Information on the target
PT HM Sampoerna Tbk. (Sampoerna/IDX: HMSP) has solidified its position as a leading tobacco company in Indonesia, demonstrating significant investment value and labor absorption. With a commitment to creating sustainable long-term value for its stakeholders, including adult consumers, employees, business partners, and the broader community, Sampoerna has been operational in Indonesia for 110 years. The company adheres to Sustainability Principles encompassing Environmental, Social, and Governance (ESG) topics, integrating these principles into every aspect of its business through the overarching program "Sampoerna untuk Indonesia."
In early 2023, Sampoerna announced additional investments, including a new production facility for innovative smoke-free tobacco products in Karawang, West Java, aimed at exports to the Asia-Pacific region and the domestic market. The company also introduced its latest science-based innovation, IQOS ILUMA, and completed the construction of a world-class Testing and Analysis Laboratory for smoke-free tobacco products. These achievements mark significant steps in providing science-based smoke-free alternatives for adult smokers.
Industry overview in the target’s specific country
The Indonesian tobacco industry is currently facing challenges due to rising excise taxes that exceed inflation rates, creating a widening gap between higher and lower tax segments. From January to September 2023, the overall cigarette industry volume declined by 5.0% compared to the same period last year. However, the Hand-Rolled Clove Cigarette (SKT) segment has shown signs of recovery, with market share improving to approximately 27% by the third quarter of 2023. This recovery is attributed to government policies on tobacco excise that consider labor absorption in the SKT segment.
Sampoerna, as a producer of SKT with brands like Dji Sam Soe and Sampoerna Kretek, has announced plans to absorb tens of thousands of new workers across East Java, Central Java, Yogyakarta, and West Java for its SKT production facilities. This initiative is expected to create direct job opportunities and generate a multiplier effect for local communities. The new SKT production facilities are set to commence operations in the first semester of 2024, with ongoing preparations and recruitment processes currently underway.
With an investment of approximately Rp638 billion (around US$42 million), Sampoerna aims to strengthen its SKT portfolio, which dates back to 1913. The company operates four existing SKT production facilities and collaborates with 38 local cigarette production partners across Java, employing over 76,000 individuals directly and indirectly. The expansion of production facilities and workforce is anticipated to enhance local economic growth and contribute positively to the national economy.
The rationale behind the deal This investment aligns with the Indonesian government's priorities to promote industrial downstreaming, innovation, and labor absorption, ultimately creating sustainable value for society and…