South Korea - Tobacco Reporter

Outdoor Smoking Bans Constitutional

South Korea’s law designating public facilities, including crowded outdoor plazas, as nonsmoking areas is constitutional, according to the Constitutional Court.

In an April 25 ruling, reported by the Korea JoongAng Daily, the court held that the National Health Promotion Act, which requires all public facilities, including outdoor spaces, to be designated as nonsmoking areas, does not violate the Constitution.

Article 9 of the National Health Promotion Act designates public facilities that are 1,000 square meters or more as nonsmoking areas.

The law was challenged after a smoker fined for lighting up outside of the Bexco convention center in Busan filed a legal case arguing that it was excessive to designate such open areas as nonsmoking areas.

The case eventually made its way to the Constitutional Court, which held that even public outdoor areas can’t be considered completely free from the risk of secondhand smoke, noting that it is difficult to completely block cigarette smoke even if there are separate nonsmoking and smoking areas.

The court noted that the need to protect people who do not want to breathe in secondhand smoke is greater than the need to guarantee smokers’ freedom to smoke.

May 6, 2024

KT&G Sued

A former KT&G Corp researcher has filed a lawsuit against his former employer claiming that he was insufficiently compensated for inventing “the world’s first e-cigarette” while working at the firm, reports the Yonhap News Agency.

Kwak Dae-geun demands KRW2.8 trillion ($2 billion), reportedly the highest amount ever claimed by an individual in a South Korean legal action

According to the suit, Kwak joined the Korea Ginseng and Tobacco Research Institute in 1991 and began developing a tobacco-heating product in 2005.

In July that year, he registered his first patent for a prototype. In December 2006, he registered another patent for an upgraded version with a controllable heater.

Subsequently, he developed a full e-cigarette set, and registered a patent for part of the device in 2007 before leaving the company in 2010 as part of corporate restructuring.

After Kwak’s departure, KT&G allegedly registered patents for some of his technologies without recognizing his contributions.

In addition to his claim about compensation, Kwak contends that a prominent rival global tobacco firm was able to commercialize its internal heating-based e-cigarette model in South Korea in 2017 due to the absence of overseas patents.

Kwak’s requested damages reflects his portion of the revenue KT&G is expected to generate through Kwak’s patented technology during the 20-year patent term, as well as what KT&G would have earned if it had registered patents overseas.

KT&G counters that it has properly rewarded Kwan in the form of offering a technology advisory deal, and that Kwak had agreed not to raise any legal issues.

The firm also said the technologies invented by Kwak are not currently used in the products it is selling.

The e-cigarettes being sold by the global firm in question, meanwhile, did not involve technologies patented by Kwak, according to KT&G, which also noted that the rival firm had already commercialized early-model heated tobacco-type products in 1998.

April 24, 2024

New KT&G CEO Engages Employees

Three weeks after his inauguration, KT&G’s newly appointed president, Bang Kyung-man, engaged in a casual meetings with employees to demonstrate his commitment to robust communication.

The event was held on the 20th floor of KT&G’s Seoul headquarters, and attended by about 20 employees from various jobs and ranks.

Bang shared his personal growth story, from joining KT&G as a new recruit in 1998 to taking on the role of CEO 27 years later. In addition to sharing his insights as a company senior, he sought employees’ opinions on the company’s mid- to long-term vision and growth strategies.

Following his appointment as CEO on March 28, Bang immediately visited KT&G’s Chungnam Headquarters and Seo Daejeon Branch, emphasizing communication with the sales team on the ground.

“This event was organized to reflect the management’s desire to communicate freely with team members, breaking away from traditional formats and fostering consensus on the company’s vision,” KT&G wrote on its website. “We will continue to promote a culture of bidirectional communication among staff to develop a more horizontal and flexible organizational culture.”

April 19, 2024

KT&G Volunteers Assist With Transplanting

KT&G volunteers transplanted tobacco seedlings to help tobacco farmers who are struggling with labor shortages.

The volunteer team consisted of 36 members from the SCM Headquarters Raw Material Business Division and the Gimcheon Factory. They visited a tobacco farm in Jangan-myeon, Boeun-gun, Chungcheongbuk-do, and transplanted about 32,000 tobacco seedlings across approximately 15,000 square meters of farmland.

KT&G workers have volunteered on tobacco farms for 18 years not only helping with seedling transplantation but also supporting tobacco leaf harvesting activities during the summer, which require intensive labor in hot weather.

“KT&G has been engaging in activities that provide practical help to farmers for a long time,” said KT&G’s SCM Division Head Jeong-ho Kim in a statement. “We will continue to make efforts to grow together with the farming community and the local society.”

Additionally, KT&G has been supporting welfare improvement projects for domestic tobacco farmers. In June last year, KT&G paid KRW520 million ($372,949) for tobacco farmers’ health checkups, children’s education fees and support for devices that reduce fuel for curing barns. Since 2013, the cumulative support amount has reached approximately KRW3.85 billion, benefiting a total of 13,050 farmers.

April 16, 2024

South Korea to ‘Refresh’ Graphic Warnings

In December 2024, South Korea will mandate new graphic health warnings on cigarette packs, reports mk.co.kr .

The new warning pictures and phrases, the fifth approved set under the National Health Promotion Act, will be applied Dec. 23, 2024, through Dec. 22, 2026. The fourth approved set of warnings expires on Dec. 22, 2024.

The new warnings replace two out of 10 types of pictures on cigarette packs, increasing the proportion of the disease depicted, and the phrase changes from a word to a sentence.

For e-cigarettes, the subject of the warning pictures will increase from one to two, but the warning phrases will remain the same.

“The fifth warning picture and phrase comprehensively considered the analysis of domestic and foreign policy studies, public surveys and opinions of related experts,” said Jeong Yeon-hee, head of the Health Promotion Division at the Ministry of Health and Welfare. “We set it as an effective plan to prevent smoking and induce smoking cessation by utilizing the purpose of introducing the cigarette pack health warning notation system.”

April 4, 2024

Top KT&G Shareholder Opposes CEO Nominee

KT&G’s biggest shareholder is opposing the nomination of Bang Kyung-man as the cigarette manufacturer’s new CEO, reports Yonhap News. The Industrial Bank of Korea (IBK), which owns about 8 percent of KT&G, cited falling profitability and dubious business practices during the nominee’s tenure as a board member.

On Feb. 22, KT&G’s CEO candidate recommendation committee selected Kyung-man Bang, senior executive vice president of KT&G, as the final CEO candidate, citing his performance on criteria such as management expertise, global acumen, strategic thinking skills, stakeholder communications and universal morality and ethical awareness.

KT&G shareholders are due to vote on the nomination during the company’s annual general meeting on March 28. The appointment would mark KT&G’s first leadership change in nine years.

IBK opposes Bang’s nomination because “KT&G’s operating profit has fallen more than 20 percent” since he was appointed as vice president of the cigarette maker, an IBK official was quoted as saying.

“Given a decision to secure friendly shares using its own stocks, the independence and fairness of the current board of directors are bound to be seriously questioned,” the official said.

In a regulatory filing dated March 12, IBK also made a shareholder proposal to improve KT&G’s governance by strengthening the expertise and independence of the board of directors.

KT&G has faced pressure recently to be more transparent in its CEO selection process. In a video published ahead of the South Korean tobacco firm’s annual general meeting, KT&G shareholder Flashlight Capital Partners highlighted what it considered the problems during previous CEO nominations.

In January, the incumbent CEO, Baek Bok-in, said he would not seek reappointment.

March 14, 2024

Song Young-jae to Lead BAT Korea

British American Tobacco has appointed Song Young-jae as its new country manager in Korea, reports The Korea Herald.

A marketing and finance expert, Song will be tasked with promoting BAT’s combustible products.

“Song is an expert in the global tobacco industry and the right person to spearhead the company’s future innovation,” a company official was quoted as saying.

A graduate from the London School of Economics and Political Science, Song started his career at the BAT headquarters in London in 2008. In 2010, Song moved to BAT’s Netherlands office, where he nurtured his specialty in marketing and finance.

Following a first stint at BAT’s Korean unit between 2014 and 2020, Song was appointed general director of the BAT-Vinataba joint venture in Vietnam.

“I feel heavy responsibility taking the country manager post at BAT Rothmans amid the rapidly changing market environment,” Song said. “I will introduce innovative and sustainable business strategies so that BAT Rothmans can lead the market in the future and solidify its status in the global tobacco industry.”

February 2, 2024

Korean Sales Fall for First Time in Years

South Korean cigarette sales fell in 2023 for the first time in four years, reports Yonhap News Agency, citing data from the finance ministry. Electronic cigarette demand, however, grew.

Last year, South Koreans purchased 3.61 billion cigarette packs, down 0.6 percent from 2022, the first on-year decrease since 2019’s 0.7 percent fall.

Sales of duty-free cigarettes increased 60.7 percent in 2023 in line with an increase in post-pandemic tourists.

Traditional cigarette sales fell 2.8 percent, but heat-not-burn electronic cigarettes increased 12.6 percent.

Last year, electronic cigarettes accounted for 16.9 percent of total sales, an increase from 12.4 percent in 2021.

January 31, 2024

KT&G Starts CEO Search

KT&G Corp. has started the process for appointing its next CEO.

To secure a wide array of qualified candidates, the external CEO candidate pool will be drawn from a combination of open recruitment and search firm recommendations. The internal CEO candidate pool will include individuals who have participated in KT&G’s senior management training program, as well as the incumbent CEO, Beak Bok-in. The governance committee will impartially assess both the external and internal pools to establish the longlist for CEO candidates.

Then, the governance committee will institute an advisory panel comprised of external experts to bring an objective perspective into the process of selecting the shortlist for CEO candidates, thereby enhancing the impartiality of the process. KT&G plans to proactively identify and nurture both external and internal CEO candidates moving forward, under the guidance of the governance committee.

The eligibility criteria for candidates participating in the open recruitment for the CEO position include individuals with experience in the tobacco or consumer goods industry (manufacturing or distribution business) as a representative director, or in the profit/loss management of a business unit equivalent to a company’s representative director.

KT&G lists the following skill requirements:

in-depth understanding of the tobacco or consumer goods industry and management expertise, capability in driving new business initiatives and global expertise;
business intuition and strategic thinking skills responsive to environmental changes;
ability to communicate with and manage stakeholders;
universal morality and ethical awareness required of a CEO

Candidate application for the open recruitment will be accepted through registered mail or e-mail by Jan. 10, 2024. Details regarding the application will be available on the KT&G website from Dec. 28, 2023.

According to KT&G, the CEO appointment process will be conducted over approximately three months in a fair and transparent manner. The governance committee will finalize the shortlist for CEO candidates in late January by incorporating the impartial and objective opinions of the advisory panel composed of external experts, and recommend to the CEO candidate recommendation committee.

After conducting a systematic and in-depth review of the shortlisted candidates, the CEO candidate recommendation committee will name the final CEO candidate and report to the board of directors in late February. The board of directors will then resolve the agenda for the annual general meeting of shareholders, and the CEO will be appointed following the approval at the annual general meeting of shareholders in late March.

“We have been committed to improving our CEO appointment process, especially focusing on strengthening the transparency, impartiality and objectivity of the process,” said Lim Min-kyu, chairman of the KT&G board of directors.

“Moving forward, we plan to conduct a comprehensive candidate selection process, taking into account the assessment and perspectives of the advisory panel comprised of external experts.”

Earlier this month, KT&G shareholder Flashlight Capital Partners urged the tobacco company to select its next CEO in a more transparent manner, after expressing disappointment with the current CEO’s performance and identifying several shortcomings in the previous selection procedure.

In a press note announcing the new CEO search, KT&G stressed that its governance committee is composed exclusively of outside directors. The Dec. 28 board of directors meeting, it added, was attended only by outside directors, “reinforcing the company’s commitment to ensuring independent decisionmaking of the board.”

December 28, 2023

KT&G Recognized for Carbon Neutrality

KT&G’s Yeongju factory has been recognized by South Korea’s Ministry of Trade, Industry and Energy for its commitment to achieving carbon neutrality.

Since 2020, the Yeongju plant has actively engaged in reducing greenhouse gases through continuous investment in equipment and improvements in manufacturing processes, successfully cutting down 437 tons of oil equivalent over three years. Moreover, the plant participates in the energy saving technology information exchange program, contributing to greenhouse gas reduction policies and leading carbon reduction activities through ongoing education and promotional efforts.

In 2021, the Yeongju plant acquired ISO 50001 (energy management system) certification. Last year, the plant was selected as an exemplary site under the Korea Energy Agency’s voluntary energy efficiency goal program.

“KT&G aims to go beyond mere numerical improvements, linking our value chain to tackle climate change and lead in reducing greenhouse gases,” KT&G wrote in a statement. “We will continue to generate tangible ESG results and engage in diverse activities connected to sustainability.”

November 21, 2023

Tag: South Korea