Cigarettes Industry in Indonesia: Market Overview & Outlook 2026-2030

Market Overview

Indonesia is one of the largest cigarette markets in the world, and one of the most distinctive. Almost everything smoked here is kretek, a blend of tobacco and cloves that crackles as it burns and gives Indonesian towns their sweet, spicy smell. White cigarettes of the kind sold in most countries make up less than X% of legal volume. The industry employs millions of people, from clove farmers in Sulawesi to the women who hand-roll kretek in factories in Kudus and Kediri, and it pays a larger share of state revenue than almost any other consumer industry.

We estimate legal retail sales of cigarettes at about IDR 584 trillion in 2025, roughly USD 35.6 billion at IDR 16,400 per dollar. That covers machine-made kretek, hand-rolled kretek, white cigarettes and fine-cut tobacco sold with valid excise bands through warung, minimarkets, supermarkets, online and hospitality outlets. Value rose only 0.7% in 2025 after growing almost 9% a year between 2019 and 2024.

The headline hides a split story. Value has risen because prices have risen, not because more cigarettes are being sold. Legal volume fell from about XXX billion sticks in 2019 to about XXX billion in 2025, a drop of roughly XX%. Each year the government raised excise, makers passed it on, and smokers paid more per stick while buying fewer of them, switching to cheaper brands or turning to the black market.

A useful way to think about this market is as three overlapping businesses. The first is a premium business built on a handful of famous brands, where smokers are loyal and price increases stick. The second is a mass business in the middle, where smokers compare prices pack by pack and switch quickly. The third is an economy business of hand-rolled kretek and small regional brands, where price is everything and the competition includes cigarettes that pay no tax at all. Since 2023 money and volume have been flowing from the second business into the third.

Excise: The Force Behind Every Number

To understand Indonesian cigarettes you have to understand the excise system, because it decides prices, product mix and even which companies win. Excise is a fixed amount per stick, and the rate depends on the type of cigarette and the size of the maker. Machine-made white cigarettes pay the most: IDR X,XXX per stick for the largest makers in 2024. Machine-made kretek pays a little less. Hand-rolled kretek, protected because it employs so many workers, pays the least. Smaller makers in lower tiers pay less again.

Tax makes up roughly two-thirds of the price of a typical pack once VAT and regional cigarette tax are added. The state collected IDR XXX.X trillion of tobacco excise in 2024 and IDR XXX.X trillion in 2025, according to customs data reported by CNBC Indonesia. The X.X% fall in 2025 came even though collections had been running ahead in the first half of the year, and it reflects lower volumes and a shift toward lower-taxed products.

The freeze for 2025 and 2026, decided under Finance Minister Purbaya Yudhi Sadewa, was a response to two problems: falling legal volumes and a surge in illicit cigarettes. It gives legal makers breathing room. It does not stop the shift toward cheaper products, because the gaps between categories and tiers remain.

Segments: SKM, SKT, White Cigarettes and Price Bands

The market splits three ways by product. Machine-made kretek, known locally as SKM, is the largest by far and includes the "mild" low-tar brands that dominate urban shelves, such as A Mild, Djarum Super and Clas Mild. Hand-rolled kretek, or SKT, is the traditional product, still made by hand in large factories and partner units, and it is growing again because it is cheaper. White cigarettes (SPM), led by Marlboro, are a small and shrinking niche.

The price bands tell the story of the past five years. Premium brands have held their smokers, who are generally better off and loyal. Economy brands, mostly hand-rolled kretek, have gained steadily. The losers are mid-priced machine-made brands, which carry the heaviest tax burden relative to their price and lose smokers both to premium and to economy. Euromonitor's price breakdown illustrates the squeeze: tax accounts for about XX% of the price of a pack of A Mild and of Gudang Garam Merah, but nearly XX% of a pack of mid-priced Clas Mild.

Menthol has doubled its share in five years, driven by younger adult smokers, and flavour capsules have grown from a tiny base. Both now face new limits on additives under Government Regulation 28/2024. Packs remain small: more than nine in ten legal sticks are sold in packs of 12 or 16, which fit daily budgets.

Pack prices make the gaps concrete. Euromonitor's price checks put a 16-stick pack of A Mild at about IDR XX,XXX, a pack of Clas Mild at IDR XX,XXX and a pack of hand-rolled Gudang Garam Merah at IDR XX,XXX. For a smoker who buys a pack a day, moving from a mid-priced machine-made brand to an economy hand-rolled one saves close to IDR XXX,XXX a month, a meaningful sum for a household on the minimum wage. That arithmetic, repeated across millions of smokers, explains most of the share shifts described below.

Who Smokes in Indonesia

The Ministry of Health's 2023 Indonesia Health Survey estimated about XX million active smokers, and X.X% of them were aged 10 to 18. The Global Youth Tobacco Survey found that XX.X% of students aged 13 to 15 smoked in 2019. Smoking is overwhelmingly male and deeply social: a cigarette is offered to guests, shared at roadside stalls and smoked through long evenings of conversation. Kretek in particular carries cultural weight.

For the industry, the most important fact about the Indonesian smoker today is price sensitivity. Lower-income smokers rarely quit when prices rise. They cut back, switch to cheaper brands, buy single sticks, roll their own or buy illegal cigarettes. The customs directorate has said openly that falling production reflects downtrading from machine-made to hand-rolled kretek. Weak purchasing power, which we examined in our study of Indonesian purchasing power, has made this shift faster since 2023.

Younger adults behave differently. They are more open to menthol and capsule cigarettes and increasingly to e-cigarettes and heated tobacco. E-cigarette use among teenagers rose from X.X% in 2019 to X% in 2021, according to the Global Adult Tobacco Survey, and e-cigarette excise revenue grew X.X% in 2025 to IDR X.XX trillion while cigarette excise fell.

Where Indonesians Buy Cigarettes

The warung, the small neighbourhood shop that sells everything from instant noodles to phone credit, is the backbone of cigarette retail. It sells close to four in five legal sticks, often one or two at a time and sometimes on credit to regular customers. Convenience store chains such as Alfamart and Indomaret are the steady gainers as they open stores in suburbs and villages. E-commerce is the fastest-growing channel but remains small, and new rules on age checks and online sales should limit it.

Distribution reach is one of the industry's strongest barriers to entry. The large makers run their own sales forces and distributor networks that visit millions of small shops across the archipelago. Any brand without that reach struggles outside its home region, which is why the long tail of smaller makers tends to be regional.

Indonesia's islands are not one market. Java, home to most factories and most smokers, has the densest retail networks and the strongest competition between brands. In Sumatra, Kalimantan, Sulawesi and eastern Indonesia, distances are longer, fewer brands reach the shelf and illicit products travel more easily through small ports and informal trade. For legal makers, holding share outside Java depends on wholesalers and canvassers who can reach remote shops profitably.

Regulation Beyond Excise and the Illicit Trade

Government Regulation 28/2024, which implements the 2023 Health Law, is the most important change to tobacco rules in years. It raises the minimum age to buy tobacco from 18 to 21, enlarges pictorial health warnings from XX% to XX% of the pack, sets limits on nicotine, tar and additives, requires reformulations to be tested by independent laboratories and declared to the food and drug authority BPOM, and restricts single-stick sales, sales near schools and advertising.

The other big issue is illicit trade. A study by the Ministry of Industry and Universitas Gadjah Mada estimated that illicit cigarettes rose from X.X% of production in 2023 to XX.X% in 2025, reported by Fortune IDN. With production at XXX.XX billion sticks in 2025, that implies roughly XX billion illicit sticks and potential lost excise of almost IDR XX trillion. Customs carried out 30,451 enforcement actions in 2025, and XX.X% of them targeted illegal cigarettes.

Illicit sticks sell for a fraction of the price of legal ones and compete most directly with legal economy brands. This is the main reason the government paused excise increases: further hikes risked pushing even more smokers to the black market.

Competitive Landscape

Three groups dominate: HM Sampoerna, majority-owned by Philip Morris International; Djarum, the privately held Kudus-based group; and Gudang Garam of Kediri. Together they hold about two-thirds of legal volume. KT&G of South Korea, Nojorono, British American Tobacco's Bentoel and Wismilak follow, with hundreds of small kretek makers making up the rest.

The order has changed dramatically. Gudang Garam held about XX% of volume in 2020 and was the market leader; by 2025 it was down to about XX%. Its portfolio leans on mid and premium machine-made kretek such as Surya and GG International, the segments hit hardest by excise and downtrading. Djarum rose from about XX% to over XX%, helped by Djarum Super in premium and by economy lines such as Djarum Coklat. KT&G's Esse more than doubled its share. Small makers grew from XX% to about XX% of volume, using lower tax tiers to undercut the big brands.

Competition increasingly runs along the price ladder rather than between flavours or images. Advertising is tightly limited, so the levers left to makers are price, pack size, product format and distribution. Large makers have responded by launching or promoting cheaper hand-rolled lines under their own famous names, by acquiring capacity in smaller tiers and by pushing new formats such as slim, menthol and capsule cigarettes for younger adult smokers. Each annual excise decision can change which of these moves pays off.

Key Players in Brief

The listed results confirm the shift in the market. HM Sampoerna kept profit almost flat on lower revenue. Gudang Garam's profit recovered sharply from a weak 2024 thanks to cost and debt reductions, even as sales kept falling. Wismilak, a smaller maker with strong hand-rolled and economy brands, grew revenue by a third. Foreign groups other than PMI and KT&G are retreating: Bentoel delisted from the stock exchange and dropped several economy brands, and Japan Tobacco's Apache brand has all but disappeared.

The industry also matters well beyond the factory gate. According to the Ministry of Industry, the tobacco value chain employs about X.XX million people, and exports of tobacco products reached USD X.XX billion in 2024, up XX.X%. Packaging, filters, cigarette paper and clove supply are large businesses in their own right, and they move with the industry's product mix.

Alternatives deserve a closer look as well. Philip Morris sells IQOS heated tobacco through its Indonesian business, BAT has invested in its Vuse e-cigarette brand, and a large local vape industry has grown up since 2018, when e-cigarette liquids were brought into the excise system. These products are still small next to kretek, but they draw the younger urban adults who once would have started on mild machine-made brands. Their regulation under GR 28/2024 and their excise treatment will shape how fast they grow.

What This Means for Investors and Suppliers

This article describes the market as it stands today. The full report adds a Porter's Five Forces assessment, a breakdown of where each rupiah of a pack price goes, business models across the value chain, seven mega trends, five company profiles and bear, base and bull forecasts to 2030. You may also be interested in our recent reports on the fragrances industry, the dietary supplements industry and the dog food industry.

Key Questions Answered in the Full Report

Cigarettes Industry in Indonesia Executive Summary

The three slides below summarise the full report. The complete 40-slide version, with the outlook to 2030, value chain, excise analysis and company profiles, is available on Gumroad.

What the Full Report Includes