Smokers purchasing packs of Dunhill, Kent and Vogue will have to pay 200 won ($0.19) more than on Tuesday as two foreign Parliament cigarette companies, burdened by fixed prices in Korea, have raised or will raise their prices amid rising inflationary pressure.
The unexpected move has raised concerns over the effect on the nation’s already rising consumer prices.
Though the prices of other products have risen over the past nine years, cigarette prices have remained the same at 2,500 won per pack.
Since yesterday, the price of British American Tobacco cigarettes has gone up 8 percent to 2,700 won.
BAT holds the second largest market share in the Korean cigarette market, at 18 percent, which is estimated to be roughly 10 trillion won.
KT&G has the biggest market share, at 58 percent. Phillip Morris is third with a market share of 17 percent, followed by Japan Tobacco International, at 7 percent.
This is the first time since February 2002 that a tobacco manufacturer has raised prices on its own.
JTI joined BAT by announcing that it, too, will raise its prices to 2,700 won next month.
KT&G, Korea’s only cigarette manufacturer, said it currently has no plans to raise its cigarette prices.
The prices of cigarettes, as with other products sold over the counter, can be raised after the related regulations were changed in 2001.
Previously, a price hike on cigarettes had to be approved by the government but since July 2001 cigarette companies have only had to declare their intention to raise prices.
Manufacturers, however, claim they have had difficulty raising prices due to political and economic issues.
Politicians have been pushing to decrease cigarette prices for years in a bid to garner votes, especially with lower-income voters.
And with the government pledging to counter inflation, increasing prices without government support could lead to retaliatory actions such as tax probes or fair trade investigations.
In fact, higher cigarette prices could throw off the government’s strategy to curb inflation, which has already exceeded the 4-percent target.
Cigarette prices account for 1.08 percent of the consumer price index, which is more than the 0.11 percent for soju. With the recent price hike, the consumer price index is expected to grow 0.012 percentage points.
One Finance Ministry official did not hide his frustration at the price hike. “Compared to KT&G, which is obligated to use domestic tobacco, foreign brands, which import cheaper tobacco leaves, will have a much lower price burden,” the official claimed.
BAT says it had no choice but to raise its prices. “While the prices of other products have been rising over the years, cigarettes are the only products whose prices have been frozen for nine years,” a BAT official said. “For years we have been addressing the fixed price through cutbacks within the organization but our expenses, including labor costs, have recently shot up,” the official said. “We’ve tried but have reached the limi