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the Young), the launching of which had made prominent lawyer R.O Tambunan file a class action suit to have this product withdrawn from the market because of its health hazards and exploitation of youths, apparently the market target of the product.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)