Shown above is the head office of KT&G in southern Seoul. The South Korean tobacco maker has inked a 15-year sales contract with Philip Morris International about the former’s smoke-free products. Photo courtesy of KT&G

Two corporations signing 15-year exclusive contract

South Korea’s leading tobacco manufacturer KT&G announced Monday that it had signed a 15-year contract with Philip Morris International in tapping into the global market.

Under the agreement, the latter will commercialize the former’s smoke-free devices and consumables across the world on an exclusive basis, excluding South Korea.

KT&G noted that the long-term agreement is based on performance-review cycles and related commitments to be confirmed for each three-year period.

PMI has made a commitment to selling a total of 16 billion consumables during the first three years.

KT&G said that the 15-year contract was built on successful collaboration since 2020. During the past three years, PMI commercialized KT&G’s e-cigarette brand, named lil, in 31 countries.

“Based on the enhanced strategic partnership with PMI, we will be able to strengthen the competitiveness of our e-cigarette products and establish the foundation for stable growth in overseas markets,” KT&G CEO Baek Bok-in said in a statement.

PMI CEO Jacek Olczak said that the two companies’ cooperation was aimed at offering smokers access to better alternatives.

“Together with KT&G we are calling on regulators, scientists, and health professionals everywhere, including in Korea, to embrace the potential of these technological innovations to shift smokers away from cigarettes,” he said.

Other than the health issues, observers point out that the two-way alliance will be a win-win solution financially for both firms.

“Through the collaboration, PMI will secure exclusive access to KT&G’s e-cigarette products to enhance its portfolio, especially in the low- and middle-income markets,” business tracker Leaders Index CEO Park Ju-gun said.

“From the perspective of KT&G, continued access to PMI’s global commercial infrastructure and experience would be attractive.”

The share price of KT&G rose 0.21 percent on Jan. 30 on the South Korean stock exchange.

The publisher studied Korean history in Seoul and management of business administration in the United Kingdom. He has 20-year experiences in the media business. Kim can be reached at voc200@gmail.com or 82-2-6956-6698.