Bentoel rift may have wide repercussions

Bentoel rift may have wide repercussions

DENPASAR (JP): A play of words -- Bentoel pilihan betoel
(Bentoel a correct choice indeed) -- in which Bentoel rhymes with
betoel, an Indonesian word written in the old spelling system
which means "correct indeed", was once the motto of this
cigarette company.

With its head office in Malang, East Java, Bentoel now has
scores of sales representative offices across Indonesia and has
some 12,000 employees.

Bentoel can be held as a model for any industry in that it is
one of the companies successfully transforming itself from a
family-owned company run under a family-style management system
into a nonfamily company run under a professional management
system.

In the history of the growth of large companies in Indonesia,
a transformation from a family-style to a professional management
system are be brought about by either the initiative of the owner
or circumstances. Bentoel is an example of a company undergoing
such a transformation because of circumstances.

In 1990, Bentoel secured over 12 percent share of the domestic
cigarette market. It was then ranked third, following Gudang
Garam and Jarum, despite the presence of other strong cigarette
makers such as the Sampoerna Group and the BAT Group.

Slowly, however, Bentoel's market share declined until finally
it ranked only sixth in the country. One observer attributed the
decline to Bentoel's lack of innovation.

This opinion is not entirely correct because Bentoel had
resorted to a range of innovations, one of which was the
controversial Bentoel Remaja (Bentoel for the Young), the
launching of which had made prominent lawyer R.O Tambunan file a
class action suit to have this product withdrawn from the market
because of its health hazards and exploitation of youths,
apparently the market target of the product.

The decline in market share was reportedly attributed to the
inefficient family-style management system under which Bentoel
was then run.

It is public knowledge that during this period Bentoel went
through very serious mismanagement and sustained Rp 700 billion
in losses, as against its assets of only some Rp 400 billion.

The great loss could be put down to over expansion undertaken
by the company's management, then under Budhiwijaya Kusumanagera,
as well as to misuse of the loans that the company had obtained.

When Bentoel was in dire straits, it was briefly reported in
the media that Hutomo Mandala Putra was considering taking over
the company, but eventually it was Rajawali Corporation that
realized this takeover.

As stipulated in the takeover, Rajawali Corporation was
entitled to manage the company and had the option of being a
majority shareholder.

A noteworthy achievement of the Rajawali management was their
success in negotiating and restructuring the loans obtained from
a syndicate of state banks as well as from foreign banks,
although previously Bentoel had declared that it is unable to
honor its debts.

The largest company in Malang, Bentoel is a source of
livelihood for its employees as well as their families, agents
and suppliers throughout the country.

With a turnover of over Rp 2 trillion annually, Bentoel is
also one of the largest taxpayers or excise payers. Any stir in
Bentoel is sure to have wide social repercussions. (Winahyo
Soekanto)