Sunday, December 3, 2023

Cigar industry in Indonesia – a potential rival to cigarettes?

Reading Time: 3 minutes
Hanif Muhammad





The cigar business has the potential to bring great profits as they are seen as a potential replacement for cigarettes. People make cigars from rolled tobacco leaves, instead of chopped tobacco wrapped in papers like cigarettes. However, both cigars and cigarettes have similar health risks. According to online health consultation, smoking cigars can result in various forms of cancer, lung and heart diseases, addiction, dental and oral disorders and fertility problems.

The main difference between cigarettes and cigars lies in the amount of tobacco used. Cigarettes contain only 1 gram of tobacco while cigars can have between 5 and 20 grams. Both contain similar amounts of nicotine. The size of cigars also varies, with smaller sizes having less tobacco than larger ones. People do not inhale cigars deeply like they do with cigarettes. Instead, they enjoy cigars in their mouth. This is because cigars can irritate the respiratory tract. The frequency of cigar use is also different, with people typically only smoking them in certain situations.

The recent data from the Global Adult Tobacco Survey (GATS) highlights the growing number of smokers in Indonesia. The number of active smokers has risen from 60.3 million people in 2011 to 69.1 million in 2021. The increase in the number of smokers presents a significant opportunity for the cigar market in Indonesia to grow and thrive. As the number of smokers continues to rise, the demand for cigars is expected to increase as well. This presents a great opportunity for the cigar industry in Indonesia to tap into this growing market and capitalize on the increasing demand for cigars.

Cheap local brands help promote consumption

The production of cheaper and more affordable local cigar brands in Indonesia could potentially make cigars a rival to cigarettes in the country. The local brand lower price can make cigars more accessible and appealing to a wider range of consumers, including those who cannot afford expensive imported cigars.

In Indonesia, there are several local cigar brands which offer cigar at a price of less than IDR 300,000 (US$ 19.8). Some of these brands include Wismilak Premium Cigars, Dos Hermanos by Djarum, Rokok Cerutu Adipati, Kenner Bolero and Rokok Cerutu Victor Bohem. These brands offer an affordable option for smokers, who are looking for a cigar experience but may not want to spend a lot of money.

By offering cigars at a lower price, these brands are able to tap into a wider consumer base and attract new smokers who may have previously only smoked cigarettes.

Potential in domestic market

During the COVID-19 pandemic, domestic demand for cigars saw a significant decrease, dropping from 5,000-6,000 cigars per day to 1,000-1,500. Despite this, PT Boss Image Nusantara (BIN Cigar), which is based in Jember, East Java, did not give up easily and instead chose to maximize its penetration in the export market. BIN Cigar has successfully expanded into markets such as Malaysia, China, Thailand, the Philippines and even Greece.

BIN Cigar has a strong portfolio of cigar products, having produced 60 cigar brands for the national market and 30 cigar brands for the international market. This allows the company to offer a wide range of options to its customers, both domestically and internationally. By diversifying its market, BIN Cigar has been able to mitigate the impact of the decrease in domestic demand and continue to grow its business.

The government has implemented policies aimed at advancing the national cigar business. The Minister of Finance Regulation No. 199/PMK.10/2019 limits the number of cigars that can receive free excise duty to only five. This regulation, which became effective on January 30, 2020, aims to limit the entry of cigars from abroad and increase the demand for local cigars.

According to the Indonesian Chamber of Commerce and Industry (KADIN), the development of the national cigar business will create more job opportunities. By supporting domestic cigar business, the government is helping to create a sustainable source of employment and income for locals.

How cigars can rival cigarettes

There are several factors that could lead to cigars becoming a replacement for cigarettes in Indonesia. These include:

  1. Health concerns: As people become more aware of the health risks associated with smoking cigarettes, they may look for alternative “safer” products. Since cigars contain less tobacco than cigarettes and are not inhaled deeply, they may be seen as a healthier alternative.
  2. Aroma and taste: Cigars have a distinct aroma and taste that is different from cigarettes. This can appeal to consumers, who are looking for a different smoking experience.
  3. Social status: Smoking cigars is often associated with wealth and sophistication. This perception could make cigars more appealing to certain segments of the Indonesian population who are looking to demonstrate their status.
  4. Marketing and promotion: Companies in the cigar industry could target their marketing and promotional efforts at cigarette smokers in Indonesia to encourage them to switch to cigars. This could include highlighting the unique features and benefits of cigars and creating attractive packaging and branding.
  5. Increased availability: As the cigar industry grows and becomes more established in Indonesia, it will become easier for consumers to access and purchase cigars. This could lead to an increase in demand and a shift away from cigarettes.
Hanif Muhammad






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