Developing a lucrative business from fine cigars and sugar cane
ONE JAVANESE COMPANY IS RESPONSIBLE FOR 30 PERCENT OF THE WORLD'S TOBACCO, BESIDES PRODUCING SUGAR, COCOA AND JUTE

Indonesia produces 44 percent of the world’s tobacco and one plantation in Java supplies a massive 30 percent of this.
Established in 1996, PT Perke-bunan Nusantara X plantation (PTPN X) has a solid reputation in the world market. The firm produces tobacco on three estates spread over Eastern and Central Java, and its high-quality product is used to make cigars.

DUDUH SADARACHMAT President Director of PTPN X

Duduh Sadarachmat, President Director of PTPN X, says almost 60 percent of its tobacco is sold to the Swiss company Burger Sohne AG Burg (BSB), with whom the plantation operates a joint-venture factory that makes the bobbins used in the creation of cigars in Jember, East Java.
In cooperation with local firm, Koperasi Karyawan Kartanegara, PTPN X makes cigars under a variety of brand names, including Macho, Al Capone, Torpedo and Bali Tip for the domestic market. Whole leaf tobacco is used in the more upmarket cigars sold under brands such as Churchill, Grand Corona and Robusto.
BSB itself is the second-largest cigar maker in Europe, with factories in Germany, the Netherlands, Brazil Switzerland, Honduras and the Canary Islands.

HIGH QUALITY Indonesian cigars are known for their outstanding aroma and color.

Through improving its methods of producing shade-grown tobacco, PTPN X has been able to compete with Cuba, Colombia, Ecuador, the U.S., Brazil and Central American countries.
Mr. Sadarachmat says: “In the U.S., our buyers are Lancaster Leaf Tobacco and Vetab International, and we are looking for more. Most of our products go to Europe, say 90 percent, and the rest goes to the US, Japan and Africa.”

“We would like investors to come and do business with our company,” he adds. New markets are also being sought, such as Morocco and Tunisia.
PTPN X produces high-quality cigars and cigarillos made from pure tobacco. The cigar tobacco has been developed through long years of production, backed by intensive research. There are hybrids with outstanding aroma, elasticity, burning capacity and color.
Packaging is either paper or carved wooden boxes, for shipment to local or export markets.
Fillers are manufactured from a special blend of Besuki Na Oogst Tobacco, Virginia FC and Lumajang VO. The binder is made from Besuki Na Oogst Tobacco only, which has a specific taste and the wrapper is of Besuki Shade Grown Tobacco. This composition offers a neutral flavor and a smooth texture.

PRODUCTS from PTPN X include (from top): cocoa, tobacco and jute bags.

Deli Tobacco is always used exclusively for the wrappers of very expensive cigars. Vorsendlands tobacco and Besuki Tobacco are used for distinguished wrappers, high-quality natural binders and for good aromatic fillers. Besuki Tobacco is known for blending tasty cigar materials, and it can also be used for cigarettes, especially when a strong taste is desired.

The company also grows sugar and cocoa for domestic consump-tion and operates sugarcane processing plants and a jute bag factory. In addition it runs three hospitals, which provide services for company members and the surrounding farming communities.
Sugar is the main commodity at PTPN X, which is the second-biggest supplier to the domestic market. Annual output is around 286,000 tons, produced at 12 factories spread across East Java.

Some 95 percent of the sugar-cane fields are owned by the farmers, and about five percent by PTPN X. The company owns the actual sugar mills, but they need upgrading.
“If we have strategic partners in the sugar factories, we can modernize them,” explains Mr. Sadarachmat. “As long as we continue to make a profit, the cane farmers will come to us.”
Mr. Sadarachmat points out that there are great opportunities to be made in investing in sugar-processing plants. The national output is 1.8 million tons, whereas Indonesians consume more than 3.4 million tons a year. This means Indonesia has to import an annual 1.6 million tons of sugar to make up the shortfall.

“Because there is a national shortage, and the government is doing its utmost to help farmers increase productivity, if we increase production we will not need to import any sugar,” he says.
“The problem at the moment is that there are too many illegal sugar importers, and this has a direct impact on the price – it tends to drive it down sharply.”
Mr. Sadarachmat believes the establishment of a regulatory sugar board would improve the situation. “And if we can improve our productivity as well, the lower the price will be,” he adds.