KT&G started exporting its e-cigarette heating devices to Russia last month in accordance with the company’s agreement with Philip Morris International (PMI) under which the two parties will work on promoting global marketing campaigns, according to the tobacco company, Thursday.

During a conference call upon the announcement of its second-quarter results, the company confirmed an analyst question that 12.5 billion won ($10.54 million) worth of e-cigarette devices were exported to Russia throughout last month. KT&G signed a pact for strategic collaboration with its rival PMI in January.

“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,” the company said during the call. The partnership is calling for KT&G to export its “lil” tobacco heating devices and tobacco sticks worldwide through PMI’s global sales network spanning 180 international markets, without specifying which markets the two companies will focus on.

Some questions have persisted over the progress of the deal so far, as no visible outcome has been achieved over the past six months since the agreement was made. However, as exports have now begun, KT&G’s effort to expand its e-cigarette presence is anticipated to pick up momentum.

The export came after heat-not-burn (HNB) tobacco products’ domestic market penetration rate declined for the second consecutive quarter. The rate stood at 13 percent at the end of last year, but declined to 12.6 percent in the first quarter and 12.4 percent in the second quarter. The company, however, said this does not mean a deadlock in HNB products’ growth, citing the expansion in overseas markets.

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

Apart from the e-cigarette business, KT&G said conventional tobacco sales this year will likely exceed its annual goal set earlier as demand remains strong. In exports, the firm has already secured shipping volume destined for Middle Eastern markets in the second half of the year, while other overseas markets are showing signs of recovery from the impact of COVID-19.

Separately, KT&G decided to acquire 2.5 million treasury shares worth 200.25 billion won to improve shareholder value. The company said it has no plans to retire those shares, but the buyback will have the same effect because it will not sell the shares back to market.

KT&G reported 1.32 trillion won in consolidated sales during the latest quarter, up 4.8 percent from a year earlier. But the operating profit contracted by 1.1 percent year-on-year to 394.7 billion won, due to the decline in duty free sales.

Of them, overseas tobacco sales increased by 14.1 percent to 286.4 billion won, as its main export markets in the Middle East show solid recovery. The company expected the growth trajectory will continue as its sales are growing in Latin South America and Africa.

Since the COVID 19 outbreak, the epidemic has had a sever impact on many industries around the world, and the development of the e-cigarette industry has also been in the haze.

90% of the world’s e-cigarettes are produced in China. Due to the blockade and quarantine policies, from late February to early March, many Chinese e-cigarette supply chain enterprises were unable to work normally, and workers were unable to return to work, thus it has led to a worldwide shortage of electronic cigarettes.

In late February, when the epidemic situation in China continued to improve, the epidemic situation in South Korea was in an emergency, and the outbreak growth rate was very fast.

Affected by the epidemic, we thought that the sales volume of the South Korean e-cigarette market would decline severely, but strangely, the South Korean e-cigarette market not only did not decline, but rose sharply!

According to the Tobacco Online report, the actual sales statistics from Korean convenience stores show that as of the end of February, the market share of e-cigarettes in the Korean tobacco retail industry reached 13.1%, and tobacco industry officials commented, “This is the highest record ever. “.

The official said, “Due to the spread of the new coronavirus infection, the increase in indoor smoking has led to an increase in e-cigarette sales. Because of the cold winter, e-cigarette sales have shown an increasing trend, but February sales compared with January increased sharply this year, which It’s a very rare thing. ”

The Korean tobacco industry predicts that the share of e-cigarettes will continue to increase in the future. The spread of cognition that “e-cigarettes are less harmful than ordinary cigarettes”, the advantages of not emitting odors, and the reduction of smoking places all boost the demand for e-cigarettes.

The South Korean government has told the outside world that its health regulators will speed up research to decide whether to ban the sale of e-cigarettes and have begun to advise people to stop using relevant e-cigarettes immediately.

At the same time, the South Korean government will speed up the research process to decide whether to ban such products completely, which may hit major producers such as Juul, the US e-cigarette giant, and KT & G, the local tobacco company.

To this end, South Korea’s minister of health, Park Neunghoo, also cited mysterious outbreaks of lung disease related to electronic cigarettes in the United States, saying that the current situation is considered a serious risk to public health. The minister said children, teenagers, pregnant women and people with lung disease should never use electronic cigarettes, and people who do not smoke should never use electronic cigarettes. The minister also said the government will speed up research to determine whether there is a scientific basis for banning the sale of nicotine-containing electronic cigarettes.

Recently, the safety of electronic cigarette has attracted wide attention in many countries. At present, there are many kinds of electronic cigarettes, among which liquid electronic cigarettes are the most important kind, with a longer history of development and more users, especially in Europe and America.

Following recent cases of lung disease or even death in the United States caused by the use of liquid electronic cigarettes by consumers, there have been cases of suspected lung disease caused by vapes in South Korea. The South Korean government said Tuesday it would speed up research to decide whether to ban the sale of liquid e-cigarettes in an all-round way, and suggested that people stop using related products immediately.

Park Ling Hok, South Korea’s health and wellbeing minister, said the product posed a serious threat to public health as a result of recent outbreaks of lung disease in the United States caused by the use of electronic cigarettes.

Park also said that relevant departments will complete a study on harmful substances in liquid electronic cigarettes in November, investigate the health risks caused by the use of the product, and decide whether to ban the sale of liquid electronic cigarettes in the first half of next year.

On the 14th of this month, South Korea’s disease management department received the first case of lung symptoms such as cough and dyspnea caused by suspected use of vapes. The patient has continued to use liquid electronic cigarettes for the past six months. At present, the patient’s condition has improved after treatment.

Since this year, the Korean government has proposed a number of measures to ban smoking. On the one hand, it has restricted the advertising of tobacco companies. On the other hand, it has stipulated that warning pictures and words of smoking hazards must be printed on electronic cigarette packages. At the same time, it has banned retailers from selling electronic cigarettes to minors. These measures are expected to be formally implemented from next year.

According to the report of Korea Bizwire, the latest Euromonitor International data show that in 2018, the market value of heat not burn product in Korea reached 1.67 billion US dollars, far exceeding the $453 million in 2017, making it the second largest HNB tobacco market in the world.

In 2018, the total size of the Korean tobacco market is 15.6 billion US dollars, and the growth is expected to be limited by 2023, but Euromonitor International said that the country’s heat not burn market is expected to grow by 21% annually and reach 4.4 billion US dollars by 2023.

“Within less than two years of the first launch of heat not burn products in South Korea, the country has become the second largest market in the world after Japan,” Euromonitor International said in its report, adding that South Koreans are familiar with the use of new device and enthusiastic about high-end technology, so the country can achieve better-than-expected growth.

In addition, Korea’s electronic cigarette market is expected to grow substantially, at the same time the market for heat not burn products is also growing rapidly.

Euromonitor International said that South Korea’s pod system market is expected to grow substantially, reaching $228 million in 2023, a larger growth than this year’s estimated $40 million.

Lee Oryoon, Euromonitor International analyst, said: “Korea is an emerging market for pod system products. After convenience stores begin selling e-cigarettes, the market is expected to grow at a surging rate. These products attract young consumers in particular.