JAKARTA (TheInsiderStories) - The global cigarette giant, Philip Morris International (PMI) Inc., (NYSE: PM) market shares in Indonesia dropped by 19.3 percent due to virus outbreak. Its unit, PT HM Sampoerna Tbk (IDX: HMSP) only sold 79.5 billion cigarettes in 2020 from previous year be able to sold 98.5 billion cigarettes.
The decline in sales volume, said the company, was caused by several factors, including adult smokers shifting to segments below tier one which benefited from tax policies. In addition there are an impact from the increasing price gaps due to delays in enforcing minimum prices and the disproportionate impact of tighter restrictions on the mobility of people in urban areas.
Based on IMS Data, total domestic cigarette market fell by 9.6 percent to 276.3 billion sticks from 305.7 billion cigarettes a year earlier. The decline in the global cigarette market is better than in the Philippines, which fell 12 percent from 70.5 billion sticks to 62.1 billion cigarettes, or Mexico, which fell 13.5 percent from 35.5 billion sticks to 30.7 billion sticks.
Indonesian cigarette market is the largest contributor globally, followed by Russia (219.1 billion sticks), Japan (142.9 billion sticks), and Turkey (114.8 billion sticks). Globally, total number of cigarette markets reached 2,548 billion cigarettes in 2020, dropped by 5.8 percent from prior year around 2,705 billion cigarettes.
In the third quarter of 2020, HM Sampoerna recorded a nine-months’ net profit amounted to Rp6.91 trillion (US$493.57 million), down 32.25 percent from the same period in 2019 of Rp10.20 trillion. Net revenues of the producers Dji Sam Soe and Sampoerna Mild also fell 12.55 percent to Rp67.78 trillion from the same period in 2019 worth of Rp77.51 trillion.
Its competitor, PT Gudang Garam Tbk (IDX: GGRM) also experienced a declined in net profit as September 2020 amounted to Rp5.65 trillion. The cigarette company owned by the Wonowidjojo family’ profit fell by 22 percent from the same period in 2019 of Rp7.24 trillion.
Other producer, PT Bentoel International Investama Tbk (IDX: RMBA), which is owned by other giant cigarette-maker BAT, posted a net loss of Rp563.86 billion in nine months of 2020 compared the same period in 2019 bookek a net profit of Rp11.25 billion. Only PT Wismilak Inti Makmur Tbk (IDX: WIIM) net profit rises from Rp15.4 billion to Rp108.7 billion until September 2020.
End of last year, Indonesian government decided to raises the cigarette tax in average 12.5 percent in this year. More details, class A machine white cigarettes jumped by 18.4 percent, type 2A up 16.5 percent, and the 2B type lift up to 18.1 percent. While, the tariff adjustment not implemented for the hand-rolled ‘kretek’ cigarettes as this category involved huge labor element.
According to finance minister, Sri Mulyani Indrawati, the reasoned her ministry took the decision, caused number of smokers increased among women from 2.5 percent to 4.8 percent and among children up from 7 percent to 9 percent. In addition, there were five aspects that the government had paid attention like the consumption, labor, farmers, illegal cigarettes, and the state revenues.
The government has hike the cigarette tax four times. In 2015, the country raised the excise by 8.72 percent, in 2016 11.19 percent, 2017 10.54 percent, and 2018 rises by 10.04 percent. Initially, the government planned to increase the cigarette tax again by 23 percent in this year. But, do various reasons, Indonesia not run the program.
With the policy, is estimating the average retail selling price of cigarettes to lift by 35 percent from the current selling price. The minister assured that with the new policy, the government could maintain the tax revenues.
The trend of increasing cigarette excise tax rates also occurs in other hemisphere countries in the world. In fact, the increase in excise duty and the selling price of cigarettes has been more rapid in the Organization for Economic Cooperation and Development countries.
The OECD reports that the total excise tax burden on cigarettes has reached 50 percent of the selling price to consumers in almost all the member countries. the director Pascal Saint-Amans stated, “There are even eight countries with an excise tax of 80 percent of the price of cigarettes.”
Some of them are like France, Chile and Finland. Countries such as Luxembourg, Portugal, the Netherlands, and the United Kingdom also raised excise tariffs for tobacco products. In Australia, since July 1, tobacco importers are required to pay import duties and import taxes before goods can be entered and stored in warehousing (anti-tax avoidance).
Written by Editorial Staff, Email: theinsiderstories@gmail.com
