Higher prices cause drop in Philip Morris cigarette sales

Philip Morris's decision to raise cigarette prices caused a slump in sales, while rivals who did not follow suit reported a gain in local market share, retail industry sources said Tuesday.

Sources said sales of Philip Morris brands fell 16.4 percent in the Feb. 11-17 period compared to the one week period just before the company's Korean branch marked up prices.

Prices of Marlboro and Parliament jumped 200 won ($0.17) per pack of cigarette as of Feb. 10. The company raised the retail price of its Virginia Slims by 100 won.

The move, however, helped sales of other tobacco companies, which reported sales jumps of 8-9 percent.

KT&G Corp., Korea's largest tobacco and ginseng product manufacturer, said sales of its products jumped 9.0 percent during the cited period, with Japan Tobacco International (JTI) reporting 9.6 percent sales gains.

British American Tobacco (BAT) said sales of its brands like Dunhill moved up 8.2 percent on greater consumer demand.

Related to the sales figures, a poll conducted by the Korea Tobacco Retailer Association showed that most smokers will change the brand they smoke if the manufacturer raises prices.

"A poll conducted on 1,022 people, revealed that 56.6 percent will buy cheaper cigarettes," the association said.

It added that the greatest beneficiary of Philip Morris's decision has been KT&G. The Korean corporation said earlier this month that it will freeze prices of its cigarettes for the time being as part of its effort to help the government control inflationary pressure.

KT&G, meanwhile, said that it has inked a 566.2 billion won ($503.5 million) export contract with Alokozay International Ltd. in the United Arab Emirates. The company said in a regulatory filing that the deal is equivalent to 22.7 percent of last year's total sales and should benefit the company down the line.(Yonhap)