In October 2017, the Ministry of Finance announced new legislation stipulating a further increase in cigarette excise tax of around 10% effective 1 January 2018 and plans to revise the tax structure for cigarettes by reducing the number of excise tax layers from 10 in 2018, to eight in 2019, six in 2020 and then just five in 2021. The excise tax increase in 2018 led to price hikes for many cigarettes brands over the year, especially the mid-priced and economy brands including machine-made kreteks (SKM).
Manufacturers launched several new cigarette products with novel technology during 2018. Amongst those were Gudang Garam’s GG Move brand with duo-filter technology; Aroma Bold brand, Nojorono’s first SKM brand; and Bentoel’s Dunhill Fine Cut Mild Ultra with reduced-smell technology.
The simplified tax structure from 2019 to 2021 means that SKM and SPM cigarettes will be taxed at the same layer. This is expected to benefit white cigarettes (SPM) such as Marlboro, as they will pay a lower excise tax compared to machine-made kretek (SKM) cigarette brands such as A Mild.
HM Sampoerna continued to lead in cigarettes in 2018, followed closely by Gudang Garam, which was encroaching on the leader’s volume share. Over the year, the performance of Sampoerna brands was mixed.
KT&G Corp is still a relatively small player in cigarettes in Indonesia, but it managed to register robust volume growth in 2018 despite the challenging environment. Its innovative new product launches targeting young adults of legal smoking age from the middle- to upper-income groups prompted a rise in the company’s volume share heading into 2018.
In 2018, Japan Tobacco International Indonesia PT (JTI) gained a stronger foothold in cigarettes, after acquiring local player Karyadibya Mahardika in August 2017. With the well-known Apache brand under its portfolio, it launched new variants including Apache Exotic and Apache Exotic Menthol.
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This industry report originates from Passport, our Tobacco market research database.