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Tobacco in Indonesia
Euromonitor International, Feb 2008, Pages: 43
Euromonitors Tobacco in Indonesia report offers a comprehensive guide to the size and shape of the market at a national level. It provides the latest retail sales data (2001-2006), allowing you to identify the sectors driving growth. It identifies the leading companies, the leading brands and offers strategic analysis of key factors influencing the market - be they new legislative, distribution or pricing issues. Forecasts to 2011 illustrate how the market is set to change.
Product coverage includes: cigarettes, cigars and smoking tobacco.
Data coverage: market sizes (historic and forecasts), company shares and brand shares.
Why buy this report?
- Get a detailed picture of the tobacco industry;
- Pinpoint growth sectors and identify factors driving change;
- Understand the competitive environment, the market’s major players and leading brands;
- Use five-year forecasts to assess how the market is predicted to develop.
Executive summary
Slower performance with curbed consumer spending
Overall volume performance of tobacco products in Indonesia showed a growth decline in 2006. This was due to inflated daily living costs as a result of the government’s policy to reduce the nation’s fuel subsidies early in the year. There was slow economy growth as a consequence of various national disasters in the latter half of the review period. Mass Indonesian consumers were, therefore, impelled to economise with cheaper alternatives and thriftier consumption.
Excise tax hike imposed yet again
Tobacco products, particularly cigarettes, increasingly became an expensive indulgence for most Indonesian consumers in 2007. This was because of consecutive price increases implemented by the manufacturers as a result of the government’s policy to increase the retail price of cigarettes per stick (HJE) in 2005, and then again in 2006. Manufacturers and retailers made stringent efforts to dampen and lessen the impact of price increases. However, price-sensitive low-income consumers were forced to both cut back on their daily consumption and seek cheaper alternatives.
White cigarettes sector narrows
White cigarettes in Indonesia continued to decline from 2004 to the end of the review period. This was largely due to the minimal marketing activities of international players – namely BAT Indonesia Tbk, PT and Philip Morris Indonesia PT – to promote their brands. Instead, the popularity of kreteks continued to prevail. It surged with intense above-the-line marketing efforts by all major players, as well as attractive product launches. Volume shares of leading white cigarette brands – Marlboro, Ardath and Lucky Strike – subsequently dropped in 2006 with waning consumer interest in the brands.
HM Sampoerna Tbk PT scores high in ‘mild’ cigarettes
‘Mild’ kreteks continued to perform robustly in 2006, as an increasing number of regular kretek smokers shifted to mild kreteks. Despite the presence of numerous mild kretek brands in Indonesia offered at lower price points, Sampoerna A Mild succeeded to outperform these brands. This was due to its first-comer advantage and effective mass media advertisements. A Mild was particularly popular in urban centres, such as Jakarta, where consumers were less price sensitive and were more concerned about brand image and quality.
Consumption is forecast not to drop too drastically
The Indonesian government will implement another hike on the retail price per cigarette stick (HJE) in March 2007. This is to be followed by an additional specific tax per cigarette stick in July 2007. Retail prices of all cigarette products will, consequently, be further raised in 2007. Overall consumption of cigarettes, however, is not anticipated to drop too drastically over the forecast period due to the perceived daily necessity of tobacco for mass Indonesians. The prevalence of illegally traded cigarettes, both in urban and rural areas, will further maintain volume consumption alongside continuous media advertisements and product launches by local major players to stir up consumer interest.
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