Korea is the 10th biggest cigarette market on the planet, not so weird because you see smokers everywhere. I visited the British American Tobacco (BAT) factory in Sacheon together with the DBCK last week. The flight to Jinju was already scheduled at 07.30 AM, took a cab at 5AM. We gained more knowledge about the tobacco industry and had a tour inside the factory during the day. It was interesting to see the inside of an advanced Korean factory and to hear about the double message in the companies marketing policy: 1. We don’t promote smoking to non-smokers, women and children. 2. we produce cigarettes for our customers. (Meaning that they don’t persuade non-smokers to start) What drive the people working here; the people behind the cigarettes, are they smokers themselves?
The company visit was hosted by Richard Bakker, the finance director of BAT Korea and member of the DBCK. Bakker explained that the factory was the most recent and advanced out of the 47 BAT factories in the world. BAT profit grew with 20% last year but sales in the EU are stagnating. BAT is the only tobacco factory in Korea that doesn’t process genetically modified tobacco for their cigarettes.
Company performance
Bakker explained the tobacco strategies: Its about becoming premium reseller in a country and that can be done by getting long term relations with companies like Shell, Carrefour and Ahold. Direct sales through special stores and festival presence are also important. BAT hardly suffers from the financial crisis. We asked how much the cost price of a cigarette was, the reply was “Cheaper then you think”
China
China closed borders for cigarette companies 20 years ago to protect domestic production, today they are opening the border for foreign companies. There are many local cigarette brands in China, they are expected to lose market to the ‘experience’ created by marketing of premium brands. BAT is one of the tobacco companies that is trying to establish in China and is currently advertising in Beijing and Shanghai to do so.
Innovations
Bakker’s presentation mentioned three interesting tobacco products. While I was living in Sweden, I noticed these bags on the floor that looked like tea bags, but smaller. It turned out to be a typical Skandinavian tobacco product called snus – tobacco that can be placed between lip and teeth, a smokeless way of consuming nicotine. BAT is currently testing snus in the rest of the EU and South-Afrika.
Another new product that I thought was interesting was the Kool Boost cigarette, created for the Japanese market. The ‘powerball’ inside is a cobalt blue plastic globe of concentrated menthol flavor. It responds to pressure by releasing more menthol into the smoke stream. In effect, smokers can adjust each cigarette to their preferred level of coolness.
Another product that I haven’t seen before was the nanotek cigarette, aimed for the Russian market. Its a small cigarette created for the quick smokers – office clerks that go outside for a few puffs. The small cigarette is designed to have flavor like a larger cigarette but is more economic since it doesn’t require to throw away half a cigarette.