Cigarette consumption continues to record strong growth
With ever increasing smoking prevalence amongst both women and men, Indonesia witnessed stronger consumption of tobacco products in 2012 despite the high excise increase which was implemented during the year. The good economy inflated purchasing power and the relatively low cost of cigarettes compared to neighbouring countries continued to facilitate tobacco to flourish. As raw materials and production are also mostly sourced domestically, tobacco was thus resilient from the global economic downturn. Exports continued to be relatively slower, whilst domestic sales soared. Tobacco recorded strong volume growth rates across all categories despite the high retail price increase during the year.
SKM ‘mild’ most dynamic segment
SKM or Sigaret Kretek Mesin (machine-manufactured cigarettes) of ‘mild’ variant or ‘lighter’ high tar cigarettes as opposed to the traditional ‘regular’ variant or the ‘heavier’ high tar cigarettes did not show signs of slowing down despite substantial tax increase was imposed year-on-year by the government. In fact, this segment was the primary fuel of growth of total volume of cigarettes in the country at the expense of the further contribution decline from the traditional SKT (hand-rolled cigarettes) and the SKM ‘Regular’. The continuing trend from the previous years, economy-priced products of these ‘lighter’ high tar cigarettes have become the key to success to leading manufacturers, including the best performing company, Sampoerna Tbk PT, HM with its U Mild, Vegas Mild and Trend Mild.
Companies lose profitability due to high tax increase
Although revenue sales substantially increased in 2012 across leading manufacturers, most of them suffered profitability decline during the year as production costs soared above the retail price increase. By absorbing increased production costs, the companies expect to retain their consumer base and volume sales. Bentoel Internasional Investama Tbk PT was the affected with both lower volume sales and losing profitability due to increasing production costs, in particular the grouping of tax excise in SPM (machine manufactured white cigarettes) into one tariff. Meanwhile, Sampoerna Tbk PT, HM achieved the best performance through its strategy in penetrating the economy segment of SKM ‘Mild’.
Economy brands prefer traditional stores
Due to a relatively higher retailing fee tagged by modern retail chains, the majority of economy brands prefer to be distributed through a vast base of traditional retailing channels, primarily street vendors. Therefore, brands available at modern retail stores continue to be dominated by middle to premium-priced products, or the upper range of economy-priced whilst vice versa, traditional channels prefer to stock the most popular brands in middle to economy-priced bands. Street vendors continued to account for the majority of cigarettes sales in 2012, despite continuous increase of contribution from modern channels such as convenience stores.
PP109/2012 released, harsh environment ahead
The long anticipated regulation which was pushed by local and International anti-tobacco NGOs and Ministry of Health was finally legalized on 24 December 2012 and officially announced on January 2013.The many restrictive environments contained in this regulation include the most opposed by the tobacco industry: banning sponsorship from promoting its brand/logo/image and pictorial graphic warning on every cigarette packet. Peraturan Pemerintah (PP) or Government legislation number109 in 2012 awakes further controversies and market response is difficult to predict. Overall, a substantial slowdown of both production and consumption is anticipated across the forecast period. The volume growth rate is still expected to be positive yet downsized by nearly half than previously estimated.
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Discover the latest market trends and uncover sources of future market growth for the Tobacco industry in Indonesia with research from Euromonitor's team of in-country analysts.
Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.
If you're in the Tobacco industry in Indonesia, our research will save you time and money while empowering you to make informed, profitable decisions.
When you purchase this report, you also get the data and the content from these category reports in Indonesia for free:
The Tobacco in Indonesia market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Production, imports by origin, exports by destination
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Tobacco in Indonesia?
- What are the major brands in Indonesia?
- Which sector of the tobacco products market is the largest by value sales in Indonesia?
- Which sector of the tobacco products market has been growing the fastest, by volume and value, in Indonesia?
- Which sector is the most heavily taxed in Indonesia?
- Which companies dominate in the total tobacco market in Indonesia in terms of market share?
- What is the distribution channel split for the tobacco products market in Indonesia?
Why buy this report?
- Gain competitive intelligence about market leaders
- Track key industry trends, opportunities and threats
- Inform your marketing, brand, strategy and market development, sales and supply functions
This industry report originates from Passport, our Tobacco market research database.