INDONESIA
Higher sin taxes have prompted cost-conscious smokers in the world’s second largest cigarette market to move from premium brands to cheaper ones. PT Hanjaya Mandala Sampoerna and PT Gudang Garam, the country’s top two cigarette manufacturers, are both seeing their market shares decline.
Both companies sell standard white cigarettes, as well as kretek, a local clove variety, but Sampoerna’s products are positioned as more premium. A Jakarta-based analyst at PT Sinarmas Sekuritas said, “People still prefer the lower-end products because prices keep increasing. We see that prices of cigarettes are always going up. The cigarette prices in Indonesia can go up at least 7-8% per year, more than inflation.”
According to Euromonitor figures, though still dominant, Sampoerna’s share of Indonesian retail cigarette volumes has fallen four straight years from 36% in 2012 to 34% last year. Gudang Garam went down to 23% in 2016 from 24% two years earlier, after rising for a number of years before that.
Analysts say that Indonesia’s excise tax increases have hurt Sampoerna more than rival Gudang Garam as the latter has a wider portfolio of cheaper tobacco products. Revenue growth at Gudang Garam, however, has outstripped that of Sampoerna’s in five of the last seven quarters.