Sampoerna's success started from modest beginnings

Mon, 21 Mar 2005, 00:00 WIB | Source: JP

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.