Indonesian cigarettes maker plots Kenyan market entry

PT Djarum, a 73-year-old Indonesian cigarette manufacturer, is considering entering the Kenyan market, which could challenge the dominance of British American Tobacco (BAT) Kenya.

Last week, a Djarum delegation visited Kenya to assess the market, including cigarette demand, competition, and tax regulations. Djarum, Indonesia’s second-largest cigarette maker, already operates in South Africa and views Kenya as a potential gateway into the East African market.

The company’s cigarette brands include Djarum Super, Djarum Coklat, Inspiro, and LA Lights. During their visit, the delegation met with the Kenya Association of Manufacturers (KAM), which provided insights into the Kenyan market and highlighted potential trade benefits if Djarum sets up operations in Kenya. KAM also emphasized its efforts to combat illicit trade and ensure a fair market.

BAT, the leading cigarette manufacturer in Kenya and listed on the Nairobi Securities Exchange, faces increased competition and market challenges. Another cigarette producer, Mastermind Tobacco (K), was placed into administration last December due to financial issues.

Recent tax hikes on cigarettes have exacerbated market difficulties for BAT, with cheaper cigarettes from neighboring countries flooding the market. BAT reports that illicit cigarettes now account for 27 percent of the Kenyan market, resulting in a loss of approximately Sh7 billion annually in taxes. Additionally, high product costs have led to decreased demand, with consumers opting for cheaper brands.