Cigarette Makers Increase Prices Ahead of Tax Boost

Published on July 6th, 2015 00:00

Korea’s major cigarette maker KT&G reported these days that the prices of most its smoking products would raise by around 2,000 won ($1.80) beginning January, 1 in conformity with the government’s final decision to increase taxes on tobacco.

KT&G primarily thought to add an extra 200 won to 500 won along with the demanded tax boost in an effort to compensate the forecasted drop in sales, however explained it has made a decision to keep with the minimum expected volume. The government has projected that the 2,000 won surge will result in a 34 % drop in yearly sales of cigarettes, with tobacco companies getting 940 billion won in sales cutbacks.

Beginning next year, famous cigarette brands made by the company like Esse, The One and Raison will be available at 4,500 won, higher from 2,500 won now. Lower-tier cigarettes such as This, Hallasan and Lilac will sell for 4,000 won, a 2,000 won surge. “We anticipate reduces in sales volume and profits as a result of the price boost, but we set only the minimum raise due to worries for any adverse effects that the price boost will have on people with lower incomes,” KT&G stated in a report.

Even so, the Imperial Tobacco made a decision to boost the price of Davidoff cigarettes by about 2,200 won. The British international tobacco company that is the owner of the brand has the power to choose the price of its cigarettes. Philip Morris, another leading cigarette producer that owns the second-major market share in Korea after KT&G, will also increase its prices by 2,000 won.

Philip Morris’ Marlboro and Parliament cigarettes will be available for 4,700 won, higher from 2,700 won. Other international makers, which include British American Tobacco (BAT) and Japan Tobacco International (JTI), have still to claim their finalized prices; however, they were expected to introduce their retail prices before Friday.

The 2,000 won boost is divided into a tobacco use tax, local education tax, health payments and value-added taxes. Confronted with the severe price boost, some cigarette users have stocked up cigarette packages before the tax execution. Several convenient stores in the common district reduce the number of cigarette packages per person. An employee at a CU convenience store close to Lotte Department Store in Myeong-dong, central Seoul, explained that the store has established a restriction of around three packages per person. “A customer is not permitted to purchase over three tobacco products,” stated a clerk at the shop.

Several months ago, cigarette sales at the nation’s three largest convenience store raised by over 30 % after a set of news reviews on the upcoming tobacco price boosts broadcasted on TV.