Domestic Tobacco Brands Losing Market Share

The quarterly market share of Korean tobacco brands fell below 70 percent for the first time since the complete opening of Korea’s tobacco market to foreign competition in 1988.

According to industrial sources yesterday, shares of KT&G, Korea’s largest tobacco company in the domestic Korean cigarette market, in the second quarter this year recorded a market share of 69.3 percent, lower than the all time low of 70.1 percent in the first quarter of 2005.

KT&G is planning to formally announce its earnings, including revenue, operating profits, and market share during the second quarter this year on July 25. So far, the corporation tried to ensure its market share was 70 percent or over and aggressively focused on marketing.

However, analysts say that its goal of 73 percent market share this year will be hard to achieve as KT&G’s market share dropped to the 60 percent range in the second quarter for the first time in the company’s history.

The share of KT&G in the Korean tobacco market fell from 90.6 percent in 2000 to 78.71 percent in 2002. Except for some countries with multinational cigarette companies such as the U.S., the U.K., and Japan, market shares of local corporations are small in general, with Taiwan at 38 percent, France at 26.8 percent, and Spain at 34.4 percent.

The industry cites the reason for the fall as high smoking cessation rates among middle-aged people and seniors, who make up a significant proportion of the smoking customer base. In contrast, foreign brands, whose major customers are relatively young, do not feel pressure from anti-smoking trends as much as domestic brands.

Another reason could be the new products rolled out by foreign tobacco companies, which undermined KT&G’s presence in the market.

Foreign tobacco brands launched six new products in the first half of this year as opposed to only one from KT&G, called Esse Light 0.5.

A KT&G company official said that the corporation is determined to recover its market share by launching various new products in the latter half of this year.

parky@donga.com larosa@donga.com