1. Korea’s HNB Regulatory Environment: Growth Under Strict Tobacco Control
In South Korea, the Ministry of Health and Welfare regulates heated tobacco products, and the relevant laws and regulations include the National Health Promotion Act, the Tobacco Business Act, the Youth Protection Act, and related tax laws. According to the Tobacco Act, e-cigarettes containing nicotine are classified as tobacco. Regarding the regulation of heated tobacco products in South Korea, there are no channel restrictions at the retail level, but promotional activities and free distribution are prohibited; advertising is required to include clear warning images and slogans; and smoking is completely prohibited in restaurants. In terms of taxation, the South Korean parliament is discussing raising the tax rate for e-cigarettes (including heated tobacco products) to the standard for traditional cigarettes.
2. Korea Tobacco Market Trends: Combustibles Decline, HNB Drives Growth
The South Korean tobacco product market has experienced fluctuating growth, steadily increasing from US$14.675 billion to US$15.884 billion between 2019 and 2021, with an average annual growth rate of approximately 4.0%, primarily driven by the increasing penetration rate of heated tobacco products (HNB). From 2022 to 2023, the market contracted continuously due to the consumption tax increase and macroeconomic pressures, declining to US$13.088 billion in 2023. In 2024, the market size slightly recovered to US$13.13 billion, an increase of 0.32%. Overall, although the penetration rate of HNB products has increased year by year, it has not yet fully offset the overall decline in market size caused by the decrease in demand for traditional cigarettes. Future growth will depend more on the expansion of high-value-added products and the development of overseas markets.
The South Korean tobacco product market structure shows a trend of declining share for traditional cigarettes and steady growth for heated tobacco products (HNB). Between 2019 and 2024, the share of traditional combustible tobacco products decreased from 87.82% to 78.80%, an average annual decrease of approximately 1.8 percentage points; while the market share of HNB products increased from 10.85% to 20.13%, with a significant increase from 2022 to 2024, accumulating to over 4 percentage points, becoming the main driver of this structural change. In contrast, the share of e-cigarettes and smokeless tobacco products remained at a low level (below 2%), having a relatively limited impact on the market structure. Influenced by a combination of factors, including consumer awareness of harm reduction, tax policies, and the regulatory environment, the market share of HNB products is expected to continue to increase in the future.
3. Korea HNB Sales: A High-Growth Five-Year Window
Overall Sales Revenue of Heated Tobacco Products (HNB) in South Korea The South Korean heated tobacco product (HNB) market has experienced continuous growth, increasing from US$1.593 billion in 2019 to US$2.643 billion in 2024, with an overall average annual growth rate of approximately 8.8%. Growth was relatively stable from 2019 to 2020, with an average annual growth rate of 5.05%; the growth accelerated from 2021 onwards, reaching an average annual growth rate of 10.7% between 2021 and 2024, reflecting a significant increase in HNB penetration. This growth trend is attributed to supportive tax policies, the establishment of a dominant position for domestic brands (such as the KT&G Lil series), and continuous upgrades in equipment technology. In the future, as the marginal growth from increased penetration slows, industry growth will increasingly rely on the synergistic advancement of high-end tobacco cartridge optimization and overseas market expansion.
4. Sticks Dominate Revenue: Share Rises to 90.31%
From a structural perspective, the South Korean heated tobacco products (HNB) market is centered around tobacco sticks, with the sales share of devices gradually shrinking. From 2019 to 2024, the sales share of tobacco sticks increased from 86.86% to 90.31%, an average annual increase of approximately 0.69 percentage points, indicating a continued strengthening of their revenue contribution as a high-frequency consumable. During the same period, the share of devices (smoking accessories) decreased from 13.14% to 9.69%, and has remained stable in the 8% to 10% range since 2021, reflecting the structural solidification of the market after entering a relatively mature stage. This structural change is influenced by the strategy of local brands (such as KT&G Lil series) to expand their market with high-value tobacco sticks. In the future, as the market approaches saturation, device sales are unlikely to see a significant rebound, and growth will be driven more by the added value of high-end tobacco cartridge products and expansion into overseas markets.
5. Sales Volume: Device Rebound & Strong Stick Growth
The South Korean heated tobacco device market has experienced phased fluctuations followed by a gradual recovery. Sales declined from 2.5 million units in 2019 to 2.1 million units in 2021, with two consecutive years of negative growth reflecting the adjustment pressure during the early market penetration phase. Since 2022, sales have returned to a growth trajectory, increasing by 19.05% in 2022, rising 32% year-on-year to 3.3 million units in 2023, and further increasing to 3.8 million units in 2024, a 15.15% increase and a record high. This sales rebound is mainly attributed to technological upgrades (such as new induction heating models) and product updates from both domestic and international brands, enhancing users' motivation to replace their devices. Compared to other major markets, South Korea has a relatively high sales share of heated tobacco devices, reflecting more frequent device replacement behavior among consumers. As overall market penetration gradually increases, future sales growth is expected to stabilize.
The South Korean heated tobacco product market continues its growth trend. Product sales increased from 7.159 billion units in 2019 to 13.282 billion units in 2024. The growth rate gradually increased from 6.68% to 20.12% between 2020 and 2022, reflecting accelerated market penetration. From 2023 onwards, the growth rate stabilized but remained at a relatively high level of over 10%. This growth was mainly driven by domestic brands (KT&G's market share is close to 50%), increased device ownership (3.8 million units in 2024), and high user consumption frequency. Currently, South Korean users consume an average of approximately 350 products per year, significantly higher than the global average. It is projected that the overall growth rate of heated tobacco product sales in South Korea will slow to 5%-8% in the future, but high-value-added products (such as KT&G's FIT series) are expected to continue to support industry sales growth.
6. Brand Landscape: A Structural Shift Toward Local Leadership
The South Korean heated tobacco products (HNB) market is showing a shift in brand landscape, moving from foreign brands to domestic brands. KT&G's MIIX brand rapidly increased its market share from 29.6% in 2023 to 41.6% in 2024, becoming the brand with the highest market share. During the same period, Philip Morris International's (PMI) TEREA brand saw its share rise from 29.6% to 31.7%. Traditional products HEETS (PMI) and Fiit (KT&G) gradually withdrew from the mainstream market, driven by new induction heating equipment, with their market shares declining to 15.0% and 0.5% respectively in 2024. Overall, KT&G's combined market share reached 47.2% in 2024, slightly higher than Philip Morris's 46.7%, demonstrating that South Korean domestic brands have achieved leadership through technological upgrades, localized flavors, and product compatibility strategies. Future market competition will focus on equipment system ecosystems, user loyalty, and continuous innovation in high-end products, and the market share gap between brands still has room for change.
