Tobacco Asia

Volume 18, Number 3

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32 tobaccoasia By Mike Phillips Kretek Questions Indonesia's smokers change tack, while the flavors issue leaves a nasty taste Indonesia has plenty to worry about when it comes to kretek, the indigenous cigarette that blends tobacco primarily with clove and clove oil. An already hostile international environment cranked up the pressure with a new EU directive that includes bans on flavored tobaccos, which adds to Indonesia's ongoing dispute with the US at the World Trade Organization (WTO). And, in developments at home, hundreds of thousands face potential job losses in a changing Indonesian landscape. Despite the bumps, domestically, at least, the sector overall looks set to continue the extraordi- nary success that led in just a few decades from a small cottage industry to a giant that enjoys the unique position of being an indigenous product that is far more popular than white cigarettes. In May, though, shock waves swept through the market, with the announcement that Indonesia's biggest cigarette maker, HM Sampoerna, would close two of its hand-rolled kretek plants. The fa- cilities in Jember and Lumajang, both in East Java, ceased production at the end of that month, laying off some 5,000 workers in the process. The company is owned by Philip Morris Inter- national (PMI), who acquired a controlling stake in 2005. The surprise of the closure was compounded by the fact that the Jember plant was only one year old. So what had changed in such a brief period? Sampoerna says it opened the plant on the back of strong sales of hand-rolled kretek. Cor- porate affairs director Yos Adiguna Ginting ex- plained that: "In 2010, as many as 74 billion sticks of hand-rolled kretek were sold. The next year, it rose to 79 billion and finally to 80 billion in 2012." But the bottom fell out, with 2013 figure of 74 bil- lion sticks being no better than 2010. Sampoerna's share of the Indonesian hand- rolled kretek market dwindled from 11.2% in 2012 to 8.3% in 2013, and it continued downwards in Besides tobacco, cloves are a major component of kretek cigarettes

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