Giants cough as poor smokers swith brands
Giants cough as poor smokers swith brands
Rendi A. Witular, The Jakarta Post/Jakarta
Poverty has not stopped the poor from smoking -- the latest
market research shows they have just switched to cheaper non-
branded cigarettes, which is giving the country's traditional
tobacco giants a proverbial kick in the butt.
And ironically, these smoking habits, the experts say, are
also an indication of the relative health of the economy; they
show that the poor, stuck with their cheap tobacco, cannot taste
the benefits of the recent economic growth.
As the cigarette companies' largest market declines, the fight
now is for the buyers from the middle- and upper-income brackets,
the statistics show.
This shift of smokers' appetites in the lower-end market
segment, the largest base for giants like PT Gudang Garam and PT
Djarum Kudus, is reflected in data issued by the Indonesian
Association of Cigarette Companies (GAAPRI), in which the market
share of these companies has declined in the third quarter of
this year.
Publicly listed Gudang Garam and non-listed Djarum are the
nation's largest and second-largest cigarette producers
respectively. Both companies have lost market share to publicly
listed PT HM Sampoerna, the country's third-largest cigarette
producer, and to smaller producers of budget "no-name"
cigarettes.
Sampoerna is known for its cigarettes aimed at the middle and
upper-income market, such as the hand-rolled "Dji Sam Soe" and
machine-rolled low tar "A Mild".
According to GAAPRI, the market share of Gudang Garam for both
hand-rolled and machine-rolled cigarettes has declined to 34
percent in the third quarter from 37.2 percent in the same period
last year.
Its rival Djarum has also suffered a drop in market share to
18.8 percent from 19.1 percent.
Meanwhile, Sampoerna enjoys an increase in market share to 21
percent from 19.1 percent.
The statistics also show other producers; the non-branded
products and international makers of "prestige" brands -- Philip
Morris Indonesia and British American Tobacco -- are enjoying a
higher market share; from 24.1 percent in the third quarter last
year to 25.4 percent in the same period this year.
While things may be getting sweeter for the underdogs peddling
their addictions to the middle classes, the results show that
life for the poor, whatever they smoke, remains a drag.
"Higher economic growth, which is supposed to fuel higher
consumer spending, has not necessarily helped drive up
consumption for low-income people," said Gudang Garam director
and corporate secretary Heru Budiman on Friday.
"Our cigarette production is likely to remain flat this year.
The higher economic growth has only affected the middle- and
upper-class buyers," said Heru.
The industry's total output for both the hand-rolled and
machine-rolled tobacco is expected to reach about 196 billion
sticks this year, still below the pre-financial crisis level of
198 billion sticks in 1997.
The Kediri-based Gudang Garam produced 50.6 billion sticks of
cigarettes in the first nine months of this year, relatively flat
in growth compared to 50.3 billion sticks it produced in the same
period of last year.
For the full year, the company has expected to produce some 63
billion sticks, from its installed capacity of 110 billion sticks
per year.
Heru said the projected higher economic growth of 5.2 percent
next year would mean nothing for the poor unless there were
sufficient jobs for them.
"The higher economic growth it turns out is only being enjoyed
by those with the middle and upper incomes, while those in the
lower income bracket remain poor," he said, adding that the urban
areas would be the main sources of growth next year.