KT&G enjoys sales boom in Mongolia with tailored strategies

Published : Feb 27, 2017 - 17:15 Updated : Feb 27, 2017 - 17:15

Hallyu is strong in Mangolia, where there are three streets named after Korean places and around 7 in 10 cars are from Korea. Many stores also sell Korean products, including cigarettes.

KT&G is showing a high growth rate in the country, which is a rising market for the exports of Korean firms.

KT&G products ESSE Blue and ESSE Change are being sold in a wholesale store situated in the downtown area of Ulaanbaatar, Mongolia. (KT&G)

The company started off by selling 4.7 million cigarettes there in 2000 and has seen continuous growth since 2010. KT&G sold 750 million cigarettes there last year -- 160 times more than its first-year sales -- with its market share at around 17.8 percent.

The growth of KT&G’s exports to Mongolia was led by the super-slim low-tar brand ESSE, which costs almost twice the price of Mongolia’s most-sold cigarette Ulaan Shonhor, but ranks No. 1 among exported cigarette brands. It accounts for 78 percent of the market for super-slim cigarettes.

ESSE was able to achieve such a high market share due to KT&G’s local marketing strategy that focuses on positioning itself as a premium brand.

Taking into account that the cigarette market in Mongolia has been growing in the area of high-tar regular products, it decided to sell a low-tar super-slim cigarette brand instead.

Recently, KT&G has been showing high growth in emerging markets, including Indonesia and America. Out of the 48.7 billion cigarettes sold overseas, 40 percent or 18.4 billion were sold in the emerging markets.

KT&G’s foreign performance has been boosted by the expansion of its distribution networks to emerging markets such as Asia, Africa and America through product development based on the local tastes and trends.

Indonesia, for instance, is the world’s third-largest consumer of cigarettes. The kretek cigarette, which has clove added to it, accounts for 90 percent of the market. Due to this distinct culture, foreign companies have found it difficult to enter the country.

With an aim to develop a product that resembles the kretek cigarette, KT&G released ESSE Change -- which uses a kretek blend -- last year, leading to more than 300 million cigarettes sold locally.

“The success was due to the continuous efforts in product development that aimed to suit the diverse tastes of the locals from various countries,” a KT&G official said.

“We are going to regard ESSE, which has developed into a global brand, as a stepping stone to expand our exports to diverse countries further.”

By Yim Ji-min (jiminy@heraldcorp.com)