The Premiumisation of Cigarette Packaging in Indonesia

Indonesia’s tobacco industry is undergoing dramatic changes as cigarette companies turn to premiumisation to stand out in a highly saturated market.

It comes as no surprise that Indonesia is known as ‘smoker’s paradise’. The nation makes up the largest percentage of cigarette consumption in Southeast Asia, at 51%. Indonesia has a population of about 240 million, and 70% of male adults are said to be smokers. 90% of the cigarette market is dominated by five major players; Sampoerna, Gudang Garam, Djarum, British American Tobacco, Nojorono.

“‘Kretek’, or clove cigarettes, are the major tobacco type sold in Indonesia. The so-called ‘white’ cigarettes, such as Marlboro, takes up less than 10% of sales,” said Dr. Daryanto Winoto, M.Sc., Ph.D., printing and packaging consultant, Kreativindo Blue Ocean.

Dr. Winoto has spent over 20 years in the packaging industry. Now a consultant, he focuses on cigarette packaging, in which he spent 18 years of his career. In his career span, he has witnessed significant changes to the Indonesian tobacco packaging industry.

“Based on the Indonesian Cigarette Custom report released in October 2016, cigarette sales dropped about 1% in comparison with last year. That might not seem like much, but for the Indonesian market it can amount to a lot,” said Dr. Winoto.

There are several factors attributing to the changes. For starters, the Indonesian government has imposed tighter anti-tobacco regulations, which include the ban of smoking in more public areas. Government and custom taxes will also rise; effective 1 January 2017, cigarette tax in Indonesia will be increased by an average of 10%.

More packaging has graphical health warnings printed on. Today, 40% of packaging have health warnings, and this number is expected to increase to 75% by 2019. In addition, there is a behavioural change amongst smokers, especially with the younger generation.

Premiumisation

These factors contribute to the rising trend of premiumisation within Indonesia’s tobacco packaging industry. Premiumisation refers to the movement towards an increased value of a particular product. 2016 was dubbed the most affluent trend of premiumisation by Forbes magazine.

“Everyone wants to be successful in creating a product that is perceived as premium. Being premium meant that consumers would want to pay more for the quality that they get. This equals to higher margins for tobacco companies – that is the ultimate goal of premiumisation,” said Dr. Winoto.

Premiumisation gives tobacco companies the opportunity to differentiate its product in an extremely saturated market: “At the moment there is a price war amongst tobacco companies in Indonesia. It has become increasingly difficult for cigarettes to be differentiated in the market. On top of that, expenses are increasing. Taxes are increasing, and costs such as food, transportation, labour are all on the rise,” Dr. Winoto continued.

“The initial perception of quality is the key – this is premiumisation,” Dr. Winoto added. “In the case when cigarette prices get increased dramatically to Rp 50,000,- per pack by the Government - as was worried by cigarette companies a few months ago - then what should we do to justify the price change from the current price of less than Rp 20,000,- per pack ? Premiumisation in packaging, as what has already happened in other countries such as China, is one of the solutions in giving added values to compensate for the dramatic price change."

Premiumisation can be conveyed the most easily and most immediately through packaging. A premiumisation technique include tactile, which is becoming recognised as an effective and unique communicative tool to customers at point-of-sale. Features such as velvet touch, soft touch, etching, rise and relief can be applied across the surface of the packaging to make the product more impactful and raise customer engagement.

The look of the packaging such as intense metallics through the use of foil simulation inks can also give cigarette packaging the luxurious effect and adds on to the premium feel of the product. Using colours as a technique is effective, especially black. Black is often used to give the appearance of strength. Dr. Winoto added that all of the major cigarette companies in Indonesia have some sort of black packaging in the market.

To meet the trends of premiumisation, Dr. Winoto predicted that rotogravure will continue to dominate Indonesia’s cigarette packaging production, along with flexo processes: “Flexo will grow to support gravure processes in producing short-runs, high-quality cigarette packaging. This is apparent as the cigarette market declines and price sensitivity increases.”

Offset processes, which is often not as suited for the cost-effective premiumisation trend, will however decline. Its use will be limited to smaller tobacco companies. Digital print is in exploratory stage in Indonesia, and is expected to remain rather insignificant in its use in the premium tobacco packaging industry.

“As a consultant, I help companies pinpoint the problem source within production and printing quality processses, especially in offset, flexo and rotogravure. A major part of what I do is ensuring the best quality can be produced at a lower cost, and as efficiently as possible, and synergising processes between design agencies and production people,” said Dr. Winoto.

“When it comes to premium packaging specifically, I’ve noticed that some of these issues are in maintaining colour consistency and standardising colours. Thus, while it is important to have good productivity in terms of costs, the most important step towards premium packaging is: ensuring colour and registration consistency, especially for print production runs involving 10 or more colour units.”

Read the full version of this article and more print news in Issue 11 of Print Innovation Asia.

Featured Posts
Recent Posts
Follow Us
  • Facebook Classic
  • Twitter Classic
  • Google Classic
  • Twitter B&W
  • LinkedIn B&W

Asian Print Awards Management Pte Ltd

65 Chulia Street, OCBC Centre 

#46-23, Singapore 049513

Print Innovation Asia | Labels and Packaging Innovation Asia | Asian Packaging Conference | Asian Packaging Excellence Awards | Asian Print Awards

© 2023 by Digital Marketing. Proudly created with Wix.com