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Tag: Indonesia

  • Industry Groups Push Back on Plain Packaging

    Industry Groups Push Back on Plain Packaging

    Photo: Taco Tuinstra

    More than 20 industry organizations signed a joint statement against Indonesia’s plans to require plain packaging for tobacco and vaping products, reports The Jakarta Post. The signatories included groups representing manufacturers, tobacco and clove farmers, labor unions, traders/retailers, creative industries, broadcasters and advertisers.

    Franky Sibarani, vice chairman of the Indonesian employers’ association Apindo, noted that, given the significance of the tobacco business in Indonesia, the regulatory pressures were likely be felt in other sectors as well. The tobacco industry, he pointed out, supports millions of jobs, including farmers, workers, traders and retailers, along with professionals working in the creative industry.

    “Policymakers should be cautious in issuing regulations that could threaten prolonged contractions,” said Sibarani.

    Henry Najoan, chairman of the Indonesian kretek cigarette manufacturers association Gappri, emphasized that the tobacco industry is not just a business but a significant economic and cultural chain.

    “The proposal for plain packaging […] will have serious impacts, as it exacerbates already excessive policies and could lead to a contraction in state revenue and employment,” he said. “Therefore, we firmly reject this regulation.”

    Benny Wachjudi, chairman of the Indonesian white cigarette producers association Gaprindo, highlighted the tobacco industry’s contributions to the national economy. The industry, he said, accounts for up to 10 percent, or more than IDR200 trillion ($12.99 billion), of Indonesia’s annual excise duty collections. Plain packaging, Wachjudi warned, would boost the illicit cigarette trade.

    Kusnasi Mudi, secretary-general of the National Tobacco Farmers Association, noted that tobacco cultivation alone supports 2.5 million livelihoods in Indonesia. “Tobacco is one of the national strategic commodities, but our existence is continually suppressed,” he said. “We request government protection for the 2.5 million farmers who are also struggling for their livelihoods and facing various other issues.”

    Tutum Rahanta, chairman of the advisory council of the Indonesian Retailers and Shopping Center Tenants Association, said that the plain packaging proposals are impractical for all parties involved. “This regulation seriously undermines the tobacco industry at a time when the sector, from upstream to downstream, has adhered to previous regulations,” he said. “The government should focus on combating illegal cigarettes rather than interfering with legal cigarettes that comply with the law.”

    Fabianus Bernadi, chairman of the Indonesian outdoor media association AMLI, said the proposed legislation would significantly impact his members’ economic viability. A recent survey suggested that in some regions, the organization’s companies derived up to 79 percent of their business from tobacco products.

  • ‘Excessive Tax Hike Could Spur Illicit Trade’

    ‘Excessive Tax Hike Could Spur Illicit Trade’

    Photo: Taco Tuinstra

    Indonesia’s above-inflation tax hike could fuel illicit trade and depress government revenue collections, according to Apindo, a leading employers association, reports Tempo.

    To discourage smoking, the government last year approved a 10 percent increase in excise taxes on cigarettes for 2023–2024.

    Despite the tax hike, the number of cigarette factories has increased significantly in Indonesia. Data from the Directorate General of Customs and Excise revealed a surge from 1,214 factories in early 2022 to 1,723 factories in June 2024.

    Meanwhile, Statistics Indonesia (BPS) reported a 28.62 percent smoking rate among Indonesians aged 15 and above in 2023. The largest number of smokers was reportedly in the 35–39 age group at 35.21 percent while the youth group (15–19 years) had a rate of 9.62 percent. The Health Ministry’s 2023 Indonesian Health Survey found 70 million active smokers, including 7.4 percent aged 10–18 years.

  • Indonesia Tightens Tobacco Rules

    Indonesia Tightens Tobacco Rules

    Photo: Taco Tuinstra

    Indonesia has tightened controls on tobacco sales and distribution, according to The Jakarta Post.

    The new rules prohibit sales of cigarettes and electronic cigarettes to people under 21 and pregnant women. They also ban cigarette and e-cigarette sales within 200 meters of an educational institution as well as on digital platforms that do not have an age verification system. Retailers are also barred from selling individual cigarettes, and all machine-rolled cigarettes must be sold in packs of 20 cigarettes.

    Observers have previously noted that selling individual cigarettes tends to attract younger consumers, largely because they are sold without packages carrying warning labels and cost less up front.

    With more than one-third of Indonesian adults (35.4 percent) smoking, Indonesia ranks among the world’s largest cigarette markets, according to the World Health Organization. And bucking the global trend, where tobacco use among individuals aged 15 years and above is projected to drop to 18.1 percent in 2023, tobacco prevalence in Indonesia is expected to increase to 38.7 percent in 2030.

  • Sampoerna Profit Dips

    Sampoerna Profit Dips

    Photo: Sampoerna

    Sampoerna sold 39.9 billion cigarettes in the first semester of 2024, 3 percent less than in the comparable 2023 semester. Net income increased 3 percent to IDR57.8 trillion, but net profit was down 11.6 percent to IDR 3.3 trillion.

    Sampoerna President Director Ivan Cahyadi cited a challenging operating environment. “Although economic growth is relatively stable, the purchasing power of adult consumers tends to weaken,” he said in a statement. “The challenges of the tobacco industry are also added by the pressure of double-digit excise rate increases far above the inflation rate, and the widening gap in excise rates between segments.”

    Rising taxes combined with declining consumer purchasing power has prompted many Indonesian smokers to shift to lower-taxed cigarettes or illicit offerings. According to Sampoerna, the “Below Volume Tier 1” segment has doubled since 2017 to claim 44 percent of the cigarette market.

    “Moving forward, we hope that the government continues to issue a multi-year tobacco excise policy based on clear economic parameters, like inflation rates, as well as considering adult consumers’ purchasing power, to create a conducive and sustainable business and investment climate combined with the continuous effort to combat illicit cigarettes,” said Cahyadi.

    “In addition, the government is also hoped to continue implementing policies that will support the continuity of the labor-intensive segment such as hand-rolled kretek cigarette (SKT) and halt the acceleration of downtrading to optimize government revenue from tobacco excise.”

    Cahyadi also emphasized the importance of a balanced excise policy based on risk profiles to support innovation in the tobacco industry.

    In 2023, Sampoerna invested more than $300 million in smoke-free products factory in Karawang, West Java.

    Earlier this year,  the company opened third-party operator factories in Jaten, Central Java and Dander, East Java.

    Throughout the first semester of 2024, Sampoerna employed, directly and indirectly, more than 90,000 people, of which around 90 percent are working in the labor-intensive SKT segment.

  • Indonesia Bans Single Stick Sales

    Indonesia Bans Single Stick Sales

    Photos: Taco Tuinstra

    Indonesia has banned the sale of individual cigarettes and raised the minimum purchase age to 21 from 18, reports Reuters. Its new rules also mandate restrictions on tobacco and e-cigarette marketing; large, pictorial warning labels on tobacco products; and bans on the sale of tobacco and e-cigarettes near schools and playgrounds. In addition, it includes new restrictions on social media sales.

    Single stick sales make cigarettes more accessible to vulnerable populations, according to health activists.

    The rules are intended to reduce smoking prevalence and prevent young people from taking up the habit. With 70 million smokers in a population of 270 million, Indonesia has one of the world’s highest smoking rates. The country also struggles with a high level of underage smoking. A 2023 survey revealed that 7.4 percent of smokers are between the ages of 10 to 18, with 15-19 being the age group with the most smokers.

    Health Minister Budi Gunadi Sadikin emphasized that the new rules represent a significant step forward in strengthening Indonesia’s health infrastructure.

    “We welcome the issuance of this regulation, which will serve as a foundation for us to jointly reform and build the health system down to the farthest corners of the country,” he was quoted as saying by Xinhua.

    The Campaign for Tobacco-Free Kids too welcomed the new rules. In a statement, the organization urged the Indonesian government to dramatically raising tobacco prices, simplify the tobacco tax system and ban smoking indoor public places.

    Henry Najoan of the cigarette factory association was quoted by news web site Kumparan as saying that the rules would destroy the tobacco industry.

    According to the Ministry of Industry, Indonesia’s cigarette industry employs 5.98 million people, including 4.28 million workers in the manufacturing and distribution sector, and 1.7 million in tobacco cultivation.

    Indonesia is one of the only countries in the world that has not signed the World Health Organization’s Framework Convention on Tobacco Control.  

  • Smoking Down, Vaping Up Among Minors

    Smoking Down, Vaping Up Among Minors

    Photo: Taco Tuinstra

    Smoking is down but vaping is up among Indonesian minors, reports The Jakarta Globe, citing a recent health survey.

    According to the Indonesian Health Survey (SKI), the prevalence of smoking among 10-18-year-olds decreased to 7.4 percent in 2023, down from 9.1 percent recorded in the 2018 Basic Health Research.

    However, the figure is still higher than the 7.2 percent prevalence in 2013 and the 5.4 percent target set in the 2015-2019 National Medium-Term Development Plan, noted Eva Susanti, director of non-communicable disease prevention and control at the Health Ministry during a World No Tobacco Day media briefing in Jakarta on May 29.

    Minors’ use of e-cigarettes, meanwhile, increased from 0.06 percent in 2018 to 0.13 percent in 2023.

    The Health Ministry is intensifying efforts to prevent children from smoking or vaping. This includes banning the consumption of tobacco and e-cigarettes by children and pregnant women, prohibiting tobacco advertising on social media, and outlawing the sale of single cigarettes.

  • New Sampoerna Boss: Workforce has Value

    New Sampoerna Boss: Workforce has Value

    Ivan Cahyadi
    (Photo: Sampoerna)

    Ivan Cahyadi, the new president director of Sampoerna, emphasized the company’s commitment to human capital development during a May 14 media meeting reported by The Jakarta Post.

    Celebrating its 111th anniversary, Sampoerna prioritizes human capital as crucial for business sustainability and societal well-being in Indonesia. Cahyadi, who began his career at Sampoerna in 1996, credits the company’s development programs for his rise to leadership. Sampoerna’s policy of job rotation and training across various departments enabled him to understand the business comprehensively.

    Sampoerna’s human capital initiatives include job rotation, overseas assignments and training, fostering an inclusive environment irrespective of ethnic or cultural backgrounds, according to Cahyadi. This approach has positioned Indonesians among global scientists and experts in innovative tobacco products. The company also operates advanced laboratories in Karawang and Pasuruan, enhancing local talent’s potential.

    Cahyadi highlighted Sampoerna’s support for traditional retailers through the Sampoerna Retail Community program, which aids 250,000 micro, small, and medium enterprises (MSME), boosting their competitiveness and economic impact.

    Additionally, the Sampoerna Entrepreneurship Training Center has trained over 72,000 MSME players in various business skills. Emphasizing gender balance, Ivan noted that women represent 46 percent of department heads. Sampoerna’s commitment to human capital aligns with its “Three Hands” philosophy, aiming to advance Indonesia collectively through sustainable business practices.

  • KT&G Expands in Indonesia

    KT&G Expands in Indonesia

    Photo: KT&G

    KT&G CEO Kyung-man Bang participated in groundbreaking ceremonies for the South Korean tobacco company’s second and third factories in Surabaya, Indonesia, on April 26.

    According to a company press release, Bang also visited KT&G’s Asia-Pacific headquarters in Jakarta during his trip, which was his first visit to an overseas business operation since assuming the top position at KT&G.

    Spanning approximately 190,000 square meters, KT&G’s second and third factories in Indonesia are set to commence operations in 2026. The combined production capacity of the factories is projected to reach 21 billion cigarette sticks per year. KT&G plans to make Indonesia its largest global production base, with an annual production capacity (including existing factory capacity) of 35 billion cigarettes, and focus on global market expansion.

    “We have been committed to delivering and accelerating our mid-[term] to long-term vision of becoming a global top-tier company by executing vigorous investment strategies and leading bold innovations,” said Bang during the ceremony.

    “Indonesia serves as our primary global export hub, driving the expansion of our export business in Asia-Pacific and the Middle East markets. We will continue to develop the global production hub in Indonesia as a core growth engine for the company,” Bang added.

    Last October, KT&G broke ground for a factory in Almaty Province, Kazakhstan, designed for exports across the Eurasian region. The following month, the company announced an expansion of its next-generation product capacity at its Daejeon factory.

    To accelerate its global expansion, KT&G recently separated its Asia-Pacific headquarters and Eurasia headquarters from the company, establishing them into separate business entities.

  • Sampoerna Profit Jumps by One Third

    Sampoerna Profit Jumps by One Third

    Photo: Taco Tuinstra

    Net profit of Sampoerna grew 28 percent to IDR8.1 trillion ($501.11 million) in 2023. With shipments of 83.4 billion cigarettes, the company remained the undisputed leader in Indonesia, claiming a market share of 28.6 percent.

    “2023 marked a year of return to robust profitable growth, with Sampoerna reaching significant milestones for advancing scientifically substantiated smoke-free products, increasing its investment and employment in Indonesia, and generating strong multiplier effects, in line with the country’s priority to enhance down-streaming.” said Sampoerna President Director Vassilis Gkatzelis in a statement.

    Sampoerna’s performance was driven in part by the recovery of the hand-rolled kretek cigarette (SKT) segment in Indonesia. After declining for many years, its share rose from 17 percent of overall tobacco sales in 2019 to 28 percent in 2023, boosted by the government’s favorable tax treatment of this labor-intensive sector.

    In early 2024, Sampoerna added SKT production facilities and third-party operators, creating employment for tens of thousands of new workers.

    The company has also been developing its smoke-free portfolio in Indonesia. In 2023, the company inaugurated a dedicated factory in Karawang, near Jakarta, which supplies both the domestic market and customers in the Asia Pacific region.

    In the Jakarta urban area, the company’s IQOS tobacco-heating product reached a market share of 3.5 percent in the fourth quarter of 2023, an increase of 2 points from the fourth quarter of 2022.

    To date, Sampoerna has invested $300 million in smoke-free products in Indonesia.

    Gkatzelis will leave Sampoerna in May and join Philip Morris International’s executive leadership team as president of the East Asia, Australia and PMI duty-free region.

    His successor at Sampoerna is Ivan Cahyadi.

  • Sampoerna Opens Third-Party Factory

    Sampoerna Opens Third-Party Factory

    Photo: Sampoerna

    Sampoerna opened a new third-party operator (TPO) factory for hand-rolled kretek cigarettes (SKT) in Jaten, Central Java, Indonesia, on March 27.

    Owned and operated by Attin Sigaret Indonesia, Jaten facility employs approximately 2,000 people.

    During the inauguration ceremony, Directorate General of Customs and Excise Representative Iyan Rubiyanto lauded the anticipated economic impact of the new factory.

    “We hope that the opening of this TPO will continue to absorb workforce and create a multiplier effect on the surrounding economy,” he was quoted as saying. “The sustainability of the industry is among the focus of the Directorate General of Customs and Excise, Ministry of Finance. Therefore, let’s maintain economic sustainability as a positive impact of the SKT industry.”

    Following a period of sustained decline, the SKT segment started recovering in 2020 after the government started supporting the segment in an effort to boost employment. Partially as a result of its measures, the SKT’s share of the tobacco market increased from 17 percent in 2019 to 28 percent in 2023.

    “On behalf of Sampoerna and tens of thousands of SKT hand-rollers, I would like to express my gratitude for the concern and support of the Directorate General of Customs and Excise, which represents the central government, in ensuring the sustainability of the tobacco industry, including protecting the SKT labor-intensive sector through various policies,” said Sampoerna Director Elvira Lianita in a statement.  

    TPO Jaten is one of five new TPOs that officially started operations in the first quarter of 2024. It complements Sampoerna’s other new SKT partnerships in Cilacap, Purwodadi, and Kebumen Regencies in Central Java, as well as Bojonegoro Regency in East Java.

    Sampoerna now has partnerships with 43 TPOs, all of which are owned and operated by local entrepreneurs and/or local cooperatives. The company now employs, directly and indirectly, more than 90,000 people, about 90 percent of whom are working in SKT production facilities.