Korea’s major tobacco company launches its own HnB device

On the 7th of November, Korea’s top tobacco company KT&G, announced the launch of its Heat-not-Burn (HnB) device, ironically only two days before the local parliament passed a bill that will raise the tax on such devices by 90%.

Diane Caruana

November 15, 2017

KT&G Corporation is a Korea-based tobacco company which manufactures and sells several cigarette brands including, ESS, PINE, ZEST, CIMA, CARNNIVAL, RAISON, BOHEM, both in Korea and overseas. Last July, the tobacco company had announced that it would launch its own HnB product, which would compete directly with PMI’s iQOS and BAT’s Glo.

A significant 90% tax to be imposed on HnB products

So far, these products had held an advantageous position in the market, as South Korea had categorized such tobacco products differently than their combustible counterparts, hence iQOS and Glo are currently levied at a lower tax rate than the 75% imposed on regular cigarettes.

A bill implementing the new tax was passed last Thursday, and it is expected to go into effect sometime next month.

Then last October, Korea’s National Assembly’s finance committee discussed the possible implementation of a tax on HnB. A bill implementing this excise tax was passed last Thursday, and it is expected to go into effect sometime next month.

HnBs are battery operated smokeless alternatives to combustible cigarettes and work by heating sticks containing tobacco leaves. These refills which look like short cigarettes, must be inserted into the devices and are heated up once the latter are switched on.

Will HnB prices be raised to reflect the new tax?

KT&G’s Lil, will be available on the market as of the 20th of this month, starting off with a pilot launch at 259 stores in South Korea’s capital, Seoul. The tobacco company said it would be selling it’s refill sticks at 4,300 won (US$3.87) per pack, which is the same price BAT and PMI charge for theirs.

However, the latter two have talked of plans to raise their prices from the current 4,300 range to about 5,000 won (US$4,415) a pack, in order to keep up with the impending tax. “We may have to consider raising the price per pack to over 5,000 won, if the government increases consumption taxes,” said a Philip Morris spokesperson last month.

“For now we do not have any plans of raising our prices.” Lim Wang-seop, chief of innovative product department, KT&G

As of now, KT&G has no such plans. “For now we do not have any plans of raising our prices,” said the company’s chief of innovative product department, Lim Wang-seop, at press conference in Seoul. However, he added, things may change according to future market requirements.

Read Further : The Korea Herald