Tobacco Groups Race to Recruit Indonesian Smokers

Source from:  Financial Times  05/10/2013

As students and teenagers sip coffee and eat noodles in Tebet, a bustling South Jakarta district of cafés and clothes shops, coquettish models wearing short white dresses encourage them to buy Dunhill's new "Mild" cigarettes and sign up to a marketing database.

An accompanying TV advertisement for the brand launched in Indonesia last year by London-listed British American Tobacco portrays a male model spearfishing before cooking up his catch with his fashionable friends while the voiceover declares it is "time to discover what fine taste is all about".

Such messaging has been effective in promoting smoking as a lifestyle choice for happy-go-lucky young Indonesians like Titis Katanti, who dropped out of medical school to become a model.

"I got used to smoking because everyone in my family smokes and my friends smoke too," says the 21-year-old, who gets through three packets of cigarettes a day, as she hangs out with her friends in Tebet. "It's better to be an active smoker than a passive one."

All this promotional activity is proscribed by BAT's self-imposed marketing code, which prohibits advertising or promotion that links smoking to professional or sporting success, popularity or sexual prowess.

But BAT has exempted itself from its own rules in Indonesia, where international and local tobacco companies are fighting it out for market share in one of the embattled industry's last great frontiers.

With 61m smokers – two-thirds of men and 5 per cent of women – Indonesia is the world's fourth-biggest cigarette market and one of the least regulated.

Like other large smoking nations such as Russia and China, which long resisted the global shift towards tighter regulation, Indonesia has finally started to introduce some controls on tobacco.

Following the introduction of limited curbs on tobacco advertising this year, health campaigners and tobacco industry executives agree that regulation will only get stricter in the coming years as the government becomes more worried about the social and financial impact of tobacco-related diseases, which killed 190,000 people in 2010.

So BAT and Philip Morris International, which both acquired large Indonesian tobacco companies, and their local rivals like Gudang Garam and Djarum are racing to reach as many new smokers as possible while they still have a free hand.

By sponsoring music concerts, sports events and even educational scholarships, cigarette companies have ensured that many young Indonesians think smoking is "cool", says Mia Hanafiah, chair of the national commission on tobacco control.

"Indonesia has been without proper regulation for too long," she says. "With all the advertising, many young people think there are no risks. Tobacco companies are putting all their efforts into increasing the numbers of smokers now."

Muhaimin Moefti, chairman of one of the main tobacco lobby groups in Indonesia, says that the industry plays a crucial role in supporting the fast-growing economy, employing up to 6m people from farmers to street hawkers and contributing Rp80tn ($8.2bn) to government revenue last year through excise duties.

Industry executives also say they do not deliberately target young people and support the government's introduction of a ban on selling cigarettes to under-18s, even though they accept that the government has no resources to enforce it.

But, at a time when cigarette sales are falling in many of their traditional developed markets, international tobacco companies are reluctant to go beyond the local regulation for fear of losing out to their rivals in a highly competitive but profitable market.

Many of Indonesia's wealthiest tycoons from the Hartono family to Peter Sondakh made their fortunes by selling cigarettes and PMI's $5bn acquisition of Sampoerna, another family-owned Indonesian tobacco company, in 2005 has been one of the most successful the industry has ever seen, rival executives say.

BAT, which acquired Bentoel, a local tobacco company, for $494m in 2009, says that it is working with other tobacco companies and the Indonesian government to ensure better regulation and "a level playing field".

But, says a BAT spokesman, "implementing our international marketing principles in full without other industry players following similar standards, would have placed our relatively new and small business there at an exceptional disadvantage". Enditem