Philip Morris Accelerates Regain of Lead by Increasing Market Share
KT&G Counters with Expanded Sales Channels for 'Lil Hybrid 3.0'
The competition for the top spot at the end of the year between KT&G and Korea Philip Morris, the two leading companies in the domestic tobacco market, is heating up again over the heated tobacco market. While Korea Philip Morris is strengthening marketing for the ‘IQOS Iluma’ lineup and regaining market share, KT&G is responding by expanding the sales channels of its new products nationwide.
Philip Morris Raises Market Share Led by Iluma
According to Philip Morris International (PMI) on the 27th, Korea Philip Morris's market share in the domestic tobacco market (conventional cigarettes + electronic cigarettes) for the third quarter of this year was 19.6%, an increase of 0.6 percentage points compared to the same period last year (19.0%). The cumulative market share up to the third quarter also rose by 0.3 percentage points to 19.5% compared to the same period last year.
The improvement in Korea Philip Morris's market share was driven by heated tobacco products. The domestic market share of heated tobacco sticks (HTU) such as ‘Terea’ and ‘HEETS’ in the third quarter was 7.1%, up 1.2 percentage points from 5.9% a year earlier. This is twice the growth rate of the overall tobacco market share, indicating that heated tobacco is leading the growth. The cumulative market share for the third quarter also increased from 6.1% last year to 7.0% this year.
In October last year, Korea Philip Morris reignited the competition for the top spot in the domestic electronic cigarette market by launching the new heated tobacco product IQOS Iluma and its dedicated stick Terea after three years. This was a masterpiece introduced after losing the leading position, which had been maintained for about five years since the launch of ‘IQOS’ in 2017, to KT&G in the first quarter of last year. Subsequently, in February, they released the integrated product ‘IQOS Iluma One,’ and in July, they introduced their first limited edition product, ‘IQOS Iluma We Edition,’ focusing on expanding the lineup. Consumers responded positively to the company's active moves, and as of the first half of this year, the membership program ‘IQOS Club’ surpassed 650,000 members.
As market reactions turned positive, Korea Philip Morris accelerated its steps to reclaim the lead. This month, they strengthened trade-in promotions by offering up to a 40,000 KRW discount to consumers who return existing IQOS products and purchase the Iluma series, focusing on expanding the distribution of the completed Iluma three-product lineup this year.
KT&G Responds with ‘Lil Hybrid 3.0’... "Expanding Global Business"
As Korea Philip Morris tightens its pursuit, KT&G is also accelerating efforts to widen the gap again. KT&G's domestic market share of heated tobacco sticks, which was 48.4% in the first quarter of this year, fell by 2.0 percentage points to 46.4% in the second quarter within just one quarter. In response to the sharp decline in market share, KT&G launched ‘Lil Able’ in November last year to counter IQOS Iluma, and this year, in July, released ‘Lil Hybrid 3.0,’ which added three smoking modes and a pause function to the existing device, launching an offensive. On the 11th, they also expanded sales channels to all convenience stores nationwide.
With the domestic heated tobacco market continuing to grow in the third quarter, KT&G is expected to maintain its number one position and show solid performance that meets market expectations. According to financial information firm FnGuide, KT&G's consolidated sales for the third quarter are expected to increase by 1.4% year-on-year to 1.6473 trillion KRW, while operating profit is expected to decrease by 11.5% to 359 billion KRW. Eunju Shim, a researcher at Hana Securities, said, "Domestic conventional cigarette demand continues to decline, but heated tobacco is offsetting this," adding, "With steady sales of heated tobacco, KT&G's electronic cigarette market share is also expected to rise slightly with the launch of Lil Hybrid 3.0."
Meanwhile, according to the Ministry of Economy and Finance's tobacco market trends for the first half of this year, sales of conventional cigarettes were 1.4782 billion packs, down 2.9% compared to the same period last year. On the other hand, sales of heated tobacco products increased by 13.5% to 292.6 million packs. The sales share of heated tobacco, which was 14.8% at the end of last year, has been increasing annually to 16.5% as of the first half of this year.
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