KT&G drives global expansion with new branding and products

KT&G has been on a drive to break into the European tobacco market, recently concluding its participation in two key trade fairs: TFWA World Exhibition and Inter-Tabac, in Cannes and Dortmund, respectively.

The South Korean tobacco products company is also keen to break into China, KT&G Overseas Brand Development Manager Kelly Song* told The Moodie Report at the Cannes show. The Chinese market is dominated by state-managed China National Tobacco Corp, which leaves only about 1% market share for foreign players – a small but still lucrative slice of the pie given the sheer size of the population. Song is optimistic that this proportion will increase as China becomes more open to international trade.

KT&G is also hoping to exhibit at the IAADFS Duty Free Show of the Americas in 2012, in a bid to target the US market.

In Cannes, the company introduced new additions to its flagship ESSE superslim cigarette range – ESSE Compact Slim (which comes in Red, Silver, Black and Menthol) and ESSE Aura (flavoured superslims).

(Top) KT&G has unveiled new branding for its flagship ESSE brand, with the tagline ‘Love Smart: For the Smart Generation’ to reflect its popularity among female smokers; (Above) New LED displays were introduced at KT&G’s stand at the TFWA World Exhibition in Cannes, with products presented in the background as ads played in the foregeoundA new branding campaign was also unveiled for ESSE Blue, with the tagline ‘Love Smart: For the Smart Generation’, featuring images of blue lipstick and a female model clad in a slinky blue dress. The new image reflects the brand’s popularity among female smokers, thanks to its superslim format.

KT&G also presented Raison, a king-size cigarette brand said to be highly popular among the young generation in South Korea. New ad visuals for the brand featuring edgy young male and female models, which were displayed at the stand, target consumers in their early 20s and reflect their way of thinking and experimental culture. Its low tar content (less than 5.0mg) is a significant draw for young smokers, Song added.

New from the brand is Raison Pop containing 20 cigarettes, three of which come with a menthol capsule in the filter that provides flavouring when ‘popped’.

Also on show was the Bohem range of cigar-flavoured cigarettes, made with 30% of premium cigar leaves, and touted as KT&G’s next flagship brand.

Of particular focus was Bohem Cigar Master, a premium addition to the range. Each cigarette contains 6mg of tar and 0.6mg of nicotine and has a carbon charcoal filter. The 84mm king-size cigarette contains 36% Cuban cigar leaves and is finished in a cigar wrapper instead of white cigarette paper. The high-end product is offered in both regular cigarette packaging and in a special-edition wooden gift box.

Soon to launch in duty free is the lime-flavoured Bohem Cigar Mojito, Song revealed.

*NOTE: Kelly Song has since transferred to another team within KT&G, and will no longer be in charge of marketing and communication for travel retail. Ms Choi Ji Hyun (tel: +82 2 3404 4823, e-mail: iloveyou@ktng.com) will take over her responsibilities.

Bohem is touted as KT&G’s next flagship brand; pictured above is Bohem Cigar Master, the high-end product from the range which contains 36% Cuban cigar leaves and is finished in a cigar wrapper instead of white cigarette paperFirst half (1H) and second quarter (2Q) 2011 results

Net sales* in 1H 2011 grew +0.6% to KRW1,160.7 billion compared with the same period last year. First-half total sales volume rose +6.5% to 42.9 billion sticks, with domestic sales volume down -0.8% to 25.4 billion sticks. Operating profit (-13.6%) and net income (-35.8%) declined to KRW416.5 billion and KRW378.2 billion, respectively.

Net sales** in 2Q 2011 rose +1.7% to KRW623.6 billion (domestic: +1.6%, export: +0.4%). Total sales volume grew +6.3% to 23.4 billion sticks, with domestic sales volume down -0.2% to 13.7 billion sticks. Operating profit fell -22.1% to KRW227.1 billion while net income declined -56.3% to KRW179 billion.

Second quarter export sales volume jumped +17.1% to 9.6 billion sticks. Export sales volumes in the company’s main market (Middle East/CIS/Russia) grew +19.4% in the quarter, while the ‘New Market’ segment (all other export regions except main market) grew by +8.7%.

Export sales amount grew at a lower rate than volume, +0.4% to KRW138 billion, due to the appreciation of the Korean Won and “temporal product mix deterioration”.

Total overseas sales volume, which includes sales by KT&G subsidiaries, went up +21.5% to 10.2 billion sticks in the quarter. The sales volume of these subsidiaries grew by a solid +195.1% to 608 million sticks. In terms of sales amount, subsidiaries contributed KRW12.2 billion (+162.2%) to the overall sales figure of KRW150.2 billion (+5.6%).

**NOTE: Includes cigarettes, real estate and others

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