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Bosston turned out a resounding success and is now available in a range of flavor profiles. Photo credit: Venus Tobacco Group
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Pragon supplements Venus Tobacco Groups’ successful Bosston brand. Photo credit: Venus Tobacco Group
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Zane Kang, manager of IKT’s business department. Photo credit: IKT
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Pointful Korea is available in a variety of blends and flavors, including the spearmint capsule “IceNova”. Photo credit: IKT
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IKT’s Pointful Korea brand has successfully carved out a niche for itself in heavily competed Asia. Photo credit: IKT
Though largely under the sway of the “Big Five” and various tobacco monopolies, East and Southeast Asia still has a fair scattering of independent cigarette companies.
The picture is quite similar across Southeast and East Asia: this enormous geographic area has been pretty much carved up among national tobacco monopolies and the five multinationals in various configurations. There exist exceptions, of course. For instance, while Indonesia is dominated by state-owned Sampoerna and its various subsidiaries, the country also hosts a multitude of privately-owned firms that either market their proprietary brands or act as OEM manufacturers, or both. But, looking a little deeper into the matter, one soon realizes that a scattering of companies have also developed in nations that do not immediately come to mind when thinking about independent cigarette manufacturing in that particular region.
The birth of Venus (not by Botticelli)
A good example is Malaysia, where the multinationals’ mainstream brands reign supreme. In addition, the country is not exactly noted for a burgeoning tobacco growing sector. And yet a small company by the name of Venus Tobacco Group is successfully challenging the status quo. Based in the capital Kuala Lumpur, it makes the popular Bosston and Pragon cigarette brands, which account for 95% of its annual production volume, the rest being OEM orders. “Our company’s journey began in 2015 as a cigarette merchant focused on selling high-end brands and a raw tobacco trader,” divulged Venus Tobacco’s director, Dato Sky. This early phase allowed the company to gain a deep understanding of the tobacco industry, products, and market dynamics.
“Over time, we identified an opportunity to leverage our expertise and resources to expand into actual cigarette manufacturing on our own, a transition that was a significant milestone for us,” Dato said. This strategic move also gave Venus Tobacco Group full control over the entire process from raw material sourcing to final product. The result was the creation of the Bosston brand, later followed by Pragon. “Today, we are proud to be a comprehensive tobacco company, with robust capabilities in both tobacco trading and cigarette manufacturing,” Dato said, but also reiterated that the firm’s “humble beginnings as a merchant have played a crucial role in shaping our growth and evolution.”
A story of personal ambition and drive
Venus Tobacco Group is operating its own manufacturing facility, which is “strategically located to ensure efficient distribution and access to high-quality raw materials.” But Dato also conceded that the firm “occasionally” utilizes third-party manufacturing under certain circumstances. This may occur when a temporary production capacity increase is required or when the company tests out new products or processes. Dato said he understood the surprise voiced by industry observers when they stumble across a company like Venus Tobacco Group in Malaysia. “It’s not something they expect. But actually, the inception of our company is, in many ways, a story of my personal ambition, drive, and the ability to identify and seize opportunities. The tobacco sector presented such an opportunity,” he confided. “Though Malaysia may not be a major tobacco producer herself, she is strategically located, making it a significant hub for trade and commerce in Southeast Asia.”
Standing up against overwhelming competition
The firm’s debut brand, Bosston, deploys “a unique cigarette formula developed by British experts” and it is designed “to cater to public consumption preferences while maintaining high quality,” according to Dato. Bosston is available in 5 blend and flavor varieties. Interestingly, besides from its native Malaysia, where it has garnered quite a consumer following, Bosston is also distributed in Vietnam and Indonesia. Following Bosston’s success, the company soon conceived a second brand, Pragon, which comes in full-flavored, mild, and menthol varieties. However, Pragon is currently exclusively marketed within Malaysia only. While Dato readily acknowledged that the region is “dominated by multinational corporations whose established brands have significant resources at their disposal and a strong brand presence,” he also asserted that his products have been able to stand up to that overwhelming competition “by focusing on quality and creating unique blends.”
Not the easiest market
That doesn’t mean that the Malaysian outfit enjoys nothing but smooth sailing all around. For one, there is regulatory compliance including a complete advertising ban, making Malaysia certainly not the easiest market. “Staying abreast of [frequent] changes in laws and regulations requires constant vigilance,” Dato said. Supply chain management poses a significant challenge too, especially since the company imports its raw materials from many source countries. “That requires careful coordination and planning to ensure steady availability of high-quality tobaccos for our manufacturing processes,” Dato pointed out. Lastly, there is the constantly evolving public perception of the tobacco industry in general as well as the health implications of tobacco use that is ceaselessly flogged by Malaysia’s health authorities and a rather zealous anti-tobacco lobby. But Dato had a viable resolution at hand: “We engage in responsible marketing practices and contribute to initiatives aimed at minimizing the adverse effects of tobacco use.”
Only launched recently: Pointful Korea
Let’s now move over to South Korea, where former state monopoly KT&G, now privatized and publicly listed, rather comfortably competes against its fellow multinationals. But there apparently is still some wriggle room left for smaller cigarette companies, too. An excellent example for that is Seoul-based IKT Company, Inc., a wholly-owned family business headed by its founder, Dae-Yoon Kang, who also acts as company president. IKT started out in 1998 with semi-cigar type flavored cigarettes. However, it is the latest offering, a regular “whitestick” brand named Pointful Korea that has quickly become the company’s marketing focus. Only launched in September of 2022, Pointful Korea has since already expanded its range from initially 1 to currently 4 varieties, including the spearmint capsule IceNova rolled out only in March 2023.
A “latecomer” well received at international exhibitions
Myeong-Woo Kang (a.k.a. Zane Kang), manager of IKT’s business department, gave himself perfectly aware that Pointful Korea was “a latecomer” in his home country’s mature market. “That is why we invested a considerable amount of time and effort to create unique selling points revolving around Pointful Korea’s rich aroma, its softness of inhalation, comparatively low pricing, and a thoroughly modern, trendy image,” he told Tobacco Asia.
Kang added that since the brand’s launch the company had participated in several exhibitions around the globe, including TFWA events in France, Bahrain, and Singapore, as well as last November’s WTME in Dubai. “At those exhibitions, we tested our products with visitors of various ages, nationalities, genders, and ethnicities and found that they resounded well with them,” Kang claimed. “Our super slim formats were particularly well received by the young generation while the king-size formats proved popular among heavy smokers over 27 years old.”
Combustibles will stay despite e-cigarette boom
The fact that especially younger people – in South Korea just as much as elsewhere - are increasingly flocking to vapes or heated tobacco products (HTPs) didn’t faze Kang’s colleague and director of IKT’s executive department, Dae-Young Jung. E-cigarettes, he conceded, posed an increasingly bigger stumbling block for regular cigarettes. “But I doubt that they will ever replace [combustible] cigarettes for good.”
Moreover, Jung said IKT disagreed with the popular opinion that e-cigarettes had any health benefits or advantages and that they could provide the same sensory satisfaction that smokers valued in combustibles. “No matter how popular e-cigarettes are among the younger generation, we strongly believe that there always will be people who consume cigarettes,” he said. “And even when [regular smokers] experiment with vapes or HTPs, a large proportion of them eventually will switch back to regular cigarettes at some point.”
Ship Ahoy!... a unique sales channel
IKT markets its Pointful Korea range through various channels, one of them being a quite intriguing option. First of all, the brand is presently available in regular retail in the Philippines, some of the Central Asian “-stans”, in Hong Kong, and Iraq.
In the two latter territories, Pointful Korea is also marketed in international airport duty free stores. But it is the “ship bonded” sales channel that is of particular interest – and it is utilized by IKT in its native Korea, Hong Kong, Singapore, Australia, and the US.
To explain: during port calls, large cruise ships will usually stock up on essential goods but also other merchandise – such as cigarettes – before departing for their next cruise leg. Because no local taxes are levied on these goods, they are considered “bonded”, i.e. they may only be distributed or sold once the vessel has actually left territorial waters. In a sense, “ship bonded” trading is thus quite reminiscent of travel retail in the international areas of airports.
Though as soon as the vessel re-enters any territorial waters, sales activity must cease. Upon mooring, passengers may import duty free cigarettes up to the maximum tax-free volume allowed by the local customs authority. Excess volume must be declared.
More Asia expansion before tackling US
“Ship bonded” merchandise aside, travel retail generally is regarded by IKT as “a very significant marketing channel for our brand,” according to Kang. “We are still new, so it is important to us to place Pointful Korea not only in local retail but also further develop travel retail in order to increase brand awareness among as many consumers as possible, including international travelers.” For the time being primarily aiming at pushing its market shares in Asia, the company also plans to focus more intensively on the Americas beyond the US.
However, until that can kick off on any larger scale, IKT is looking for local partners and distributors in its primary target markets of East Asia, Southeast Asia, the Middle East, and Central Asia. To handle the rapidly increasing demand for Pointful Korea, IKT is also eyeing a major capacity expansion of its production facility near Seoul. It all seems to pan out favorably for Pointful Korea, and is quite in line with its brand slogan, “Smooth Beginning & Sweet Ending”.
Southeast Asia’s Chinese Tobacco Industry Diaspora
With their home country’s monopoly maintaining a very firm grip on all matters concerning tobacco and making it rather difficult to import raw tobacco independently, increasingly more Chinese entrepreneurs are moving into Southeast Asian nations, where private business environments generally are more relaxed. In the Philippines, the Clark Freeport Zone near Angeles City is harboring several Chinese-owned cigarette manufacturers. Being located in the zone allows them to import raw materials tax-free and exempts them from Filipino tobacco and excise duties. The situation is quite similar in Cambodia’s Sihanoukville Special Economic Zone in the southwestern part of the country, numerous tobacco factories owned by Chinese businesspeople have established themselves. Thinly populated Laos has set up several special economic zones (SEZs) that apart from other industries have likewise attracted Chinese tobacco firms. In Indonesia, an SEZ industrial park on the island of Batam is beginning to turn into a sort of hub for Chinese companies producing heated tobacco products. Besides enjoying certain tax exemptions, the location also provides them easy access to local Indonesian tobacco.