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Philip Morris To Cut Virginia Slims Brand Price In South Korea

04/13/2012 | 02:52pm US/Eastern

--Tobacco firm to trim price of Virginia Slims Superslims by 14% in South Korea as of April 23

--Philip Morris facing pressure from KT&G, the region's dominant player

--Price cut a setback for Philip Morris, which has shown a great ability to raise prices in various markets

 
   By John Kell 
   Of  
 

Philip Morris International Inc. (>> Philip Morris International Inc.) will cut the price of Virginia Slims Superslims cigarettes in South Korea, backtracking from a price increase enacted in February as the company faces pressure from competitor KT&G Corp. (033780.SE).

The tobacco company confirmed it would cut the price on Virginia Slims Superslims by 14% to 2,500 won ($2.21) per pack from KRW2,900, as of April 23. Prices of all other Philip Morris brands in South Korea will remain unchanged.

The price cut comes roughly two months after Philip Morris raised prices on Marlboro in South Korea by KRW200, to KRW2,700, and on Virginia Slims by KRW100. At the time, Philip Morris management conceded it was facing "ferocious" advertising by the region's dominant tobacco company, KT&G, which currently sells its Esse ultraslim brand at KRW2,500 per pack.

Strong demand in Asia has driven sales and earnings growth for Philip Morris, which makes brands such as Marlboro and L&M and derives all sales from outside the U.S. South Korea is a key market for the company as 2010 industry volume ranked above Italy, Germany and Spain, though below other Asian markets like Japan and the Philippines.

While the price decrease is a setback for Philip Morris, the company has shown a great ability to implement price increases in numerous markets it serves. In February, Philip Morris said about 70% of pricing actions taken in markets including Germany, Russia and Indonesia were included in the company's 2012 guidance.

Philip Morris in recent years has gained market share dramatically in South Korea, commanding 19.8% of the market at the end of 2011, far above 2006's level of 8.6%. While the region's total cigarette market dropped 0.6% last year to 90 billion units, Philip Morris's volume jumped 17% as Marlboro and Parliament gained share.

Shares of Philip Morris, which is due to report first-quarter earnings next week, were up 1.3% to $88.41 in recent trading Friday afternoon. The stock has gained 13% so far in 2012.

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

Stocks mentioned in the article : Philip Morris International Inc.
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