December 2025: Philip Morris International – KT&G Partership Agreement is revised
KT&G announced that it revised the key contractual terms related to its 15-year long-term partnership with Philip Morris International (PMI). The first 3-year period (2023-25) of the agreement, with a minimum guaranteed sales quantity of 16 billion sticks (for exclusive use with lil heated tobacco device), has ended. For the next 3-year period (2026-28), the minimum guaranteed sales quantity is set as 11 billion sticks. At the time of signing the contract in 2023, KT&G projected an average annual growth rate of 20.6% in overseas next-generation product sales and 24.0% in stick sales over the next 15 years. Separately, through the revision, KT&G acquired (back) the overseas commercialization rights for various KT&G platforms, including the lil Hybrid series.
July 2024: Collaboration on US Regulatory Submissions
Philip Morris International (PMI) and KT&G signed a memorandum of understanding to collaborate on US regulatory submissions for KT&G’s heated tobacco products (“lil”). Following the announcement on January 30, 2023, of an agreement providing exclusive rights for PMI to commercialize KT&G’s smoke-free products in markets outside South Korea, this non-binding memorandum establishes the parties’ intent to collaborate on regulatory submissions for those new KT&G heat-not-burn products that PMI selects to commercialize in the USA. PMI aims to make different tiers of FDA-authorized heated-tobacco products available in the US market.
KT&G’s new platform products are expected to be launched first outside the U.S. Thereafter, the partners plan to work on a Pre-Market Tobacco Product Application (PMTA) submission for review by the US FDA, in accordance with the memorandum.
January 2023: Extension of the Global Distribution Agreement
KT&G’s lil has been the most successful contender to PMI’s IQOS so far and S. Korea is the only market where PMI lost its leadership in heated tobacco to a competitor. PMI Management acted swiftly and decisively on the “lil threat” and signed a deal with KT&G in Jan 2020 to distribute KT&G’s heated-tobacco and hybrid products outside of South Korea for an initial period of three years1.
In January 2023, PMI announced an agreement to extend and deepen collaboration with KT&G2
– Running for 15 years (to Jan 29, 2038)
– Performance-review cycles and volume commitments for each three-year period
– Commitment for the first 3-year period equivalent to 16Bn consumables.
KT&G Executives made multiple public statements on this partnership to re-assure the activist KT&G investors – underlining that $25Bn in total sales is aimed over the next 15 years via the PMI partnership. Nevertheless, Flashlight Capital (an activist shareholder) recently released an official statement3 on its court injunctions against KT&G filed on October 6, 2023. Among other points (i.e. export business profitability and consulting fees), these injunctions seek the disclosure of information related to the global distribution agreement with PMI. Flashlight Capital questions KT&G reliance on a competitor in a vital growth category and the absence of transparency surrounding the agreement’s terms & potential risks.
KT&G cited the confidentiality clauses as the reason for not disclosing the KPIs for its heated tobacco exports to PMI.
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