Indonesian Cigarette Manufacturers Diversify to Remain Relevant as They Face Sunset Industry
Every once in a while, Indonesia Investments discusses the cigarette manufacturing industry of Indonesia. Although it remains a big industry in Southeast Asia’s largest economy, it did lose some of its shine over the past decade or so as it faces various challenges.
Key obstacles for stakeholders in Indonesia’s cigarette manufacturing industry are:
- Indonesians’ improving awareness of healthier lifestyles;
- The government frequently raises the tobacco excise tax for cigarettes (almost every year), causing cigarette manufacturers to raise selling prices to pass on costs to consumers;
- It has become increasingly difficult to make advertisement for tobacco-related products (for example, cigarettes and packages as well as the act of smoking are not allowed to be shown in advertisement);
- There is an increase in smoke-free places;
- Packages need to contain graphic warning labels that discourage consumers from buying cigarettes.
Still, if we take a look at the table below, we can see that production of cigarettes in Indonesia actually managed to touch a record level in 2019 (when a total of 356.5 billion cigarette sticks were manufactured in Indonesia). Production numbers then dropped significantly when the COVID-19 crisis emerged in 2020. To what extent this industry will fully recover from the COVID-19 crisis remains to be seen.
So, despite the increasing challenging conditions for local cigarette manufacturers, production numbers managed to grow until the COVID-19 crisis hit.
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