Three key trends force tobacco companies to continuously re-assess and optimize their manufacturing footprint:
(1) Cost savings: Transferring labor intensive operations to lower-cost countries within a certain geography
(2) Geographical re-balancing: Fast-declining cigarette volume in the Western markets vs. Stable (even, increasing) cigarette volume in the emerging markets (especially, in East & Southeast Asia)
(3) Product mix re-balancing: Transformation from cigarettes to RRP/NGPs
The recent developments on KT&G’s manufacturing footprint:
October 2026: KT&G Launches Full-Scale Operations at New Indonesia Factory, Completing 5-Country Global Production Network
KT&G has officially commenced full-scale operations at its newly constructed manufacturing plant in Pasuruan, East Java, completing the establishment of a five-country global production network. The completion of the facility marks a key milestone in the company’s multi-trillion-won international expansion strategy, positioning Indonesia alongside South Korea, Russia, Kazakhstan, and Turkey as a central pillar of its global supply chain.
The new plant houses nine cigarette manufacturing lines capable of producing up to 21 billion sticks annually. Combined with KT&G’s existing Indonesian facility, which has an annual capacity of 14 billion sticks, total production output in the country will reach up to 35 billion sticks per year. This expansion solidifies Indonesia as KT&G’s largest manufacturing hub outside South Korea.
KT&G entered the Indonesian market in 2011 through a local acquisition and currently holds the fourth-largest market share nationwide, led by brands such as ESSE and JUARA. Beyond supplying the domestic market, the new Pasuruan plant will function as a central export hub, distributing products across the Asia-Pacific region and to additional international markets, including Taiwan, Mongolia, India, and Nigeria.
The facility launch represents the culmination of KT&G’s ₩2.4 trillion (US$1.8 billion) global capital expenditure program launched in early 2023, following the opening of a plant in Kazakhstan in April 2025. With overseas hubs operating in Indonesia, Russia, Kazakhstan, and Turkey, KT&G’s combined international capacity will reach 65 billion sticks annually. The company projects that overseas production will account for more than 60% of its total global output by 2028.
The inauguration of the Indonesian plant completes the company’s overseas investment phase and establishes a manufacturing framework intended to drive long-term global growth. The integration of domestic and international facilities is structured to maximize profitability, strengthen international competitiveness, and enhance overall corporate value. With the major capital expenditure cycle concluding, the company plans to focus its financial stability on shareholder returns, including share buybacks, stock cancellations, and dividend payouts.
April 2025: KT&G inaugurates its fourth overseas factory in Kazakhstan
KT&G completed the construction of its fourth overseas plant in the village of Kokozek, Karasai district, Almaty in Kazakhstan, as part of its global expansion strategy. The Kazakhstan facility, with an annual capacity of 4.5 billion sticks, will serve as a production hub for exports to the Eurasian region, including the Commonwealth of Independent States (CIS), and currently employs 130 people. The number of personnel will be increased over time.
KT&G’s $135 million investment in Kazakhstan factory is part of the drive to earn half of the total revenue from overseas by 2027. KT&G aims to achieve sales of ₩10 trillion (US$7 billion) by 2027, up from ₩5.9 trillion in 2024. To meet the target, KT&G recently expanded its production capacity in Turkey and is building a second plant in Indonesia, which is expected to begin operations in 2026.
KT&G currently operates seven tobacco manufacturing plants: three in South Korea and four overseas (Russia, Kazakhstan, Turkey and Indonesia).
January 2025: KT&G expands the production capacity at Turkish plant
KT&G announced the completion of production capacity expansion in Turkey to meet the growing demand in North Africa and Latin America. The expansion started in April 2024 and added two new production facilities to the factory, increasing its total ground area by 1.5 times to 25,000 square meters and effectively doubling the production capacity. With the expansion, the four facilities can now produce up to 12 billion cigarettes annually. KT&G established the Turkish factory in Tire, Izmir as its first overseas manufacturing plant in 2008. KT&G is also making major investments in Indonesia and Kazakhstan to expand its manufacturing footprint overseas1.
April 2024: KT&G is building two new factories in Indonesia
The groundbreaking ceremony for KT&G’s second and third Indonesian factories took place in Surabaya, East Java Province. These two new facilities will span 190,000m2 and are set to commence operations in February 2026, adding a combined production capacity of 21 billion sticks per year. KT&G plans to make Indonesia its largest global production base by expanding the total annual production capacity in Indonesia to 35 billion sticks (three facilities combined). Leveraging its increased production capacity, KT&G aims strategically foster Indonesia as its biggest global production base for export products and driving the expansion of export business in Asia Pacific and the Middle East.
KT&G is taking on a multi-dimensional growth drive. In Oct 2023, KT&G held a groundbreaking ceremony for a new manufacturing plant in Almaty, Kazakhstan to supply the Eurasian region. In Nov 2023, KT&G expanded the domestic NGP production capacity at the Daejeon, Korea factory. Moreover, KT&G recently separated the Asia Pacific Region and the Eurasia Region from the HQ as standalone business entities to accelerate global market expansion.
November 2023: KT&G eveals an aggressive manufacturing footprint expansion plan
With the ambition to become the 4th largest global tobacco tobacco (by volume), KT&G reveals an aggressive manufacturing footprint expansion plan. KT&G sold ~82Bn sticks in the first 9 months of 2023 and its FY23 sales volume is likely to be around 110Bn sticks. Meanwhile, the 4th placed, Imperial Brands sold 198Bn in FY23 – still a large gap for KT&G to close. However, Imperial reported -7% volume decline (excluding Russia exit) year-on-year basis in FY23 while KT’s volume is growing around +7% per annum. If the current trends broadly prevail, KT&G is set to become the 4th largest global tobacco company by 2028 (and, in any case, by the end of this decade).
KT&G’s manufacturing capacity expansion plans have two pillars: NGP/RRPs and Combustibles. In the 2023-27 period, KT&G projects its heated tobacco volume to grow by 30% per annum – mostly, thanks to its global partnership with PMI. In 2024, KT&G will expand its production base in Korea. In 2025, they will inaugurate a new factory in Kazakhstan (- see the “October 2023” notes below). KT&G is also planning to set up a manufacturing hub in Eastern Europe at a later stage. As a result of these investments, KT&G will increase its manufacturing capacity to 4.3x folds and be able to produce almost half of its heated tobacco volume outside Korea by 2027.
Currently, KT&G manufactures 84% of its combustible (cigarette) volume in Korea (versus a 45% weight in sales volume). In order to move the production closer to the consumption, KT&G will firstly expand its operations in Turkey – as a manufacturing base for Africa & Latin America. At a later stage, KT&G is planning to establish a cigarette manufacturing base in Indonesia for the ASEAN region and in Kazakhstan for the Eurasian region. As a result of these investments, KT&G will increase its manufacturing capacity by 30% and be able to produce 50% of its cigarette volume outside Korea by 2027. Moreover, manufacturing in Indonesia (the main international growth market for KT&G) will reduce the unit cost by 20% (compared to Korea).
October 2023: KT&G is building a new factory in Kazakhstan
KT&G breaks ground for a new ~200,000m2 factory in Almaty, Kazakhstan2. The site will function as a “hybrid production facility” manufacturing both RRP/NGP consumables and cigarettes for the Europe & CIS region. In January 2023, KT&G also established local sales and manufacturing subsidiaries in Kazakhstan.
September 2023: KT&G announces the plan to build a new manufacturing plant in Indonesia
KT&G plans to a build a second manufacturing plant in Indonesia3, aiming to start operations in 2026. The new Indonesian plant will serve as the Southeast Asian manufacturing base for exports. KT&G currently has three factories, outside South Korea, with a combined capacity of 13.6Bn sticks a year: Russia, Turkey and (Surabaya) Indonesia.
KT&G sold 5.9Bn sticks in Indonesia in H1 2023. KT&G’s Indonesian volume grew 180% over the past two years (H1 2023 vs. H1 2021) and now has 22% weight in total cigarette sales, outside South Korea.
