TOBACCO INDUSTRY IN INDONESIA

cigarettes on sale at a convenience store in Indonesia in 2024

The tobacco industry is dominated by a handful of large companies but there also hundreds of small producers. As of 2014, there were more than 3,300 tobacco brands owned by 672 companies in Indonesia according to the Food and Drug Monitoring Agency. Indonesia's biggest cigarette producer is Philip Morris-owned Sampoerna, Marlboro has traditionally been a sign of high status. [Source: Associated Press, June 25, 2014]

The Indonesian tobacco market is dominated by a handful of major companies, led by PT HM Sampoerna Tbk, a subsidiary of Philip Morris International, which holds roughly 27 to 33 percent of the market. Close behind is PT Gudang Garam Tbk, a leading domestic producer with an estimated share of around 29 percent. Together with PT Djarum, another major privately owned Indonesian company that controls about 19 percent of the market, these three firms account for the majority of cigarette production and sales in the country.

Other notable players include PT Bentoel Internasional Investama, part of British American Tobacco, which holds about 8 percent of the market, and PT Wismilak Inti Makmur Tbk, a smaller but still significant company with a market capitalization of approximately $386 million. While these firms are less dominant, they contribute to the overall competitiveness of Indonesia’s tobacco industry.

The Indonesia tobacco industry had annual turnover of $8.7 billion in 2003. About 200,000 people were formally employed by the tobacco industry at that time, many of them women who hand rolled clove cigarettes, By one estimate 20 million jobs are somehow tied to the tobacco industry. These included distributors and cigarette sellers.[Source: Dean Yates, Reuters, March 2004]

Tobacco and the Indonesian Government

women sorting in tobacco leaves in Java in 1951; Tobacco was introduced by the Dutch during the colonial period

The Indonesian government relies on the tobacco industry for around 10 percent of state tax revenue. Although tobacco is not nationalized, the government issues growth targets; in 2015, the Industry Ministry released a “road map” for the industry calling for expanded cigarette production. At the same time, the industry faces growing pressure from rising tobacco taxes, which have begun to affect sales and reshape market dynamics.[Source: Jon Emont, New York Times, April 30, 2016]

Tobacco taxes brought in more than $4 billion into the Indonesia government’s treasury in 2009. The head of customs and excise estimated that revenue could drop by 10 per cent if the government made a serious effort to reduce smoking. [Source: Paul Watson, Los Angeles Times, February 06, 2009]

In 2003, tobacco excise taxes accounted for 8 percent of the Indonesian government’s revenues. At that time the government refused to launch a vigorous anti-smoking campaigns, partly because so many people were employed by the industry and so much of the revenues for the debt-laden government come form tobacco. Lack of government effort to launch anti-smoking campaigns and the power of cigarette lobbies are believed to be the primary reasons why smoking rates have increased so much. [Source: Dean Yates, Reuters, March 2004]

Big Tobacco in Indonesia

Jon Emont wrote in the New York Times: The densely packed houses along Yogyakarta’s Kali Code River went from drab to a riot of reds, blues, yellows and whites. “Residents did not know who had paid for the elaborate painting job in 2015. The Yogyakarta press speculated that an unknown company had painted the houses so they would resemble the colorful favelas of Rio de Janeiro. It turns out the village’s benefactor was Philip Morris International and its “Show Your Colors” advertising campaign. On the side of the Gondolayu bridge that overlooks the settlements sits a giant picture frame, with tag lines hung above it reading, “Create your own story” and “Go ahead.” The village had been transformed into a giant for a brand owned by the tobacco company. [Source: Jon Emont, New York Times, April 30, 2016]

“The ads were another aggressive marketing attempt by an international tobacco company to gain market share in Indonesia. In the 2000s and 2010, Indonesia became a last Eden for tobacco companies facing declining smoking rates at home. As late as 2004, international tobacco companies had a marginal presence in the Indonesian market. By 2016, led by Philip Morris International, they controlled around 45 percent.

harvesting tobacco in Wonosobo, Central Java, 2015

In October 2015, President Joko Widodo visited the United States to promote American investment in Indonesia. While he was there, Philip Morris announced a $1.9 billion expansion of its tobacco factories in the country — the second-largest investment that Mr. Joko secured from an American corporation during his visit.

“Philip Morris’s success — it controls 35 percent of Indonesia’s tobacco market through its local subsidiary, Sampoerna — ushered in a new age of foreign expansion. In 2009, British American Tobacco purchased Bentoel, a local tobacco company that is now Indonesia’s fourth largest, with around 7.5 percent market share.

Philip Morris’s Purchase Indonesia Tobacco Company Sampoerna for $5.2 Billion

In 2005,Philip Morris International spent as much as $5.2 billion to take over Indonesia's third-largest cigarette maker by sales, PT Hanjaya Mandala Sampoerna, in a deal aimed at turning the U.S. tobacco giant into a major player in one of the world's largest, fastest-growing and most competitive cigarette markets. It was one of the biggest foreign acquisitions ever in Southeast Asia, underscoring Philip Morris's continuing effort to expand in foreign markets where cigarette sales are still growing rapidly, even as health concerns and heavy taxes batter growth prospects in developed countries in Europe and North America. Philip Morris International is a unit of U.S.-based Altria Group Inc. percent the world's biggest tobacco company. [Source: Timothy Mapes, Wall Street Journal, March 15, 2005]

According to the Wall Street Journal: “Philip Morris said it agreed to pay $2 billion to buy a 40 percent stake in Jakarta-listed Sampoerna from a group of major shareholders, including the company's chairman, Putera Sampoerna. Philip Morris said it also will make a general offer for the rest of Sampoerna which, if fully accepted, will lift the value the total acquisition to $5.2 billion, including some $160 million in debt.

“Sampoerna was founded in the 1910s in East Java by Mr. Putera Sampoerna's grandfather. A spokeswoman said 47 percent of the company, which isn't traded publicly, is owned by the family and other interests. It wasn't clear why the founding family had decided to sell the bulk of its holdings.

“Though Marlboro is the best-selling cigarette in the world, it has managed to make only modest inroads in Indonesia, despite a massive marketing and advertising campaign in recent years. Currently, about 92 percent of Indonesian sales are clove-scented kreteks. Philip Morris brands account for about half of the remaining 8 percent. "This is a tremendous growth opportunity in an expanding market," said Andre Calantzopoulos, Philip Morris International's chief executive. He said the Sampoerna acquisition is aimed primarily at expanding his company's position in the kretek portion of the market. “Mr. Calantzopoulos said Sampoerna's brands are well established and have been growing rapidly. In addition, he said, the deal will give Philip Morris access to an enormous sales and distribution network that can be harnessed to increase sales of Marlboros and other brands of what are called "white" cigarettes in the Indonesian market.

"Clearly, Marlboro will also benefit from the strength and distribution muscle that Sampoerna has" in Indonesia, Mr. Calantzopoulos said. The combined company, he added, will be the second-largest in terms of Indonesian sales, surpassing privately held PT Djarum, which has been in second place behind market leader PT Gudang Garam. In 2004, Sampoerna had about a 20 percent share of the Indonesian market, which totaled roughly 200 billion cigarettes. Philip Morris said Sampoerna sold an estimated 41 billion cigarettes last year, generating net revenue of nine trillion rupiah. Its operating income is estimated at about 3.1 trillion rupiah, up 20 percent from 2003, the U.S. company said. Sampoerna hasn't published its financial statements for all of 2004.

One key issue was be the fate of about 30,000 people employed by Sampoerna as day laborers, primarily to hand-roll the company's best-selling Dje Sam Soe and other brands. While such hand processing is expensive, it has also allowed Dje Sam Soe to command a premium over other brands. Mr. Calantzopoulos said that though such manufacturing practices are unusual in Philip Morris's global portfolio, he said the company doesn't intend to tamper with the arrangement. "Given the growth rate we expect for Sampoerna, I don't expect there will be any employment issues there," he said.

Juul’s Effort to Bring Vaping to Indonesia Goes Nowhere

Decades ago, when the major American tobacco companies started to feel the pressure, they found new markets and friendlier regulations abroad. Efforts by Juul, the world largest vape maker, to do the same been “stunningly unsuccessful” according to the New York Times. Especially is Asia, the company’s moves to carve out a niche have been met with fierce anti-vaping sentiment, a a barrage of newly enacted e-cigarette restrictions and outright bans.As a result, their ambitious overseas plans have collapsed. [Source: Sheila Kaplan, Andrew Jacobs and Choe Sang-Hun, New York Times, March 30, 2020]

Indonesia, with its millions of smokers and almost non-existent tobacco regulations, seemed like perfect place to make a move. The company opened stores selling its devices and flavoured nicotine pods in upscale shopping malls, and showed slick adverts in cinemas. But perhaps its greatest asset was the hip, youthful image cultivated in the United States that reached Indonesians through social media. Audrey Anastasya Fide, a 25-year-old security and risk management consultant in Jakarta, was intrigued after seeing images on Twitter of Sophie Turner and Maisie Williams, famous for their roles in Game of Thrones, holding sleek black Juuls. 'I just wanted to try it,' she told the New York Times. A friend brought her one back from the US, and Ms Fide is now a devoted customer. ‘I prefer the shape of the Juul,’ she enthused.

Although Juul sought to position its products as smoking cessation devices, anti-tobacco advocates in Indonesia say the reality was different. They said that many Juul customers both smoke and vape, and that a worrying number of buyers are teenagers who had never smoked before. ‘If it’s about harm reduction, why is Juul selling its products to kids?’ asked Dr Mouhamad Bigwanto, an anti-smoking advocate.

Dr Bigwanto reacted sceptically to the news that Juul was pulling out, saying he feared that sales of Juul products would simply move online, where a market in counterfeit Juul pods already flourishes. ““It’s good news because right now Juul pods are sold at stores right next to the candy,” he said. “But the bad news is that Juul will use this announcement to improve their

Image Sources: Wikimedia Commons

Text Sources:“Encyclopedia of World Cultures Volume 5: East/Southeast Asia:” edited by Paul Hockings, 1993; “Culture and Customs of Indonesia” by Jill Forshee, Greenwood Press, 2006; National Geographic, New York Times, Washington Post, Los Angeles Times, Smithsonian magazine, Encyclopedia.com, Library of Congress, Indonesia Tourism website (indonesia.travel), Indonesia government websites, Live Science, The Conversation, The New Yorker, Time, BBC, CNN, Reuters, Associated Press, AFP, Lonely Planet Guides, Google AI, Wikipedia, The Guardian and various websites, books and other publications.

Last updated April 2026