Blog - Tobacco Reporter

Sampoerna Sales Up 12.5 Percent

Sampoerna reported net sales of IDR111.2 trillion ($7.38 billion) in 2022, up 12.5 percent from the previous year. Sales volume at the Indonesian cigarette manufacturer increased 4.8 percent to 86.8 billion units, bolstered by the performance of premium brands such as Sampoerna A, Dji Sam Soe and Marlboro.

“The combination of Covid-19 with the impact of the double-digit excise tax increases and widening excise tax gaps has resulted in major challenges for the tobacco industry but Sampoerna remained focused on creating values for its stakeholders, Sampoerna President Director Vassilis Gkatzelis told shareholders at the company’s annual general meeting.

“We evolved our strategy in a forward-looking way and delivered a robust topline performance in 2022 with year-on-year volume growth and stabilization of market share despite the headwinds and accelerated downtrading to the lower-taxed Below Volume Tier 1 segment.

“We also reached a critical strategic milestone with our smoke-free products manufacturing facility in Karawang with an investment valued at more than $186 million, which started operations in the fourth quarter of 2022 to fulfill demands both for the domestic market and Asia Pacific.”

Gkatzelis attributed Sampoerna’s 2022 performance to solid business fundamentals, robust route to market and resilient organization. Although the company’s profitability decreased on a yearly basis and is still significantly lower versus the pre-pandemic levels, key profitability metrics improved during the second half of 2022, both sequentially versus the first half and the year before, driven by returning to net positive pricing as of the third quarter of 2022.

The positive momentum continued in the first quarter of 2023 with IDR27 trillion in net revenues and IDR2.2 trillion in net profit, up by 3.1 percent and by 12.8 percent, respectively, compared to the same period last year. In this first quarter of 2023, Sampoerna grew its market share to 28.5 percent, up 0.2 percentage points compared to the comparable 2022 quarter.

Vassilis praised the Indonesian government for providing business certainty through the issuance of a multi-year tobacco products excise policy for 2023-2024. “We certainly wish the government issues future policies that can support the sustainability of the tobacco industry and enable economic recovery to pre-pandemic levels,” he said in a statement.

According to Vassilis, a predictable environment is key when it comes to delivering sustainable value creation for the broader ecosystem, especially for long-standing investors in Indonesia.

“I am proud to share that early this year Sampoerna completed its investment in building a production facility for the innovative smoke-free tobacco products in Karawang, West Java,” he said.

“Additionally, we recently launched the latest technology and innovation of smoke-free tobacco products, namely IQOS ILUMA, through the continuation of IQOS Club with a limited launch in 10 major cities in Indonesia. These are key milestones to mark Sampoerna’s 110 years of presence in the country.”

Indonesia’s facility for heated tobacco sticks is PMI’s first in Southeast Asia and the seventh globally. “Sampoerna’s investment is a vote of confidence in the investment climate of Indonesia,” said Vassilis. “The new factory in Karawang entails further value creation by increasing research capacity, absorbing high-skilled workers, purchasing local tobacco supplies, operating digital service centers, improving export performance and empowering MSMEs [micro, small and medium-sized enterprises] which includes digitalization support and increasing the capacity of traditional retailers,” said Vassilis.

June 12, 2023

Debt Ceiling Could Stress FDA Budget

The proposed debt ceiling budget could stress the U.S. Food and Drug Administration’s budget, according to Inside Health Policy.

The legislation’s nondefense federal funding cap makes it harder for programs like the FDA’s budget to get funding increases, and it could threaten some agencies’ existing funds, according to Steven Grossman, director of the Alliance for a Stronger FDA. “This is never a good situation for agencies whose mission and responsibilities keep expanding each year, as is the case with FDA,” he wrote.

The Fiscal Responsibility Act of 2023 caps nondefense federal spending at $704 billion for the next two years. According to Grossman, after taking out funding for Veterans Affairs medical care and appropriations adjustments, the remaining nondefense funds are about $637 billion, which is roughly unchanged from fiscal 2023.

There is still room to determine how much funding can be specifically allocated to the FDA, though, according to Grossman, despite the FDA’s funding being limited by the macro-budgetary levels determined by the debt ceiling.

“FDA’s mission and responsibilities are incredibly consequential and visible,” he wrote. “It needs resources to protect public health and safety and to set standards for products that encompass 20 percent of all consumer spending (about $2.7 trillion).”

The House GOP’s FDA funding bill cleared the Appropriations FDA-agriculture subcommittee last month; it would provide $6.6 billion in total funding with $3.5 billion in flat discretionary funding.

June 9, 2023

80 Percent of Tobacco Packs Carry Warnings

Public health warnings are on 80 percent of tobacco product packaging in Cambodia, according to the National Centre for Health Promotion (NCHP) at the Ministry of Health (MoH), reports Khmer Times.

The MoH has made health warnings mandatory on packaging, said Chhea Chhordaphea, director of the NCHP, adding that they appear on 82 percent of tobacco products.

“We see that most tobacco companies have fully complied with the requirement to place health warning messages on product packaging. We found from a survey that 97 percent of the public support a ban on smoking in workplaces and public places,” she said.

“We will increase taxes on the excise stamps for cigarette packs, and if the ministry team finds any products that lack excise stamps or warning labels, then we will take action and impose fines,” said Bou Vong Sokha, deputy secretary-general of public finance management at the Ministry of Economy and Finance.

June 9, 2023

Kingsway in Talks Over AIR Stake Sale

Kingsway Capital has begun meetings with big tobacco firms as the company prepares to sell its stake in Dubai-based tobacco business Advanced Inhalation Rituals (AIR), reports Reuters.

Kingsway is the majority owner of AIR, and the company has held talks with potential investors, including BAT and Japan Tobacco, as part of a dual-track process where a seller pursues a sale and an initial public offering at the same time.

Al Fakher, which manufactures flavored molasses for shisha pipes, is AIR’s most valuable business. An investment in AIR would provide access to the shisha and e-shisha market in the Middle East and elsewhere.

June 9, 2023

ATR Signs Letter to Stop Tobacco Prohibitions

Nine advocacy groups, including Americans for Tax Reform, have signed a letter supporting proposed legislation that would deny the U.S. Food and Drug Administration funds to implement its plans for nicotine levels and menthol flavors.

Sections 768 and 769 of the Fiscal Year 2024 Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations bill ensure that no funds provisioned by the bill can be used to implement a maximum nicotine level for cigarettes, to prohibit menthol flavors for cigarettes or cigars or other special flavors for cigars.

The letter notes the impact that tax hikes and bans can have on smuggling and organized crime and warns about a possible expansion of the black market. It also advocates for educating consumers to better empower them to make educated choices.

“The protections included in Sections 768 and 769 of this bill would prevent overreach by regulators that would have significant negative impact on taxpayers, farmers, retailers, consumers, manufacturers, state and local governments and supply chains across the country,” the letter states.

June 9, 2023

Affordable Vapes May Temper Black Market

A study conducted by researchers at Johns Hopkins University suggests that if regulators limit the nicotine content of cigarettes, people may turn to illegal sources to buy full-nicotine cigarettes, reports Filter. However, the availability of affordable vape products could deter this shift to the illicit market.

The study found that nicotine vapes, which are believed to be less harmful than cigarettes, played a crucial role in people’s choices. When vapes were priced lower than illegal cigarettes, they were purchased to a greater extent, according to the study. Restricting nicotine content alone could lead to an increase in black market cigarette purchases, but making e-cigarettes more affordable could reduce combusted cigarette consumption, the authors suggested. The study emphasizes the importance of regulating vaping products alongside reducing nicotine in smoked tobacco.

The findings suggest that a mandate requiring all cigarettes to have low nicotine content may be unnecessary if the right policy environment is established, including favorable taxation and diverse smoke-free alternatives.

June 9, 2023

Former STMA Manager Under Investigation

Wu Yi, a former deputy general manager of China Tobacco Yunnan Industrial Co., was placed under investigation “on suspicion of serious violation in law and discipline,” reports Caixin Global.

The investigation was announced by the Communist Party’s Central Commission for Discipline Inspection. This is the latest development in China’s campaign to crack down on corruption among government officials.

June 9, 2023

Kaival Appoints James Cassidy to Board

Kaival Brands Innovations Group appointed James P. Cassidy as a new member of its board of directors, according to a press release.

Cassidy joins the board of directors as part of Kaival Brands’ recently announced acquisition of an extensive vaporizer and inhalation technology patent portfolio from GoFire. Cassidy is an investor in, and serves as board advisor to, GoFire.

“We are excited to announce Jim Cassidy as our newest independent director,” said Eric Mosser, chief operating officer, president and a director of Kaival Brands. “Jim’s background as a private equity investor and advisor to growing companies not only in the tobacco space but within the consumer and healthcare spaces will be of tremendous value as we look to expand into new verticals and opportunities following our GoFire patent portfolio acquisition.”

Cassidy currently serves as the founder and CEO of Preposterous Holdings, a family-run private equity firm with offices in Asheville, North Carolina, USA, which he established in 2013. Cassidy has over 25 years of extensive experience and expertise as a private equity investor and advisor across several industries, including the key areas of tobacco, healthcare, consumer packaged goods and technology. Prior to his current roles, from 2000 to 2007, Cassidy was partner in the Strata Group, a wealth management advisory group at Smith Barney. He started his career in 1983 at UST, a tobacco business holding company, working in various roles in the government relations department and as director of corporate services.

June 9, 2023

Turkmenistan to End Smoking

Turkmenistan President Serdar Berdymukhamedov has launched an “unprecedented” anti-smoking movement, ordering the country to end tobacco use within two years, according to France24.

The movement will include a crackdown on “illegal importations of tobacco products and their sales, including shisha pipes and electronic cigarettes,” said Berdymukhamedov. “Our state will launch a vast anti-tobacco movement of unprecedented size to help expand the tobacco-less countries of the world.”

The president plans for the country to be tobacco-free by 2025. There are currently already strict anti-smoking measures in place, including advertising and public smoking bans.

June 8, 2023

Hungary Tobacco Excise to Increase

Excise duties on tobacco products and alcohol products will increase in Hungary beginning January 2024, according to Finance Minister Mihaly Varga’s tax plan, reports Hungary Today.

Under the plan, the price of a pack of cigarettes could increase by up to 250 forints.

The tax increase is necessary, according to the finance ministry, because the European Union minimum tax is set in euros.

June 8, 2023