Tobacco Asia

Volume 19, Number 4

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34 tobaccoasia / Issue 4, 2015 (September/October) On the Homefront… More Machine Made The kretek market has gone through a shift, where traditional hand-rolled kretek cigarettes, known as the sigaret kretek tangan (SKT) have been gradu- ally taken over by the sigaret kretek mesin (SKM), machine-made ones. While by no means a sudden shift – as machine-made cigarettes have consis- tently and continuously grown in popularity since they were first introduced in the 1970s, with smok- ers seeing them as the perfect combination that has the "class" of the white cigarettes and still hav- ing the much-loved taste of clove cigarettes – the upward trend for machine-made kretek is already posing a threat on unemployment rates and in ef- fect, the country's economy. Over 800,000 people are employed directly by the hand-rolled industry, with millions more of employees working in industry-related areas. With hand-rolled sales going down and manufacturers shifting production to machine-rolled cigarettes, unemployment is going up. Last May, Indonesia's largest cigarette producer, HM Sampoerna, closed two of its hand-rolled kretek facilities, shocking the industry and laying off around 5,000 workers in the process. This July, Philip Morris International (PMI), which owns 98.18% of leading tobacco company Sampoerna, announced that it would be selling a part of its stake in Sampoerna to comply with pending stock-exchange rules requiring all Indo- Kretek dominates the tobacco industry in Indonesia, accounting for about 90% of the market, despite ongoing challenges both at home and abroad, including a new EU directive that includes a ban on flavored tobaccos; Indonesia's ongoing dispute with the US at the World Trade Organiza- tion (WHO); lower consumption due to the country's own economic downturn; more stringent anti- smoking laws; and the lurking threat of higher taxation. Kretek: Weathering the Storm Typical cigarette and kretek outlet/display in Indonesia By Nattira Medvedeva

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