Indonesia’s tobacco processing industry contracted 1.96% in the first semester of 2026, according to the Ministry of Industry. The ministry said investment in the sector fell 3.93% to Rp3.08 trillion over the same period.
Merrijantij Punguan Pintaria, Director of Beverage, Tobacco and Refreshment Industries, said the industry is under considerable pressure on growth. He attributed much of that pressure to the rise of illegal cigarettes.
Exports still growing
Tobacco product exports rose 4.74% year-on-year in January-August 2026, reaching US$1.48 billion. Imports totalled US$250 million, leaving the subsector with a trade surplus of US$1.23 billion.
Conventional cigarettes accounted for 60.65% of tobacco exports. Export performance has therefore held up even as domestic output weakened.
Regulatory uncertainty persists
Rules on nicotine and tar limits, additive bans and health warning images under Government Regulation (PP) No. 28 have not yet been issued. The delay is adding to business uncertainty.
The industry is expected to adjust its strategy ahead of possible excise changes at year-end. Illegal cigarettes made up 13.9% of total cigarette production in 2025.
