Cigarette Market Share
Smokers in Indonesia was ranked third largest in the world. More than 60 million people in Indonesia smoke. Cigarette consumption in 2008 reached 240 billion cigarettes, or 658 million cigarettes per day. This means money worth Rp.330 billion “burned” in a day smoker. Indonesia’s cigarette market share dominated by three large companies. Gudang Garam 2001 ranked first (32%), followed by Djarum (25%) and HM Sampoerna (19%) in the third (AC Nielsen, 2003). After Sampoerna bought by Philip Morris in 2005, the first quarter of 2007 the market share of Sampoerna-Philip Morris has been ranked first beat Gudang Garam and Djarum. Data beginning in 2009 the market share controlled by three giant cigarettes: the Sampoerna-Philip Morris (29%), Gudang Garam (21.1%) and Djarum (19.4%). In the same year the BAT bought Bentoel.
Cigarette Industry Oligopoly
Cigarettes are a commodity market cigarette oligopoly where most (75%) were controlled by a few large industries. As a result, the major industries have the discretion to determine the price of raw materials of cigarettes (tobacco leaf). Small cigarette industry is also in a weak position. As a result, unable to compete with the big tobacco industry that have large capital. High professionalism and the ability to advertise the massive, it caused a lot of small tobacco industry go bankrupt.
Cigarette Industry in Indonesia In General
Agriculture and Farmers Tobacco
Large proportion of tobacco farmland land area of annual crops for 40 years (1961-2001) is a constant 1.2%. Agricultural area in absolute tobacco user for the year 2002-2005 from 261 thousand hectares (2002) to be 198 thousand hectares (2005) or down almost a quarter. Although tobacco cultivation acreage decreased, cigarette production increased rapidly market the same period. 1961 production of 35 billion cigarettes to 135 billion sticks tahun2005 trunk. While cigarette production increased nearly 7-fold, decreased tobacco crop land area. This indicates fulfillment supply met from imported tobacco leaves. Tobacco farmers in Indonesia are 684 thousand people (MOA, 2006) or 1.6% of total agricultural workers (42 million). This number decreased from the previous 4 years, ie 913 thousand in 2001 Agricultural tobacco is not a full time job where tobacco farmers is not a full time job where tobacco farmers do not rely on tobacco entire livelihood.
Cigarette Industry Workers and Wages
Total cigarette industry workers in 2004 was 259 thousand people or 1.2% of total industrial workers. This number decreased from 1995 amounted to 346 thousand people. Total cigarette industry workers declines with age mechanization. During 2006, the average monthly salary of the tobacco industry is Rp 670 thousand. This wage is lower than the average wage Rp851 thousand food industry workers and workers of all industries (USD 962 thousand). During 2000 and early 2006, the average ratio of the monthly salary of the tobacco industry is only 83% compared to food industry workers’ wages and 62% when compared to the wages of all workers industries (BPS, Wage Statistics, 2005).
Cigarette Industry and Foreign Ownership
Purchase of 97% stake in Sampoerna (May 2005) by Philip Morris for Rp 45triliun very significant impact. Net sales increased by almost 100% over 4 years, from Rp. 17.6 trillion (2004) to Rp 34.7 trillion. Earnings also increased by almost 100%, from Rp 1.99 trillion to Rp 3.89 trillion. British American Tobacco (BAT) is also likely to be tempted by the profits and buy a 85% stake in Bentoel worth 5 trillion (June 2009), then bought the remaining shares in public. BAT Indonesia and Bentoel then merged to double the power. High health consciousness and more stringent smoking rules in the country making the tobacco industry developed countries to shift the focus and expansion into developing countries. In a BAT document on the acquisition of Bentoel mentioned, “…. expansion into developing countries because they do not have strict rules regarding tobacco advertising, no ban on the sale of cigarettes to children, as well as poor regulation of cigarettes, unlike in Europe and America “. The dominance of foreign ownership by the tobacco industry resulted in a surplus of profits transferred (capital outflow) to their home country while diseases caused by smoking still remained in Indonesia. Superiority of Transnational Cigarette Company. Financial strength is almost boundless and high professionalism makes expansion of transnational cigarette companies are not unstoppable. Philip Morris-Sampoerna only takes less than three years to dominate the cigarette market in Indonesia. Usual strategy in transnational tobacco companies are doing is keeping cigarette prices remain low and increase promotional spending and fish. This strategy can increase cigarette consumption drastically. Besides the very lucrative, transnational cigarette companies also fairly immune to the global financial crisis. This is what makes them capable of continuing to expand into developing countries, one of them to Indonesia.
Superiority of Transnational Cigarette Company
Financial strength is almost boundless and high professionalism makes expansion of transnational cigarette companies are not unstoppable. Philip Morris-Sampoerna only takes less than three years to dominate the cigarette market in Indonesia. Usual strategy in transnational tobacco companies are doing is keeping cigarette prices remain low and increase promotional spending and fish. This strategy can increase cigarette consumption drastically. Besides the very lucrative, transnational cigarette companies also fairly immune to the global financial crisis. This is what makes them capable of continuing to expand into developing countries, one of them to Indonesia.
Teenagers are the main target of the tobacco industry as a potential life-long customers. Once entangled would be difficult to escape because of the addictive nature of cigarettes. It was also revealed in one of the documents the tobacco industry (Philip Morris, 1981), which states “teenagers today are still potential customers tomorrow because the majority of smokers start smoking as teenagers. Adolescent smoking patterns is crucial for Philip Morris “. Example vulgar industry is targeting teenagers with their release of tobacco products “Bentoel remaja”. Product was then protested many parties so its circulation is stopped. Cigarette advertising intentionally packed with sophisticated, elegant and subtle to attract children and adolescents. Advertising, Promotion and Sponsorship: Advertising, promotion and sponsorship of cigarettes is a very effective way for the tobacco industry to market their products. Unlike other countries, Indonesia is a country where almost all of the techniques of marketing tobacco products allowed. It was also revealed in one of the tobacco industry documents stating the tobacco industry in Indonesia has almost absolute freedom to advertise products in any form and through almost all communication lines (sampoerna annual report (1995). Advertising, promotion and sponsorship of cigarettes contribute to behavioral teens to smoke. 46.3 teenagers argue cigarette advertising has a big influence to start smoking and adolescent argues 41.5 involvements in activities sponsored by the tobacco industry have influence to start smoking.
A new trend
Women and Young Smokers: The prevalence of smokers in Indonesia increased from 27% (1995), 31.5% (2001) and became 34.4% (2004). The highest increase occurred in the group of adolescent smokers 15-19 age, from 7.1% (1995) to 12.7% (2001) and 17.3% (2004) or an increase of 144% over the years 1995-2004. By sex, two of the three men (63.1%) of adult smokers. The prevalence of female smokers was 4.4% (2004), an increase of 3.5-fold over three years. The highest increase occurred in female adolescent age group 15-19 years increased by 9.5-fold, from 0.2% (2001) to 1.9% (2004) BPS, the national socio-economic survey (SUSENAS) 2004 2004, one of the three (33%) of teenage boys usia15-19 years were active smokers. Trends show, more and more youth smoking uptake. Children aged 5-9 years have even started smoking and the increase in prevalence is very alarming, which is 0.4% (2001) to 1.8% (2004), an increase of over 4 times