In March 2005 Philip Morris International (PMI) announced the purchase of Indonesia’s second-largest tobacco company, PT HM Samporena, signalling the company’s competitive objectives for growth. Indonesia is already the fifth-largest tobacco market after China, the United States, Japan and Russia, and provides a profitable opportunity for PMI. Excise tax on tobacco in Indonesia is among the lowest in the region, and 70% of men and nearly 20% of women smoke: the 230 million citizens consumed 215 billion cigarettes in 2004. Robert Campagnino, an analyst with Prudential, has evaluated Indonesia’s appeal for PMI, noting the ‘very attractive market, with a growing population that currently stands around 210 million, and significant smoking participation rates’.
Existing objectives
‘You know what we want,’ said a tobacco executive some years ago, ‘we want Asia.’ [Quoted in Unhealthy Alliance , World Watch Journal, 1988 ] Increased cigarette tax, smoking bans, health awareness and restrictions on advertising in much of the developed world have led to a shift in market focus, as tobacco companies have been forced to ‘find a way to feed the monsters they’ve built’. [R. Morelli, a former employee of a tobacco company, quoted in ASH (Action on Smoking and Health)] Tobacco consumption rates in the developing world are expected to increase to 5.09 million tonnes, which represents a 1.7% growth rate each year between 1998 and 2010. Companies such as PMI and British American Tobacco have seized this opportunity for growth – in 2004, PMI’s international sales grew 18% to nearly $40 billion, and BAT’s shares traded above £10 after their recent purchase of Turkish company Tekel. By 2030, a projected 7 million people in developing countries will be killed every year by tobacco, comprising an estimated 80% of all tobacco-related deaths. It appears that women and children are key targets in the developing world, with recent increases in female smoking prevalence having been reported in Cambodia, Malaysia and Bangladesh, and a survey by WHO and CDC finding that one in five school children smoke in developing countries.
A decade earlier, a Rothmans public affairs manager stated that ‘It would be stupid to ignore a growing market.’ I can’t answer the moral dilemma. We have a very strong feeling that if no one had heard of cigarettes in Timbuktu, then a Rothmans billboard would not mean anything. All we are doing is responding to a demand.’