Indonesia are set to commence operations in 2026. The combined production capacity of the factories is projected to reach 21 billion cigarette sticks per year. KT&G plans to make Indonesia its largest global production base, with an annual production capacity (including existing factory capacity) of 35 billion cigarettes, and focus on global market expansion.

    “We have been committed to delivering and accelerating our mid-[term] to long-term vision of becoming a global top-tier company by executing vigorous investment strategies and leading bold innovations,” said Bang during the ceremony.

    “Indonesia serves as our primary global export hub, driving the expansion of our export business in Asia-Pacific and the Middle East markets. We will continue to develop the global production hub in Indonesia as a core growth engine for the company,” Bang added.

    Last October, KT&G broke ground for a factory in Almaty Province, Kazakhstan, designed for exports across the Eurasian region. The following month, the company announced an expansion of its next-generation product capacity at its Daejeon factory.

    To accelerate its global expansion, KT&G recently separated its Asia-Pacific headquarters and Eurasia headquarters from the company, establishing them into separate business entities.