By Timothy S. Donahue

Top Takeaways:

• Market leader: KT&G’s lil captured a 47.4% share of South Korea’s heated tobacco stick market in the first quarter, extending its domestic leadership.
• Growth engine: KT&G’s next-generation products business generated $640 million in 2025, and overseas sales continued to outpace domestic growth.
• Global expansion: The company now sells NGP products in 34 countries and increasingly complements its partnership with Philip Morris International.

KT&G is strengthening its position in South Korea’s heated tobacco market as its lil brand continues to gain share in one of the world’s most competitive heated tobacco markets.

According to company figures cited by South Korean financial media, lil held a 47.4% share of the domestic heated tobacco stick market in the first quarter, up 1.4 percentage points from a year earlier. The company also reported that approximately 70 million heated tobacco sticks were sold during the quarter.

The gains come as heated tobacco products continue to capture a larger share of South Korea’s tobacco market. Total cigarette sales declined 2.2% in 2024 to 3.53 billion packs, while heated tobacco sales rose 8.3% to 660 million packs. Heated tobacco products accounted for 18.4% of all tobacco sales in the country last year, reflecting the continued shift among adult consumers toward next-generation nicotine products.

KT&G entered the heated tobacco category after larger global competitors but has held the domestic market lead since the first quarter of 2022. The company’s position is particularly notable given South Korea’s status as one of the few major heated tobacco markets where a domestic manufacturer has consistently outperformed an international competitor.

The company’s broader next-generation products business has also become an increasingly important contributor to earnings. According to securities industry estimates based on KT&G’s financial disclosures, NGP revenue reached KRW 890.1 billion (US$603 million) last year, up from KRW 279.3 billion in 2020, reflecting an average annual growth rate of approximately 26% over the five-year period.

Domestic sales accounted for KRW 587.3 billion of NGP revenue, while overseas sales reached KRW 302.8 billion, underscoring the growing contribution of international markets.

KT&G said its NGP business now spans 34 countries, with international expansion supported by both its strategic partnership with Philip Morris International and its own overseas commercial operations. The company has increasingly combined PMI’s global distribution network with direct market development in regions where it already has established tobacco operations.

Product development remains central to KT&G’s strategy. The company currently offers three heated tobacco platforms—lil SOLID, lil HYBRID and lil AIBLE—designed to meet diverse consumer preferences. The newest, lil AIBLE 3.0, introduced in February, expanded to convenience stores nationwide in June, with improvements including faster heating and charging times.

KT&G has also continued to invest in research and development to support its product portfolio. The company reported filing 4,694 next-generation product patent applications from 2022 to 2024. As of the end of last year, KT&G held 16,751 registered intellectual property rights, including 12,929 overseas registrations, reflecting its focus on protecting its technologies as it expands internationally.

The company also operates in a changing regulatory environment. South Korea amended its Tobacco Business Act this year to broaden the legal definition of tobacco to include products containing tobacco or nicotine, bringing synthetic nicotine products under the country’s tobacco regulatory framework. Additional revisions to manufacturing requirements have placed greater emphasis on research and development capabilities, quality management and production capacity for tobacco manufacturers.

While Philip Morris International remains the global leader in heated tobacco through its IQOS platform, South Korea remains one of the few major markets where a domestic manufacturer has established and maintained market leadership.