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Cigarettes sector outlook cover

Cigarettes Sector Outlook

Enjoying the benefits from Indonesia’s demographic

The number of cigarettes consumer in Indonesia continues to increase from year to year. According to the latest survey, Indonesians consume 10 cigarettes a day on average, making Indonesia the world’s third-largest cigarettes consumer after China and India. It was driven by growing middle-income class that leads to greater affordability to boost their consumption and also attractive Indonesia’s demographic, given its vast population with over 250 mn people. We believe Indonesia’s growing cigarettes consumption will be sustained in the upcoming years on the back of Indonesia’s favorable demographic that has a large productive population.

More stable on raw material prices

The raw material for hand-rolled cigarettes, clove, is start picking up in the last couple of years due to poor harvest, led by weather issue. Data showed that clove price has reached its peak from only Rp45,000/kg in 2010 to Rp68,000/kg in 2012. We saw that, raw material cost made up around 26% of average producers cost. The company that will be benefitted from lower raw material price is WIIM, as they sell more hand-rolled cigarettes that need more cloves.

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