Invest KOREA

Upholding an Image

Philip Morris Korea has done business for 23 years with a commitment to doing things the right way

Philip Morris Korea Inc. (PMKI) wasn’t exactly welcomed into Korea with open arms.

Until the mid-80s, the possession of foreign-made cigarettes was illegal here and what was then known as the Korea Monopoly Corporation controlled the country’s tobacco market. Though foreign cigarettes began entering the market in 1986, their imports and locations of purchase were limited. By 1987, foreign cigarettes were sold at all of Korea’s tobacco stores, and PMKI was established in 1989.

“Tobacco probably was one of the most difficult products I guess to build in Korea, simply because we started out in a very, very anti-consumer sentiment,” said Ilwoo Chong, managing director of PMKI.

Through increasing brand appeal for what is a highly image-driven product, and through growing the local talent, PMKI today has a market share of about 20 percent and is second to market leader KT&G.

With new headquarters as of last month at Yeouido’s International Finance Center, the company has eight merchandising offices nationwide and a new 190 billion won ($167.9 million) manufacturing facility in Yangsan. About 570 employees manage five brands - Marlboro, Parliament, Virginia Slims, Lark and Oasis. Each brand has variants that deliver different tastes.

Chong and his staff keep their products in line with Korean preferences while maintaining the integrity of the brand taste.

“For example in Korea, the market is predominantly a low-tar market,” the managing director said. “The Marlboro here is not the same Marlboro in terms of intensity when you compare against some of the other countries.”

Philip Morris International sells products in 180 countries, with corporate headquarters in New York. PMKI is one of the company’s top 20 in terms of business size. It took PMKI 18 years to reach double digit market share, and it struggled during the Asian financial crisis of the late 90s. But with continued investment in infrastructure and sales networks, and by doing business “the right way,” according to Chong, PMKI has become the largest international foreign cigarette company in Korea. Sales last year totaled 579 billion won.

Chong has plenty to say about operating with integrity in a business that sells a highly controversial product.

“How we sell that product is one of the most important social responsibilities, [and] we really have to get it right,” he said.

The company makes it difficult for minors to access their products, trains retailers to make sure they don’t sell the products to kids and helps educate minors about the dangers of smoking. PMKI also considers it part of their main social responsibilities to develop a modified-risk product, which they’re doing and hope to market in about five years.

“As it is now, cigarettes cause disease and it brings a lot of problems, including premature death,” Chong said. “And for those who enjoy the smoking experience, for those who would like to continue that experience, I think it is our responsibility to develop a product that is less harmful than the products that we have.”

In addition to creating this “next-generation product,” PMKI’s goal is to meet its “30-100 vision” - build market share to 30 percent and become one of Korea’s 100 largest manufacturing companies. Having gotten past its difficult start, Chong is confident PMKI can continue to grow.

“It’s taken many years, but I think we’ve begun to show, even in this very, very uniquely sentiment environment, [that] with the proper investment and commitment to the business, we bring some success to the table,” he said.