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Tuesday, February 14, 2012

KT&G to freeze cigarette prices ‘for the time being’

KT&G Corp., Korea’s tobacco giant, said Wednesday it planned to freeze its cigarette prices for the time being, citing persistent inflationary pressures.

Esse Special Gold
Esse cigarettes are one of the most popular brands produced by Korea Tobacco & Ginseng Corp. (KT&G).
The Seoul-based company has recently been faced with a dilemma as to whether it should follow the lead of its smaller rivals, which relayed price hikes since last year to cope with surging raw material and labor costs.
Philip Morris International Korea is set to increase its cigarette prices by 6.8 percent on average starting Friday. Its flagship brands such as Marlboro, Parliament and Lark will be sold at 2,700 won ($2.4) a pack, up 200 won.
British American Tobacco Korea, the No. 2 player in the local market, and Japan Tobacco International Korea also raised the prices of Dunhill, Kent, Mild Seven and other products by 200 won in general.
KT&G, whose market share amounts to nearly 60 percent, said it has decided to try boosting productivity rather than “seek temporary sales growth,” although it faces a greater cost burden than its foreign competitors because it uses more expensive domestic tobacco leaves.
Analysts have said the three companies created a chance for KT&G to follow suit. But the former state monopoly remained hesitant due to the likely negative impact on consumer prices and constant criticism over tobacco firms’ high profit margins estimated at between 20 percent and 30 percent.
KT&G stocks closed down 1.3 percent Thursday at 76,200 won on downbeat sales growth prospects.

1 comment:

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