Philip Morris Pressed Down... KT&G Achieves First No.1 in Heated Tobacco Cigarettes

Market Share at 45.2% as of Late February... Surpasses Philip Morris at 42.9%
Effective Device Sales Expansion Strategy... Diversification of Exclusive Stick Lineup Also Contributes

[Asia Economy Reporter Eunmo Koo] KT&G has overtaken Korea Philip Morris in the domestic heated tobacco market and claimed the top position just five years after entering the market.

According to industry sources on the 8th, KT&G recorded a market share of 45.2% in domestic heated tobacco stick sales (convenience store sales) as of the end of February this year. This is not only the highest since KT&G entered the electronic cigarette market in 2017 but also the first time it surpassed Korea Philip Morris (42.9%) to take first place.

Having exceeded a 40% market share last year, KT&G raised its share to 44.3% in January, closely trailing Philip Morris (44.5%) by a fraction, and then secured the top spot within a month. According to Euromonitor, KT&G’s market share was only 2.5% in 2017 but rebounded sharply to 18.9% the following year, steadily increasing to 29.4% in 2019 and 34.4% in 2020. Last year, it surpassed the 40% mark for the first time.

KT&G’s rise in dedicated stick market share is attributed to a strategy of increasing device sales to expand dedicated stick sales. Heated tobacco products use dedicated sticks containing tobacco leaves inserted into devices, so an increase in device sales naturally leads to higher sales of dedicated sticks.

KT&G diversified its device lineup by adding new features and addressing weaknesses to boost device purchase incentives. Representative examples include the ‘Lil Solid 2.0,’ which introduced ‘Surround Heating’ technology to provide consistent flavor until the end, and the ‘Lil Hybrid 2.0,’ which features an automatic preheating function. As a result, device market share surpassed 60% in the first half of last year, and cumulative domestic sales of Lil devices exceeded 4 million units by the end of last year.

Not only the device portfolio but also the diversification of dedicated stick lineups contributed to the market share expansion. KT&G’s dedicated sticks, ‘Fit’ and ‘Mix,’ expanded their lineup from 11 types in early 2020 to 20 types currently, nearly doubling in two years.

KT&G Heated Tobacco Device 'Lil Solid 2.0' and Dedicated Stick 'Fit'

The competition for market share in the domestic heated tobacco market is expected to intensify further. This is because, while overall cigarette sales have stagnated due to smoking cessation policies and other factors, preference for electronic cigarettes?which produce no ash and have relatively less odor?is increasing.

According to the ‘2021 Tobacco Market Trends Report’ released by the Ministry of Economy and Finance, sales of heated tobacco (dedicated sticks) reached 440 million packs last year, a 17.1% increase from 380 million packs the previous year. In contrast, sales of conventional cigarettes decreased by 2.0% to 3.15 billion packs during the same period.