BUSINESS

KT&G joins HNB tobacco market in Korea

By Shim Woo-hyun
  • Published : Nov 7, 2017 - 15:50
  • Updated : Nov 9, 2017 - 15:54

Korean tobacco manufacturer KT&G rolled out its heat-not-burn device lil at a press conference in Seoul on Tuesday, becoming the third tobacco maker after Philip Morris Korea and British American Tobacco Korea to release the line here.

Price competition in the HNB products industry in Korea is expected to heat up further as Korea’s largest cigarette maker jumps into the market with its own products at cheaper prices. 

A model presents KT&G’s heat-not-burn device lil in Seoul on Tuesday. (Yonhap)

KT&G will provide the device at the retail price of 95,000 won ($85). However, customers can apply through its website for discount coupons that will bring the price down to 68,000 won at GS25 convenience stores. This is seen as an attempt by KT&G to gain a foothold in the HNB market.

The price is lower than the HNB devices sold by Philip Morris’ IQOS at 97,000 won and BAT’s Glo at 70,000 won, both with discounts.

KT&G also said the company is unlikely to increase tobacco stick prices even if the government increases related taxes in the future.

“The company is currently not considering price hikes on its tobacco sticks,” said Lim Wang-seop, chief of the innovative product department. “KT&G will go through discussions and watch the market if the government decides to raise taxes on the sticks. But the company could just keep the current price as a measure to become more aggressive in the market,” Lim added.

Each pack of tobacco sticks used for KT&G’s device is priced at 4,300 won, the same price for the other HNB cigarettes. PMI and BAT have each previously said that they might raise their prices for tobacco sticks if the National Assembly increases related taxes.

Meanwhile, the legislation and judiciary committee of the National Assembly on Monday passed a proposal to raise the individual consumption tax on HNB products to account for 90 percent of the tax levied on conventional cigarettes. If the bill passes the floor this month, each 20-stick pack of HNB sticks will be taxed to the tune of 529 won, from the current 126 won.

The tax for HNB tobacco could increase to 1,250 won when bills aimed at increasing the Health Promotion Fund tax and local education tax are also passed at the National Assembly.

Regarding patent issues involved in developing the device, the company dismissed the possibility of a patent infringement, saying the heating system has been fully developed by the company and would have no problem entering the overseas market

KT&G’s HNB device uses a circle-shaped blade to heat tobacco from the inside out. With a single charge of an in-built battery, the device can power up 20 sticks in a row.

KT&G will start taking preorders of the products between Nov. 13 and 16 at local GS25 convenience stores in Seoul and begin commercial sales of the product on Nov. 20, the company said. The company aims to expand its sales vendors nationwide down the road, it added.

KT&G added it plans to first focus on the domestic market but will come up with plans for the overseas market. Regarding when the company will enter the Japanese market, the world’s largest HNB products market, the company did not provide an answer.

By Shim Woo-hyun (ws@heraldcorp.com)