[Intl-tobacco] Korea: BAT Takes Risks To Generate New Business Opportunities (Oct article)

[Robert Weissman]

17 October 2001
Korea Times
BAT Takes Risks To Generate New Business Opportunities
By Seo Jee-yeon
Staff Reporter

John Taylor, 47, president of British America Tobacco (BAT) Korea, who said
he loves the smell of fallen leaves being burned in the fall, is more
passionate than ever this autumn.

His inspiration is due mainly to the new construction of a BAT cigarette
processing plant in Sachon, Kyongsang-namdo, in the middle of beautiful
scenery.

BAT, the maker of ``Dunhill'' cigarettes, announced last August that the
company had plans to build a manufacturing plant here. The announcement came
shortly after the liberalization of the domestic tobacco manufacturing
market, which had been monopolized by the Korea Tobacco and Ginseng Corp.

BAT has become not only the first foreign tobacco company, but also the
first private entity to announce a plan to manufacture cigarettes in Korea.

BAT decided to begin local production because the Korean government imposed
import tariffs on foreign cigarettes in return for liberalizing the local
tobacco production market.

Taylor said he hoped that, through local production, the company would
maintain its current position as the fastest growing tobacco company in
Korea, and that ``Dunhill'' would remain the most popular foreign brand.

``The project is taking longer than expected because it is the first time
for the government to deal with a private company's tobacco manufacturing
plant, but the project has been moving steadily and we will have a
groundbreaking ceremony on Nov. 20 in Sachon,'' he said in an enthusiastic
voice.

Taylor is known for making various efforts enabling foreign businesspersons
to understand Koreans, Korean culture and the local market environment. The
reason why he focuses on understanding the local culture is partly because
his is a sensitive business, based on cultural understanding and the
sentiment of the people. Secondly, his sales-oriented mindset pushes him to
keep moving forward in the market.

In 1988, when South Korea, the 7th largest cigarette market in the world,
suffered from a foreign currency crisis, Taylor, who was then the head of
the company branch in the Philippines, was named the president of BAT Korea.

With revenue on a 70 percent downward spiral compared to the level before
the financial turmoil, Taylor assumed the task of reinforcing the company's
position in the local market. He recollects that he couldn't stop chain-
smoking because of the heavily workload in those days.

When he came to this country, Taylor started conducting market research on
smoking-related behavior of Koreans.

``In the United States and other countries, statistics suggest that the
majority of people start smoking because it looks good, romantic or
masculine. However, we found that many Koreans tend to smoke to escape from
some burden caused by stress, regardless of age and sex,'' he said.

He went on to state that, ``Frequently, being Korean seems to be stressful,
but I also believe the Korean spirit will lead to the nation's economic
recovery, and that Korean consumers will return to global brands of
cigarettes.''

Withing two years, as a result of his aggressive sales and marketing drives,
one of BAT's main brands, ``Dunhill Lights,'' achieved a tenfold growth in
revenue.

The average sales of BAT Korea have increased by 150 percent in the past two
years, recording the highest growth in the tobacco industry. Also, ``Dunhill
Lights'' was the highest-selling brand of foreign cigarettes in July.

According to the company, BAT, the world's second largest cigarette
producer, sold a total of 393.1 million packs as of last July, picking up
31.9 percent of foreign cigarette sales and 4.8 percent of the overall
market.

357.1 million packs of Dunhill Lights were sold during that month, a
sizeable increase from 114.2 million packs a year ago, and considerably more
than the 294.1 million packs of Mild Seven and 148.7 million packs of
Marlboro.

``Yet, the goal of BAT is not just confined to expanding the market share.

The ultimate goal is set to make customers choose BAT brands rather than
those of our competitors,'' Taylor stressed.

During the Chosuk holidays, Taylor was excited about another new challenge
for the fall: making Korean rice cakes.

``Over the next 10 years, will BAT invest a total of 1,400 billion won
locally, including 100 billion won on the Sachon plant,'' he said.

The plant will initially have the capacity to produce 400 million packs a
year, which is 8 percent of the Korean market. It will have the
potential to
expand production to 1 billion packs, which would be a whopping 20 percent
of the market. The operation of the plant will create jobs for about 1,000
workers.

Under the current global situation, world tobacco producers, including BAT,
are fighting to increase their shares of the market. Korea became
highlighted in the industry after BAT unveiled its investment plan.

Taylor was confident, saying, ``We will strive to launch a new brand in the
near future, as well as produce ``Dunhill'' in Korea.''

jyseo@koreaitmes.co.kr