Sampoerna's success started from modest beginnings

From: The Jakarta Post

Indra Harsaputra, The Jakarta Post, Surabaya

A worker carefully dusted Raphael, a novel published by Libraine Hachette in 1920 in Paris, at the House of Sampoerna, a two-story museum showcasing the success of the family's cigarette-making history.

"After news of the Philip Morris offer, many visitors came here. They're interested in Liem Seeng Tee's book collection," Willy told The Jakarta Post on Friday.

He was referring to Sampoerna's founder Liem Seeng Tee, an immigrant from Fukkien province in China, who set up shop for his unfiltered, hand-rolled kretek -- a special mix of tobacco and dried cloves -- in his modest home in Surabaya in 1913.

Liem's descendants continue the tradition and, with shrewd management and business acumen, have made the company acknowledged internationally as a leader in its field.

Things changed on March 14 with Philip Morris International Inc.'s US$5.1 billion offer to the company, the country's second biggest cigarette maker after PT Gudang Garam.

These days, the museum does not only see local visitors but also foreigners wanting to see Liem's heirlooms, such as family photos, two old bicycles that Liem used to sell his cigarettes, and Flying Pugeon, the first cigarette brand produced in 1913.

A replica of rombong, a small, simple bamboo hut, along with sacks of various crops and traditional snacks in small containers, are also there for visitors to admire at no charge.

Some visitors were curious about Raphael, wondering whether it was one of the Sampoerna's inspirations in developing the company.

Willy said he did not know much about the book's history since it was in German.

But one thing is for sure, Raphael is part of Sampoerna's 92- year history. At that time, the company was named Handel Maastchapij Liem Seeng Tee, and later changed its name to NV Handel Maastchapij Sampoerna (HM Sampoerna). After World War II, the company was named PT Hanjaya Mandala Sampoerna.

Liem himself started as a traditional vendor selling daily commodities before entering the cigarette business in 1913.

His big break came in early 1916 when he bought various kinds of tobacco from a bankrupt tobacco businessman in East Java.

Economic hardship at that time made Liem Seeng Tee determined to make his company a tobacco kingdom producing the best cigarettes.

He bought a building on 1.5 hectares of land in 1932, where he started out his dream to build the country's biggest kretek company. The building, which first housed Sampoerna company, was named Taman Sampoerna.

Apart from using the place to produce cigarettes, Liem's wife, Liem Tjiang Nio, used parts of the space for a movie theater.

Sampoerna's business grew fast in the early 1940s, producing around three million cigarettes a week, both hand-rolled and machine rolled, with the Dji Sam Soe brand as its top selling product and some 1,300 workers as its backbone.

After Liem Seeng Tee died in 1956, the company was run by his two daughters, Liem Sien Nio and Liem Hwee Nio. Later on, the leadership was given to Liem Swee Ling, or Aga Sampoerna, Liem Seeng Tee's second son.

Aga was replaced by Liem Thian Pao in the 1970s, who is better known as Putera Sampoerna. He built factories and made Sampoerna a publicly listed company in August 1990.

Michael Joseph Sampoerna, now 27, the eldest son of Putera Sampoerna, was named the company's president director on June 27, 2001, while Putera himself remains on the board of commissioners.

Sampoerna also expanded overseas to neighboring countries, such as the Philippines, Vietnam, Myanmar and Malaysia, buying cigarette firms in the respective countries, making it the first local cigarette company to go international.

The company does not only work in the cigarette business but has also expanded to other businesses, such as printing, finance, retail and others.

The long history of success casts questions on the real reasons behind the decision to relinquish control over the company to Philip Morris.

PT HM Sampoerna Tbk. commissioner Ekadharmajanto Kasih earlier said the company would still invest in infrastructure and local media in Surabaya.

Local businessmen, however, speculated that Putera Sampoerna wanted to switch to electricity, telecommunications and computer businesses and others predicted he would be involved in infrastructure.

A businessman from Surabaya, who declined to be named, even speculated Putera would invest in a gambling enterprise in Russia.

Head of Sampoerna's public relations, Yudy Rizard Hakim, declined to speculate on the business deal.

"One thing is for sure, the employees are very shocked," he told the Post by phone on Thursday.

He is currently preparing a book on Sampoerna's history with marketing expert Hermawan Kertajaya. The book is slated to be published soon, comprising Sampoerna's long history as well as an explanation why Putera Sampoerna sold his family's company to a foreign one.

"Let's just wait for its release once the business deal is completed," he said.

Chairman of the East Java chapter of the Indonesian Chamber of Commerce and Industry, Erlangga Satriagung, was impressed by the business deal.

"I really salute them. The (Sampoerna) family are really smart in reading a business opportunity," he said.

He said the decision was brilliant as it involved a massive buy-out deal worth a staggering Rp 48 trillion (about US$5.2 billion).

PT Hanjaya Mandala Sampoerna businesses:

1. PT Sampoerna Printpack (printing), share 80,8 percent

2. PT Perusahaan Dagang dan Industri Panamas (distribution), share 99 percent

3. Sampoerna Investment Corporation Ltd (finance), share 100 percent

4. PT Sampoerna Air Nusantara (transportation), share 99,9 percent

5. Wahana Sampoerna, share 88 percent

6. PT Sampoerna International Pte. Ltd, share 100 percent

7. PT Sampoerna Food Product Nusantara (food), share 97,5 percent

8. PT Integrated Business Solution Asia (IT), share 99 percent

9. PT Sampoerna Transport Nusantara (transportation), share 88 percent

10. PT Taman Dayu (property), share 99,6 percent

11. PT Graha Sampoerna (property), share 99,9 percent.

12. PT Sampoerna Packaging Asia Pte. Ltd, share 100 percent

13. PT Asia Tembakau (cigarette), share 99,9 percent.

14. PT Agasam, share 99,9 percent.

15. PT Sterling Tobacco Corp (cigarette), share 92,9 percent.

16. Vinasa Investment Corp (finance), share 100 percent.

17. PT Sampoerna in Malaysia, share 71 percent.

18. Sampoerna Asia Pte. Ltd., share 100 percent.

19. Bursa Tobacco Corp. (cigarette) share 100 percent

20. Myanmar Sampoerna Tobacco Co. Ltd., share 90 percent.

21. Malacca Trading Corp. (cigarette), share 100 percent.

22. Sterling Tobacco Corp. (cigarette), share 92,9percent

23. Sampoerna Investment Corp. (investment), share 100 percent.

24. Sampoerna Investment Corporation (Cyprus) Ltd. (investment), share 100 percent.

JP/Sampoerna's success started from modest beginnings