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World No.5 KT&G recruiting more customers outside Korea

20 October 2023

KT&G is the world’s No.5 transnational tobacco company and it is planning to expand its business even further. Its profits are dependent on its overseas sales of tobacco products. In 2022, it sold 41 billion cigarettes in Korea and about 50 billion sticks overseas.

KT&G operates in 135 countries and has about 520 brands of cigarettes. The company is aiming to double its sales from KRW5.9 trillion in 2022 to KRW10 trillion ($7.4 billion) in 2027. The company’s cigarette division earns 78% of its sales from conventional cigarettes.

KT&G has a total of six tobacco manufacturing facilities — three in South Korea and one each in Russia, Turkey and Indonesia. Indonesia is KT&G’s biggest market in the ASEAN region and it has identified Indonesia as its strategic export hub for the Southeast Asian market.

In September 2023, the CEO of KT&G and the Indonesian Minister of Investment H.E. Bahlil Lahadalia and other key officials, met at the office of the Indonesian Ministry of Investment in Jakarta and discussed KT&G’s investment plan to establish a new manufacturing plant in Indonesia.

It also discussed regulatory support to be provided by the Ministry of Investment. The Minister of Investment in welcoming KT&G’s investment said, “[I] will do my best to ensure the smooth progress of the investment.” KT&G obtained an investment support letter on establishing the new manufacturing plant in East Java province.

KT&G has polished it public image in Indonesia through its CSR activities which includes a Korean language school and vocational training center.

The new manufacturing plant in Indonesia is targeted to commence operations in 2026 as a production hub for export and the manufactured products are expected to be exported to Southeast Asia and other regions.

11 Sep 2023: Indonesian Minister of Investment with CEO of KT&G 11 Oct 2023, Almaty: KT&G’s CEO Baek Bok-in (3rd from the right), Governor Marat Eleusizovich of Almaty (3rd from the left), and Consul General Park Nae-cheon of Almaty (2nd from the left) at factory groundbreaking ceremony.

In 2022, KT&G increased its sales by 75% by strengthening its local marketing and successfully launching new products. Besides Indonesia, the company intends to accelerate its overseas expansion in other countries and has identifies Kazakhstan as a pivotal gateway for its Eurasian business expansion.

In October 2023, KT&G had groundbreaking ceremony at the site of its new factory in Almaty Province, Kazakhstan which was attended by over 70 key figures, including KT&G CEO Bok-In Baek, Governor of Almaty Marat Sultangaziyev, Korean Consul General in Almaty Nae-cheon Park, and others. 

KT&G also has a well-entrenched duty-free business in tobacco products. WHO FCTC Article 5.3 Guidelines say the tobacco industry should not be given incentives to run its business. Allowing tobacco companies to sell duty free tobacco products at airports and other outlets is an incentive to the industry. KT&G sells its products at duty-free outlets in 171 cities worldwide in434 locations. In Asia, it has expanded its duty-free business to 28 of the top 30 Asian airports.

Korean government contravenes Article 5.3 by endorsing KT&G

Article 5.3 requires government’s interaction with the tobacco industry to be strictly limited to effective regulation.Recommendation 2.1 of the guidelines discourages public officials from fostering relations with tobacco companies. In September this year, the Minister of Public Administration and Security presented KT&G with an Award at their ’12th Korea Knowledge Awards’. This award, given by the government to public institutions and private enterprises, is a public recognition of outstanding results in knowledge administration and management.

It does not bode well when an award is given to an industry that sells a harmful product that causes disease and death that the government is spending resources and effort to reduce. The tobacco control legislation in Korea requires KT&G to apply pictorial health warnings on its products so its users can quit. This same company should not be receiving an award of praise from the government.

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