Posted by: Frederik Balfour on June 17, 2009
It was only a matter of time before British American Tobacco would follow Philip Morris International’s lead and invest in Indonesia. BAT has announced it’s paying $495 million for an 85% stake in PT Bentoel, the country’s fourth largest cigarette maker. With one of the highest smoking rates in the world among men [only China has a higher proportion of men who puff among major markets] with a population of 245 people, Indonesia is a tempting prize for foreign tobacco makers looking to win the hearts and lungs of its citizens, where 90% of smokers prefer local clove flavored kretek brands.
That’s why Philip Morris paid $5 billion to buy leading clove cigarette maker PT Sampoerna in 2004, to help offset declining smoking rates in developed countries. It even came out with a clove-flavored Marlboro. Moreover, Indonesia is a cigarette marketer’s dream. Tobacco companies advertise on television, are huge backers of sports and entertainment events, and there’s no law prohibiting the sale of tobacco to minors. Since Philip Morris entered the market, promotional efforts have been taken to a whole new level, Dina Kania, an anti-tobacco activist told me when I was writing a story with Nanette Byrnes on Philip Morris.
During the course of reporting that story I also contacted BAT here in Hong Kong and was surprised and delighted to learn that it has a worldwide Youth smoking prevention campaign. [click here to visit the site.]
I sincerely hope that once the Bentoel deal goes through, BAT pursues in earnest its campaign to discourage youth from taking up smoking in Indonesia with Bentoel products as it does with its existing brands elsewhere in the world. Better yet, I hope it takes the lead in responsible marketing, and pulls Bentoel’s advertisements from television. Then maybe Philip Morris and other competitors including Gudang Garam might even follow suit.
But it’s probably just wishful thinking on my part. The more likely outcome is with the fresh infusion of cash from BAT Bentoel will be able to ramp up its marketing efforts even more. And pressure from the government is unlikely. With tobacco exise taxes as the number one source of government tax revenue, it’s unlikely that Indonesia’s government will make any moves to restrict tobacco advertising as long as the industry opposes it.