PMI Korea Seizes Market Share with Updated E-cigarette Products

According to a report by N. News on August 6, 2024, Philip Morris International (PMI) Korea expanded its market share in the first half of the year through the upgrade of its HNB e-cigarette devices.

Against the backdrop of continued growth in the domestic e-cigarette market, the company has decided to discontinue production of the old model "IQOS" and its proprietary pod "HEETS," opting instead to focus on the new models "IQOS ILUMA" and "TEREA," resulting in significant profit increases.

According to data from PMI, in the first half of this year, PMI Korea's market share of traditional cigarettes and e-cigarettes within the country reached 20.0%, a 0.5% increase from the same period last year.

In addition, the HNB-type e-cigarette has driven up PMI's market share in South Korea. In the first half of this year, the market share of PMI's "TEREA" and other HNB-type e-cigarette pods reached 7.9%, an increase of 1% from the same period last year which stood at 6.9%. This growth rate is double that of the overall tobacco market share increase, further solidifying HNB e-cigarette's leading position in the market.

At the same time, the shipment volume of HNB e-cigarette pods reached 2.8 billion, an increase of 11.7% compared to last year, far exceeding the growth rate of the entire cigarette market (0.5%). The shipment volume of traditional cigarettes decreased from 4.4 billion to 4.2 billion, a year-on-year decrease of 5.6%.

Last year, the company focused on promoting the "IQOS ILUMA," and this year they have increased their market share in the e-cigarette market by expanding the "TEREA" pod product series.

Following the launch of "TEREA Russet" and "TEREA Teak" last year, "TEREA Arbor Pearl" and "TEREA Starling Pearl" were introduced in March and June this year, expanding TEREA's product line to a total of 17 varieties.

In order to strengthen its market competitiveness, the company has completely discontinued the old pod "HEETS" that is not compatible with "IQOS ILUMA". In June 2017, the company first launched the "IQOS" and "HEETS" series products in South Korea. And in March of this year, the company decided to cease production of all 16 varieties of "HEETS" products manufactured in South Korea.

The decision to stop production of "HEETS" is seen by the company as a strategic move to increase profitability. The new products "IQOS ILUMA" and "TEREA" are priced higher than the old products, with the "TEREA" pods being more expensive than "HEETS.

Furthermore, through equipment updates and upgrades, the company's profitability has significantly increased. According to data from the Financial Supervisory Service's electronic disclosure system, PMI Korea's operating profit last year was 105.7 billion Korean won (76.86 million US dollars), an increase of 31.1% compared to the previous year's 80.6 billion Korean won (58.61 million US dollars). Sales reached 790.5 billion Korean won (570 million US dollars), a 15.1% increase year-on-year; net profit increased from 45.3 billion Korean won (32.94 million US dollars) to 89.1 billion Korean won (64.79 million US dollars), a growth of 96.6%.

However, competitors such as KT&G have also been steadily growing. In 2018, KT&G officially entered the e-cigarette market with "Lil Hybrid," increasing its market share from 16% in 2018 to 46.6% in the first quarter of 2023. Currently, KT&G's pod sales continue to rise, reaching 1.43 billion units in the first quarter of this year, a year-on-year increase of 3.6%.