Kretek clove cigarettes are preferred by over 93% of smokers in Indonesia. But outside the country, kretek remains largely unknown to many consumers. Tobacco Asia asked one of Indonesia’s most successful kretek manufacturers, Djarum, for some insights into the pitfalls and challenges facing kretek as it struggles to conquer overseas markets.

The US had been a principal target for Djarum’s export drive for some time.

But the recent FDA decision to ban ‘flavored’ products, including clove cigarettes (but not menthol flavored cigarettes), has seen its marketing plan capsize. 

Legal action has been initiated to attempt to reverse or moderate the ban in favor of allowing kretek products to be imported and sold in the country, but clearly Djarum has an uphill climb ahead of it in the US.

“Although we are challenging this discrimination we will abide by the law,” confirmed Djarum. “The Indonesian government is complaining to WTO Dispute Settlement Body. The issues are: clove cigarette are a heritage product of Indonesia and there is not the slightest intention to be marketed to underage customers as proven from NSDUH report; banning clove but allowing menthol, we believe is a discriminatory act based on WTO regulations and so far there is no scientific evidence that clove cigarettes are more harmful than menthol cigarettes.”

The US importer of Djarum products announced recently that it would drop its case against the FDA regarding kretek cigars as the FDA clarified its position on flavored cigars allowing the trade to continue in the US. Although Djarum was not involved in this case, the ramifications are obvious. Since kretek cigarettes are currently not allowed under FDA rules, kretek cigars remain the only viable Djarum product in the US.

“It [the FDA ban on kretek cigarettes] is significant as our clove cigarette sales to the US dropped to zero immediately,” said a Djarum spokesperson. “It remains to be seen but we are hopeful that we can restore US sales with cigars. Kretek cigar packaging has been developed for some time following guidelines from FTC and ATF and it depends on FDA guidelines if any changes are required.”

In other international markets, other factors can influence export dynamics.

“Since our export is to the world therefore it is affected to some degrees by the recent global financial crisis,” said Djarum.

Malaysia, with a large number of Indonesian expats in residence, is one of Djarum’s principal export markets. However, rampant illicit tobacco products, including cheap kretek, have been creating problems for all licit manufacturers (over 30% of tobacco products consumed are thought to be tax-unpaid).

However, Djarum continues to enjoy success in the market and told us that “our export to Malaysia is legal and it will remain legal.”

While India and Russia have been identified in the past as potential markets for Djarum products, so far there has been little progress in either country.

However, the Middle East is proving to be more fertile ground, despite the recent downsizing of the expatriate work force, including many Indonesians.

“We are present in Middle East and our consumers are not only Indonesian contract workers so the effect is not much,” according to the company, adding that “Africa is also an interesting potential market for us.”

In Europe, Holland has long been the largest kretek market but there are signs that more Europeans are becoming aware of kretek.

“Holland has been a good market for kretek due to its past history,” said Djarum. “However, thanks to the freer movement of people throughout EU, some other EU countries now are more aware of kretek cigarettes.”

 

Finding a good distributor is of course key to penetrating and growing in any market. Djarum has proven itself adept at this task, not only domestically but also overseas. So what does Djarum look for in a overseas distributor?

“Djarum will look for a distributor that understands marketing because our support is also in marketing,” said Djarum. “Of course, this support is different from country to country as it depends on regulations in each country.”

Finally, to ensure its products are acceptable to both legislators and consumers in any particular country, Djarum, in conjunction with its distributors, puts a lot of effort into developing products that stand the best chance of success in the market.

“Our export products remain clove cigarettes and clove cigars as it is our expertise but it must comply to each export country’s regulations,” Djarum told us. “So since the beginning the products have been specifically developed for each particular export country.”

It has been a long road for Djarum and there have been setbacks and challenges along the way.

But Djarum’s ace in the sleeve is hard to beat: once a smoker tries kretek, the chances are they will warm to its sweet, comforting taste and aroma and become both a customer and an ambassador for this uniquely Indonesian smoking experience. And since Djarum has put a lot of effort into promoting its kretek cigarettes and cigars around the world for many years now, no one is betting against it ultimately being rewarded by a well-earned increase in exports in the future.

Meanwhile, its dominant position in the domestic market continues to prove that Djarum’s products represent the very best of kretek – and what better platform could there be to launch its exports from?