Heat-Not-Burn Device is Exported to Russia by KT&G

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Since last month, in accordance with the company's agreement with Philip Morris International (PMI), KT&G started exporting its e-cigarette heating devices to Russia. And according to the press release, this agreement allows the cooperation between two parties on promoting global marketing campaigns.

During a conference call, KT&G announced its second-quarter results. The company confirmed an analyst question that a great number of e-cigarette devices, which are worth 12.5 billion (about $10.54 million), were exported to Russia throughout last month. Moreover, according to a report in The Kores Times, KT&G signed a pact for strategic collaboration with PMI in January.

During the call, the company said:

"It is true that e-cigarette devices were exported last month. We plan to announce further details on the outcome of the PMI deal in the near future."

This partnership is calling for KT&G to export its tobacco heating devices "lil" and tobacco sticks through PMI's global sales network, which covers 180 international markets.

However, after the agreement's implementation, there are no visible outcomes that have been achieved during the past six months. Thus some questions have persisted over the progress of the deal so far. In addition, as exports have begun, KT&G's effort to expand its e-cigarette presence is anticipated to increase momentum.

The export came after the domestic market penetration rate of heat-not-burn (HNB) tobacco products declined for the second consecutive quarter. At the end of last year, the rate stood at 13%. However, it declined to 12.6% in the first quarter and 12.4% in the second quarter this year. Thus, the company pointed out that this does not refer to a deadlock in HNB products' growth, because it pays great efforts on the expansion in overseas markets.

The company said:

"From a future business standpoint, the overall heat-not-burn (HNB) tobacco market is expected to grow."

"When the new products are introduced, the market is bound to grow. While there would be some minor impact from governments' policies and market events, there is no doubt about the growth trajectory."

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