logo
















logo

logo

logo

logo

logo

logo
April,
2004


Specialty Cigarettes:
Kretek, the Clever Clove


For the second year in a row, premium cigar imports have shown small gains, posting single-digit growth. It’s not a boom, but it is a positive trend.

Staff Report

The first sensation to greet visitors to Jakarta, Indonesia when they step off the plane is the unmistakable hallmark of kretek cigarettes: the sweet aroma of cloves.

Quite why this should be is a bit of a mystery, since the airport has a strict nosmoking policy, but the redolent smell of kretek is nonetheless pungently present everywhere and remains in one’s nose until he leaves the country again. Indonesians love their kretek, but it hasn’t always been that way. Once relegated to a tiny segment of the market there, they were long favored mainly by rural smokers over the dominant “white” cigarette.

But kretek, named for the sound the burning cloves emit, captured the market in its native land and grew into the huge industry that it has now become thanks to the characteristically spicy, aromatic flavor that strikes a chord with Indonesian tastes. It is perhaps that exotic touch that has opened doors to numerous export markets worldwide, including the United States, where kretek sales continue to grow.

Ten major companies share 90 percent of total kretek sales in Indonesia; the remaining 10% is produced by over 700 manufacturers. Machine rolled kretek control about 50% of the market, and are favored by the growing urban segment. According to Rudy Halimun, international sales manager of Jakarta-based PT Djarum — the second largest kretek manufacturer in Indonesia — kretek cigarettes account for about 10% of the world’s total tobacco consumption.

Indonesia has been producing quality tobacco for several centuries, Dutch colonizers having introduced commercial tobacco production during their rule. It is also the world’s leading clove producing nation, so the elements for kretek are easily sourced for kretek manufacturers. Nearly all of the tobacco used in kretek is sourced in Indonesia, much of it from Madura, and it has to be rajangan tobacco, a term applied to a specific process whereby the tobacco is cut into ribbon-like strips before being sun-dried.

“If it’s not rajangan tobacco, its not kretek,” says Angky Camaro, managing director of Indonesian cigarette business at HM Sampoerna, “and of course, it has to have cloves in it, too.”

While tobacco and cloves make up the essential ingredients in kretek, many additional flavorings — secret concoctions known as “sauces” — are added to give the products their unique taste and aroma.

A Taste of Indonesia, Worldwide
Having conquered the huge Indonesian market, kretek manufacturers are aggressively seeking new markets overseas. Djarum is one of the strongest in this respect, exporting about five percent of their production. Already the most popular kretek in North America, Djarum has captured 70 percent of the kretek market here.

“We penetrate new markets every year,” says Djarum’s Greg Tendon. “We look for aggressive distributors in each country, and we try to build value behind the brand.”

In the U.S., Kretek International of Moorpark, Calif., is the exclusive importer of Djarum. The product range includes the Indonesian industry’s first kretek light in nicotine — Djarum Mild — as well as the first flavored kretek, Djarum Cherry and Djarum Vanilla.

“We launched Djarum Blank in 1996, and it is now the largest selling kretek in the United States,” says Tendon. “Then we introduced it to the Indonesian market.” Djarum concentrates on maintaining quality with an emphasis on innovation. “In 2002, we launched the world’s first cherry and vanilla flavored kretek in the U.S.,” adds Tendon.

Jakarta-based Sampoerna is another major player in the export market. Founded in 1913, Sampoerna — which is distributed in the U.S. by Lignum-2, Inc. of San Leandro, Calif. — has the second largest share of the kretek market in Indonesia. Gudang Garam is the number-one selling kretek band there.

One of the first kretek manufacturers to comply with international regulations and standards, Sampoerna prides itself on the consistency of its products. “Canada has the most stringent regulations for tobacco products in the world,” says Sanjay Kumar, the driving force behind the company’s export drive. “We use these regulations as the yardstick to meet global regulation. We believe we are further ahead than most other companies in this field.”

Bentoel pioneered the machine rolled filtered kretek in 1970 and rode Indonesia’s domestic kretek boom through the 1970s and ‘80s. Following a period of management and fiscal turmoil, this once-dominant company is restructuring, taking a dynamic approach to marketing, and developing new brands. The company’s Bentoel International, and handmade Jakarta brands are imported and distributed in the U.S. by G.A. Andron, Deer Park, N.Y.

Gudang Garam, which entered the market in 1958 — much later than its top competitors — has grown rapidly since then and is now the leader in kretek sales in Indonesia and among the top ten producers of cigarettes in the world. Its traditional Surya and more modern blend Surya Deluxe brands are imported to the U.S. exclusively by American Kretek Company, Chatsworth, Calif.

“The skills in manufacture and marketing which brought this company success in Indonesia are now being applied to marketing Gudang Garam in North America,” the company notes.

Milder Smokes, Export Challenges
The most recent trend to emerge is an urban preference for mild kretek in Indonesia, which now account for about 10 percent of all cigarette varieties sold there. Mild kretek sales saw an average 25 percent growth from 1998 to 2001, and the trend has also jumped stateside.

Several varieties of mild brands are available in the U.S. Sampoerna’s A Mild was the first mild kretek to be introduced. Djarum has three offerings: Djarum Lights, L.A. Lights, and L.A. Lights Menthol. Gudang Garam’s new Deluxe line includes Deluxe Mild and Deluxe Menthol Mild, packaged in category- standout rounded-edge hard packs.

Djarum, Bentoel, Sampoerna, and Gudang Garam have all made inroads into the export market, tailoring their products to suit international regulations and tastes.

Djarum uses the same packaging for its Djarum Lights, Djarum Black and other export brands but uses different specifications for these than for those intended for the domestic market. “All our light products for export contain less than 10mg of tar,” according to Djarum’s Satya. “We use a smaller diameter, more perforations and different blends in our export lines,” he adds.

Ad bans are the single most difficult problem all exporters have introducing their lines into new markets. Point-ofsale identification and advertising in trade publications serve a functional role in getting consumers overseas to try kretek, but its market penetration is relatively small in the countries currently being exported too.

“If you have a friend that smokes kretek, you might be persuaded to try it yourself,” says Satya, “but getting the product well-known to the wider consumer base remains difficult.” Anyone who has smoked a kretek will remember the sweet, spicy flavor and the soothing stream of smoke. An acquired taste, perhaps, but once enjoyed, a kretek is something that smokers want to return to again and again.

RESOURCES
American Kretek Co. ....(888) 322-3710
G.A. Andron ..................(800) 221-1634
Kretek International ......(800) 358-8100
Lignum-2 ......................(800) 544-6862


SMOKESHOP - April, 2004