Tag: Indonesia

  • Sampoerna Announces Executive Changes

    Sampoerna Announces Executive Changes

    Photo: Taco Tuinstra

    Sampoerna has appointed Johan Bink as the operations director, succeeding Dina Lombardi, and Gunnar Beckers as marketing director, succeeding Francisca Rahardja.

    Previously, Bink served as director of manufacturing at Papastratos, an affiliate of Philip Morris International in Athens, with over 33 years of experience in supply chain management and production planning.

    Beckers previously served as PMI global head of consumer experience in Lausanne, Switzerland, with over 20 years of experience in marketing.

    “Johan’s extensive experience in operations, from production floor to central functions, and his strong communication and leadership skills will continue to be great assets in his new role,” said Sampoerna President Director Vassilis Gkatzelis in a statement.

    “Meanwhile, Gunnar is a well-rounded executive, who has consistently created value across diverse assignments at global, regional and market levels. His strategic perspective, wide international experience, strong collaborative spirit, focus on consumers, and ability to build brands will be great assets in his new role.”

    Gkatzelis also expressed his gratitude to Lombardi and Rahardja for their contributions and leadership at Sampoerna. Both will assume new responsibilities within the PMI organization.

    “Ibu Dina has always prioritized the safety and development of our people, thus role-modeling the Sampoerna and PMI values during the very challenging pandemic period. She guided Operations in reaching monumental milestones, including the establishment of the manufacturing facility for innovative smoke-free tobacco products,” said Gkatzelis.

    “Meanwhile, Ibu Francisca has been leading the Marketing organization through very challenging times in a forward-looking way. In addition, she built solid foundations for the Consumer-Centric Organization. At the same time, she also contributed to the early journey of the innovative smoke-free tobacco products that Sampoerna introduced to adult consumers in Indonesia,” said Gkatzelis.

  • Indonesian Customs Seizes Millions in Goods

    Indonesian Customs Seizes Millions in Goods

    Image: Tobacco Reporter archive

    Customs in Batam, Indonesia, have seized illicit goods worth IDR1.37 trillion ($89.35 million) in the first half of 2023, including tobacco products, illegal cigarettes, e-cigarettes and alcoholic beverages containing methanol, according to 2Firsts.

    The operation was a result of tax operations aiming to ensure compliance of retail tax paying sellers as part of the area’s free-trade zone and free port, according to Anbang Puriyongo, director of Batam Customs.

    Three individuals have been named as suspects and undergone trial, according to Puriyongo. He called on citizens to report suspicious activities and actively participate in creating a fair trading environment.

    “We will further enhance inter-department coordination and cooperation, leveraging the latest technology,” Puriyongo said. “We aim for such actions to continue in the future, creating a better trading environment for Indonesia.”

  • Sampoerna Sales Up 12.5 Percent

    Sampoerna Sales Up 12.5 Percent

    Photo: Taco Tuinstra

    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.

  • Sampoerna Commits to Value Creation

    Sampoerna Commits to Value Creation

    Photo: Taco Tuinstra

    Sampoerna has reiterated its commitment to creating value and contributing to a sustainable future as the company celebrates its 110th anniversary, reports The Jakarta Post.

    Speaking to reporters on May 26, President Director Vassilis Gkatzelis highlighted Sampoerna’s investments in Indonesia.

    Since its sale to Philip Morris International in 2005, Sampoerna has invested $6.3 billion in the country. Recently, it constructed a $186 million factory in Karawang, West Java, dedicated to the production of smoke-free tobacco products, such as PMI’s successful IQOS heat-not-burn device.

    The facility started operations in the fourth quarter of 2022 and supplies both the domestic market and Asia Pacific.  

    Sampoerna also has two cutting-edge laboratories—one in Pasuruan, East Java, and one in Karawang. Directly and indirectly, the company operates 45 manufacturing facilities and employs more than 66,000 people in Indonesia. In addition, it works with 22,000 farmers who grow either tobacco or the cloves required to manufacture kretek cigarettes.

    Sampoerna also partners with third-party operators owned by local entrepreneurs or cooperatives specializing in hand-rolled manufacturing.

    Gkatzelis, who took charge of Sampoerna last year, also touched on the importance of sustainability.  “Every time we act, we try to create sustainable value for the long term,” he was quoted as saying. “So, 110 years of Sampoerna’s presence is important, but we need to create values for the next 110 years.”

     

  • Gudang Garam Owner Accused of Fraud

    Gudang Garam Owner Accused of Fraud

    Photo: Dani

    The Indonesian affiliate of Oversea-Chinese Banking Corp. has accused a billionaire owner of Gudang Garam of fraud, according to Bloomberg.

    PT Bank OCBC NISP reportedly filed a police report against Susilo Wonowidjojo, an owner and president director of Gudang Garam, concerning some INR232 billion ($15.5 million) in troubled loans.

    The bank disbursed the loan in 2016 to a wig-making company owned by Wonowidjojo’s family, according to the lender’s lawyer. The case involves a total of INR1 trillion of funds when including loans from other lenders, he said.

    Gudang Garam shares fell 5.7 percent Jan. 3 in their biggest drop since Jan. 5.

  • Indonesia Mulls Ban on E-Cigarettes

    Indonesia Mulls Ban on E-Cigarettes

    Photo: ink drop

    Indonesia may ban cigarettes if they are found to be harmful to public health, reports Antara News.

    Speaking at the University of Indonesia in Jakarta on Jan. 26, Vice President Ma’ruf Amin stated that thorough assessment of the effects of e-cigarettes on public health would be conducted before the government takes its decision. 

    If e-cigarettes are found to be safe for public health, the government will consider how to tax the products, he noted. 

    Earlier, the government proposed to strengthen health warnings on tobacco packaging, restrict advertising and prohibit the sale of single cigarettes, among other measures.

  • PMI Inaugurates HEETS Factory in Indonesia

    PMI Inaugurates HEETS Factory in Indonesia

    Photo: Arkadiusz Fajer

    Philip Morris International’s Indonesian subsidiary, Sampoerna, inaugurated a factory for the production of IQOS HEETS consumables in Karawang, West Java, on Jan. 12, reports The Jakarta Post.

    The facility, which started operations in the fourth quarter of 2022, represents an investment of more than $186 million.

    The new HEETS factory, which will serve customers in Indonesia and the Asia-Pacific region, fits with the government’s policy to encourage investment and increase the export of finished products. Speaking at the inauguration, Coordinating Minister for Economic Affairs Airlangga Hartarto said the investment will encourage innovation and create value in other sectors, such as retail, agriculture and R&D.

    According to PMI, the Indonesian plant is the company’s seventh factory for innovative smoke-free products worldwide and its first in Southeast Asia.

    During the inauguration, Sampoerna President Director Vassilis Gkatzelis conveyed his appreciation to the Indonesian government for the conducive investment climate as well as the government’s commitment to maintaining national economic stability.

    “As a company that has been operating for almost 110 years, we aim to continue to contribute to the national economy through continuous investment as well as the economic impact on the national tobacco industry supply chain and ecosystem,” he said.

    Vassilis also noted PMI’s considerable investment in smoking alternatives. The company, he said, has invested more than $9 billion to develop, scientifically substantiate and commercialize innovative smoke-free tobacco products.

    IQOS debuted in Indonesia through limited market testing in 2019 and is available in Jakarta, Surabaya, Denpasar and Bandung, among other cities.

  • Indonesia to Support Tobacco Farmers

    Indonesia to Support Tobacco Farmers

    Photo: Taco Tuinstra

    Indonesia will allocate 50 percent of its tobacco excise revenue sharing fund to support tobacco industry workers and farmers, reports Antara News, citing a Presidential Staff Office (KSP) statement.

    According to the KSP, the effort is necessary to help workers and farmers cope with the impact of global economic uncertainty on Indonesia’s tobacco industry. The assistance will reportedly be offered in the form of fertilizer, machinery and cash.

    The Ministry of Finance requires 3 percent of the tobacco excise revenue to be allocated as a profit-sharing fund managed by the producing regional government.

    Of the revenue-sharing funds, half must be used to improve the people’s welfare, while the remaining 40 percent will be used for health, and 10 percent for law enforcement.

    In December, the government announced it would increase the tobacco product excise rate by 10 percent during 2023–2024. The policy aims to manage cigarette consumption, increase state revenue and monitor illegal cigarettes. 

  • Into Indonesia

    Into Indonesia

    By Yutong Song and Alan Zhao

    Chinese e-cigarette manufacturers are expanding into Indonesia to better serve export markets.

    By Yutong Song and Alan Zhao

    China’s rules for the vaping industry are stringent. They do, however, allow leniency for most exports. There is one rule, though, that can make shipping product to some countries nearly impossible: China’s regulations state that all products produced for export must comply with the regulations and laws in the destination country, according to 2FIRSTS, a vaping industry vertical media firm. If a country does not regulate e-cigarettes, China’s rules for vaping products would apply to those exports, including bans on flavors and synthetic nicotine.

    To better serve countries that have not yet created regulations for electronic nicotine-delivery system products, manufacturers are opening factories outside of China. Many of those companies are moving into Indonesia where there are more than 70 million combustible cigarette smokers. The preference of Chinese manufacturers for Indonesia is also evident from a set of recent news headlines:

    • “Jinjia Group’s manufacturing base in Indonesia to provide integrated e-cigarette services.”
    • “Smoore Technology Indonesia (STI), a subsidiary of one of the largest e-cigarette manufacturers, has invested $80 million to establish e-cigarette factories in Indonesia.”
    • “The Indonesian factory of Zhijing Precision, an e-cigarette assembly supplier, is to be operational by 2022.”

    The cost factors, such as land and labor, make Indonesia the first choice for e-cigarette companies setting up abroad, but the country has more to offer. Garindra Kartasasmita, secretary general of the Indonesian Vapor Entrepreneurs Association, mentioned in his keynote speech at the IECIE Vape Show that the Indonesian vaping market has been growing since 2013, with an annual rate of 50 percent except for the year 2021, when it shrank by 7 percent due to the Covid-19 pandemic. It is expected to rebound to 50 percent growth in 2022.

    Integration of Production and Sales

    Indonesia is ripe for helping to grow vaping businesses and boost the harm reduction potential of vaping products. One major advantage of moving e-cigarette production into Indonesia is the ease of integration and sales offered by the country’s large population. With 280 million people, Indonesia is the world’s fourth most populous country, accounting for 40 percent of all people in Southeast Asia. Moreover, Indonesia has 70.2 million smokers, which translates into a smoking rate of 34 percent.

    The presence of so many nicotine consumers means e-cigarettes produced in Indonesia could also be sold domestically. Indonesia’s regulatory environment is conducive to the marketing of nicotine products that present lower risks than combustible cigarettes. Indonesia is the only country in Southeast Asia that allows tobacco advertising on television and in the media. It also has a place for e-cigarette bloggers and cross-category blogging, such as beauty and skin care. Indonesia has the second-highest number of posts on Instagram sharing vaping and related devices among all countries.

    E-cigarette brands can be imported and sold in Indonesia only if they are recommended by the country’s National Agency of Drug and Food Control (part of the Ministry of Health) and the Ministry of Industry. Additionally, the products must be certified by the Indonesian National Standard. The policies are a positive for Chinese e-cigarette manufacturers.

    Commenting on Smoore’s plant in Indonesia, Bahlil Lahadalia, Indonesia’s investment minister and director of the Investment Coordinating Board, publicly stated, “We need cooperation, we need jobs, we need opportunities that will make our brothers owners of our country.” And Clayton Shen, president of Smoore Indonesia, expressed his gratitude for the support of the Indonesian government, including the tariff-free incentives granted by the Ministry of Investment for the company’s much-needed machinery that needed to be imported.

    Challenges Ahead

    There are some challenges in the Indonesian market, however. Although the Indonesian market represents a large pie for Chinese manufacturers, it is not easy to navigate the market. A well-known Chinese e-cigarette manufacturer intending to build a factory in Indonesia revealed to 2FIRSTS that logistics is a problem for manufacturers, and currently no good solution is available.

    For example, if the end products are filled and assembled in China and then sent to Indonesia, the amount of time the products could be held at customs is unpredictable. “I had a batch of goods that arrived at customs the end of last month, but they are still in customs as of the 20th of this month,” the manufacturer said. “If it was assembled in Indonesia and sent from the Indonesian factory, the time difference in delivery is not much different from if it were delivered from China.”

    There is also a lack of e-cigarette machinery. Another vaping product manufacturer told 2FIRSTS that “there’s a critical lack of tools and machinery to keep pace with the production lines. Should factories be built here, machinery must be transported from China, which is a critical problem to tackle. It’s a misconception that the only shortage we would face is raw materials.”

    There is also a “workers’ gap” that can often create staff training and production concerns. In addition to overcoming cultural and geographical challenges when training local workers, it’s difficult to have the workers adapt to the Chinese style of work, which is very dedicated and focused on teamwork. An insider told 2FIRSTS that some workers have a “casual attitude to being late.” He said that he had to create numerous incentives to discourage employees from being late for work and/or going home early. “This is very different from the Chinese work habits,” he said.

    Migration or Spillover

    Shenzhen is considered the vaping capital of the world. Located just north of Hong Kong, the city designs and manufactures an estimated 90 percent of the world’s vaping and e-cigarette devices. There are more than 1,000 factories and thousands of support companies that form the supply chain throughout Guangdong Province and the rest of China.

    A joint report from the E-Cigarette Professional Committee of the China Electronics Chamber of Commerce and 2FIRSTS anticipates the global e-cigarette market to grow by 35 percent in 2022. The total market is expected to exceed $108 billion. In 2021, China’s total e-cigarette exports were $19.8 billion and were expected to reach $26.7 billion in 2022. The expansion of China’s e-cigarette industry from Shenzhen to Indonesia can more accurately be described as “spillover” rather than “migration.”

    Just because Shenzhen’s e-cigarette manufacturing hub status is unshakable in the short term does not mean that the global manufacturing layout is cast in stone. In fact, over the past five years, the country’s e-cigarette industry has spilled from the city into China’s Greater Bay Area. We have seen spillover from Shajing of the Bao’an District of Shenzhen to the Dongguan area and in between.

    This spillover has not affected the development of China’s electronic cigarette industry, however. During the same time, there was also a period of rapid industrial growth and improvements on the supply chain side of the industry.

    In a recent interview, 2FIRSTS co-founder and Chief Operating Officer Echo Guo said that years of development not only granted the Bao’an District of Shenzhen a number of e-cigarette enterprises but also brought together supporting supply chains, including industrial design, molds, batteries and other essential needs for manufacturing vaping products. “Here to there is a ‘two-hour traffic circle’ within the whole e-cigarette industry, with all of its subbranches cooperating closely,” said Guo. “Even when the manufacturers and customers exchange new ideas, it would take less than two hours to get a prototype ready.”

    The spillover of China’s e-cigarette industry to Indonesia can also be seen as the absorption and utilization of manufacturing resources by China’s e-cigarette industry, which has broken the boundary of China’s Greater Bay Area and extended to a broader region of the Asia-Pacific. The entire region will now have the opportunity to create greater economic success through the growth of the e-cigarette and vaping industry.

  • Indonesia to Raise Tobacco Tax

    Indonesia to Raise Tobacco Tax

    Photo: Taco Tuinstra

    The Indonesian government plans to raise tobacco excise rates by 10 percent in 2023 and 2024 for hand-rolled cigarettes, with the maximum increase capped at 5 percent per year, reports Antara.

    Excise rates for electric cigarettes of all types will be increased by 15 percent, and other tobacco products will be increased by 6 percent every year for the next five years.

    The minimum retail price for tobacco products has been adjusted considering the developments in market prices and the average increase in cigarette excise duty.

    The goal of the increase in tax is to decrease smoking and tobacco use among the population.

    “With excise as a fiscal instrument to control consumption, we hope that the excise will increase prices, which will then reduce the number of smokers,” said Finance Minister Sri Mulyani Indrawati during a working meeting with Commission XI of the Indonesian House of Representatives in Jakarta.

    Indonesia currently ranks first in the world for adult male smoker prevalence and fifth in the world for adult smokers.