YANGSAN, South Gyeongsang Province ― Philip Morris International Korea expects its cumulative cigarette exports to reach 20 billion sticks this year, after securing larger markets in Japan and Australia.

Like its competitors KT&G, British American Tobacco and Japan Tobacco International, PMIK chose to expand its export of cigarettes manufactured in the local factory in Yangsan, South Gyeongsang Province.

“Increasing exports is a key alternative to make up for the domestic losses,” Kim Byung-cheol, the director of PMIK, the Korean operation of multinational tobacco maker Philip Morris International, said in a press conference held on April 17 at the Yangsan Factory.

The aggressive export drive will cushion the impact of the controversial tobacco tax hike that went into effect on Jan. 1 this year. The new bill raised tobacco prices from the average 2,500 won ($2.21) to 4,500 won per pack, causing major sales drop for tobacco makers operating here. PMIK’s sales also dropped about 18 percent in the first quarter of this year from a year ago.

The tobacco maker is optimistic about this year’s exports, thanks to the increasing demand of foreign buyers for the Korean-made Philip Morris cigarettes, as well as the increased production capacity of Yangsan Factory.

“Since 2012, our exports grew more than 10 times, thanks to the increased capacity in Yangsan Factory, as well as the growing quality,” said Mikhail Prokopchuk, the PMIK director operations.

“The fact that we export products to Japan assures you that the products manufactured in the Korean factory are of the best quality,” he added.

Last year, PMIK’s Yangsan Factory scored 81 points on the cigarette physical quality index evaluation, or the CPQI test, earning No. 1 rank amongst the 50 Philip Morris factories in 32 countries around the world.

In 2012, the company invested approximately 200 billion won to expand its packaging facilities and add the raw material processing facilities. The new factory is now capable of producing 40 billion cigarettes per year, doubling the manufacturing capacity.

Following the factory relocation, the Yangsan factory of PMIK has achieved a drastic increase in exports to Australia, Japan, Taiwan, Hong Kong, Singapore and Macau. Its export volume increased from 900 million cigarettes in 2012 to 3.1 billion in 2013 and 4.5 billion in 2014, rising fivefold in two years. As of April, PMIK’s domestic sales to overseas sales was 55 to 45, according to PMIK’s data

“We are not planning on entering the emerging markets of Southeast Asia, such as Indonesia, where low price marks the highest market competitiveness,” Kim said. Instead, the director noted the expansion in Japan as one of PMIK’s top achievements in recent years with its products made in Yangsan now available in major Japanese retail stores.

In addition to the increased exports, the Yangsan factory has continued to contribute to the regional development through job creations and social contributions. PMIK’s Yangsan factory employs around 400 people while contributing to indirect job creation as it cooperates with approximately 180 domestic companies for supplies and services, such as filters, packaging, labels and logistics.

Recognized for its contributions to the local economy and tax revenue, PMIK was selected as an “Exemplary Local Tax Payer of 2014,” and received a citation from Yangsan in March last year.

By Chung Joo-won (joowonc@heraldcorp.com)