Tobacco giant Altria is teaming up with Korea’s biggest tobacco firm to look into ways to boost both firms’ oral tobacco businesses — including the fast-growing “on!” nicotine pouches made at Altria’s Richmond cigarette plant.
The agreement with KT&G Corp, formerly known as Korea Tobacco and Ginseng, marks a second major move into international markets for Henrico County-based Altria after its agreement in March to make cigarettes for KT&G at its Philip Morris USA cigarette plant in South Richmond.
Altria said the agreement includes joining forces to boost sales of ginseng in the United States. Ginseng is the root of a group of plants that has been used in traditional Chinese and Korean medicine for centuries. Collecting it has been a modest source of cash in Appalachia, and some Americans have used it for wellness regimens.
In addition, Altria agreed to take a stake in a Swedish tobacco firm that KT&G is acquiring. The firm, Another Snus Factory Stockholm AB, makes snus, powdered tobacco in a pouch that users place under a lip. Its LOOP brand is sold around the world. Altria does not currently have a snus product.
Altria said it and KT&G will explore ways to collaborate to expand global demand for nicotine pouch products.
These efforts may include the expansion of Altria’s “on!” and “on! PLUS” product line to select countries, Altria said.
It could also include what Altria described as “strategic transactions” involving oral tobacco — corporate jargon for acquisitions or purchases of major interests in firms.
Altria’s “on!” products are the fastest-growing part of its line of tobacco products. They are pouches made of a specially developed textile that contain tobacco-derived nicotine.
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While shipments of its top-selling, Richmond-made Marlboro cigarettes fell 12.3% in the first half of the year, with its two century-old Copenhagen brand snuff dropping 8.6%, Skoal snuff falling 11.6% and chewing tobacco by 6.5%, shipments of on! rose 22.7%.
“As U.S. cigarette volume continues to decline, we’re seeking opportunities to develop internal capabilities needed for competing internationally,” Altria spokeswoman Dena Potter said.
Altria and KT&G also have agreed to jointly pursue ways to optimize operating processes for traditional tobacco products to benefit the competitiveness of each company in their respective home regions.
“We believe the complementary market experience and capabilities of our two companies can accelerate the pursuit of our long-term adjacent growth goals across international regions and adjacent product categories,” said Billy Gifford, Altria’s chief executive officer.
KT&G CEO Kyung-man Bang said the agreement “secured a path to growth in next-generation tobacco products by expanding our business from cigarettes to nicotine pouches and other areas.”
KT&G is one of the five biggest tobacco companies in the world. It exports its “ESSE” and other brands to 140 countries and has so far focused on growing by expanding global sales of cigarettes and heated tobacco products. It has also been expanding its Korean and international health foods business with emphasis on its premium red ginseng brand, Jung Kwan Jang.
Altria, too, has plans with heated tobacco, through a joint venture with Japan Tobacco that would market Japan Tobacco’s Ploom heating devices with Marlboro-blended tobacco sticks. Altria has said having a lineup of smokeless products that range from its NJOY vaping products, heated tobacco sticks, to snuff and on! is aimed at offering a variety of ways to address smokers’ varied preferences and tastes when they decide to quit smoking.
Separately on Tuesday, KT&G told investors that it will target its double-digit growth for both operating profit and revenue this year, increased its dividend to stockholders by 10% and said it would liquidate non-core assets such as real estate to fund a share repurchase program beginning this week.