State-owned Thailand Tobacco Monopoly (TTM) is laying out plans to retain the market lead as competition is expected to intensify with the influx of foreign brands after the Asean Economic Community takes shape at the end of next year.
Major cigarette companies now have plants in the region, said acting TTM managing director Daonoi Suttiniphapunt, including Japan Tobacco International which has a plant in Malaysia while Philip Morris has one in Indonesia.
To protect its market share, TTM needs to strengthen its dominance of the local market by launching new products and buying new machinery to improve the quality of its cigarettes, she said.
Since Thailand's market was deregulated, TTM's market share has fallen from more than 90% to 75%.
TTM plans to branch into the premium market either through expansion or joining forces with overseas manufacturers, said Ms Daonoi.
Thailand has quality tobacco leaves, planted in Tha Sala, Nakhon Si Thammarat.
As part of its expansion, TTM will initially focus on neighbouring countries, she said, adding that it is unclear whether it will use existing brands for business expansion.
Improving cigarette quality and packaging to attract buyers is essential for TTM entering new markets, and it could shoulder initial losses to reach targeted groups.
Ms Daonoi said Vietnam and Cambodia are two markets where Thai cigarettes have gained popularity.
A TTM study found that image and brand loyalty rather than flavour are key factors for overseas cigarette producers.
Plans for overseas expansion are expected to be finalised by the end of this month.
Ms Daonoi said TTM executives will push ahead with plans to transform it from a state enterprise to a private venture. The process is expected to be completed next year.
TTM forecasts 50 billion baht in revenue and a 6.7-billion net profit this fiscal year.
The expected net profit is below its target of 7 billion baht, as the recent political tension and the impact of enlarging the warning label have taken a toll on earnings.