Sanctions Clouding S. Korean Cigarette Sales in Iran

EghtesadOnline: South Korea’s leading tobacco seller KT&G is watching the Iran market where sales of its brands were slowing down this year after US reimposed sanctions against the Middle East nation, officials said on Thursday.

News ID: ۷۸۳۷۹۶

26 August 2018

KT&G opened a factory in Iran in March 2009 that annually produced about 500 million sticks of cigarettes. The company wholly owns the plant and supplies most of the raw materials, Yonhap news agency reported.

The Iranian market for cigarettes has been growing steadily with the increase in the country’s population. The consumption totaled 47 billion sticks in 2012, 50.5 billion in 2013, 51.9 billion in 2015 and 57.2 billion in 2016. The smoking rate was also rising, from 13.5% in 2012 to 14% in 2013, 14.4% in 2014, 14.6% in 2015 and 14.9% in 2016.

KT&G’s sales in Iran rose from 900 million won ($804,289) in 2016 to 3.5 billion won last year, Financial Tribune reported.

In the first half of this year, however, sales slackened to 1 billion won, according to the officials.

“Cigarettes are not part of the first set of US sanctions against Iran,” the company said. “We will continue to strengthen our monitoring of the situation as it develops.”

Officials said that the given uncertainties are clouding business prospects for the second half and the company is trying to make up for the conditions by making marketing investments and launching new products.

“There have been examples in the Middle East and the Commonwealth of Independent States where (cigarette) sales dropped due to a spike in the exchange rate but soon were normalized after the uncertainties were lifted,” an official said.