Following PT Nojorono Tobacco International’s (NTI) move, Korea Tomorrow and Global Corporation (KT&G) produce cigarettes under a number of brands, including Carnival and Esse, have decided to reduce their production. This year, these two are Tier 2 manufacturers, after previously being Tier 1.
Capital market analyst and Founder & CEO of Finvesol Consulting, Fendi Susiyanto said that the decline in production by Nojorono and KT&G was part of the company decisions to manage increasing costs and profit margins by selling products in line with the increase in average excise tariffs of 12.5 percent last February. According to Fendi, the wide difference in excise tariffs provides an option for cigarette manufacturers to be included in Tier 1 or below.
Policy Analyst at Ministry of Finance’s Fiscal Policy Agency, Wawan Juswanto, admitted that based on existing data, cigarette production in Tier 1 is tending to decline. On the other hand, Tier 2 and 3 cigarette production saw growth. As a result, the market share of Tier 1 cigarettes fell and the market share for Tier 2 and 3 cigarettes rose. “This shows a shift from expensive to cheap cigarettes,” concluded Wawan
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Source: Bisnis.com, Apr 8, 2021: