KT&G Expands Global Production Network with New Indonesia Plant

Korean tobacco company KT&G is bolstering its global production network by opening a new manufacturing plant in Indonesia. This facility, situated in Pasuruan, East Java, was inaugurated on October 6 and will be capable of producing up to 21 billion cigarettes annually. When combined with the existing Indonesian plant, KT&G's total production capacity in the country will reach 35 billion cigarettes per year.

President and CEO Bang Kyung-man attended the opening ceremony, alongside Indonesian government officials and South Korea’s ambassador to Indonesia, Yoon Soon-gu. The new plant is strategically positioned to serve as a major hub for supplying both the Indonesian domestic market and international markets, including Taiwan, Mongolia, Nigeria, and India.

KT&G has been expanding its presence in Indonesia since 2011, following the acquisition of a local tobacco company. The company currently holds the fourth position in Indonesia's cigarette market and has increased its local manufacturing capabilities to meet rising demand. Construction of the new plant began in April 2024, followed by trial operations during the first half of this year.

The expansion aligns with KT&G's strategy to establish a geographically diversified overseas manufacturing system and strengthen its international production infrastructure. The company has invested approximately 2.4 trillion won in overseas production facilities as part of its global growth plan. In the future, KT&G aims to have its production facilities in Indonesia, Russia, Kazakhstan, and Turkey with a combined maximum capacity of around 65 billion cigarettes annually. The company targets an overseas production ratio of over 60% by 2028.

Industry observers believe that the expanded production footprint could provide KT&G with greater flexibility in responding to regional demand, reduce logistics costs, and minimize supply-chain dependence on individual manufacturing locations. This strategy reflects a broader trend among global tobacco companies, who are establishing production facilities closer to key consumer markets.

As the major overseas investment program enters its final phase, KT&G is focused on leveraging improved production efficiency and cash generation to boost shareholder returns, including share buybacks, cancellations, and dividend expansions. President Bang Kyung-man emphasized that the launch of the Indonesian plant marks a significant milestone in KT&G's transformation into a global company, as it establishes a crucial foundation for their global production network.