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Will Korea become new tobacco manufacturing hub?
Publication Date : 08-04-2014
Stringent regulations and a growing negative sentiment toward cigarettes have caused tobacco companies in the world’s most advanced countries to keep their heads down.
In Korea, however, where regulations are relatively lax and a large part of the population is still very open to the idea of smoking, the situation is a bit different.
Perhaps encouraged by this difference, Philip Morris International, the maker of Marlboro and other popular cigarette brands, has recently decided to relocate its entire Australian cigarette production facility to Korea.
“We decided to cease cigarette manufacturing in Australia by end of 2014, and transition all Australian cigarette production to our affiliate in Korea,” the company said in a statement on last Wednesday.
Australia’s strict rules on tobacco products are the main reasons for the closure of the factory, which has been in operation for nearly 60 years, the company said.
The company blamed, in particular, the country’s new fire safety requirements, which require all locally manufactured cigarettes to reduce the ignition propensity, saying that the rule forced the plant to make cigarettes that “didn’t match consumer preferences elsewhere.”
In 2012, Australia also introduced a plain-packaging scheme, which bans all company logos and colors from cigarette packs.
Advanced economies including the European Union are now following in Australia’s footsteps to introduce more stringent regulations on cigarettes.
Some market insiders say if the Philip Morris transition proves successful, it will help improve the country’s position as a global hub for tobacco manufacturing.
An official from Philip Morris Korea, however, remained cautious on making any early predictions about the plant move.
“It is too early to tell the impact of the plant transition,” she said.
The global tobacco firm set up its own plant in Korea in 2002. The plant, located in Yangsan, South Gyeongsang Province, was expanded in 2012 and is now capable of producing 40 billion cigarettes per year.
The official noted that the company’s existing plant in Yangsan is likely to be used for products shipped to Australia.
“We already export our Korean-produced products to five Asian countries, including Japan, Hong Kong and Singapore,” she added.