Indonesia’s tiered excise system keeps cheap cigarettes widely available, encouraging smokers to trade down rather than quit—while kreteks continue to anchor the market. Photo credit: Rubah Hitam Vukova, CC4.0.
Indonesia remains one of the world’s largest tobacco markets, with about 70 million smokers despite years of rising excise taxes, according to the 2023 National Health Survey. The data highlights the limits of relying on price increases alone to curb consumption.
The World Health Organization ranks Indonesia fifth globally in smoking prevalence, with 38.7% of people aged 15 and older using tobacco in 2025, behind Nauru, Myanmar, Serbia, and Bulgaria.
Jakarta has steadily raised cigarette taxes, including a 23% increase in 2020 followed by annual hikes of around 10% in recent years, aiming to reduce consumption while boosting state revenue. Even so, cigarettes remain widely available and relatively affordable, and overall smoking rates have changed little.
Smoking continues to run deep across the population, especially among men. Nearly three out of four Indonesian men smoke, underscoring both the scale of the market and the difficulty of shifting long-established behavior.
Affordability remains central to the issue. While taxes have climbed, income growth and market dynamics have kept cigarettes within reach for many consumers. As a result, many smokers still view tobacco products as affordable despite repeated price increases.
The structure of Indonesia’s tax system further shapes consumption patterns. Multiple excise tiers allow manufacturers to sell products across a wide price spectrum, including low-cost options that appeal to price-sensitive consumers. This setup encourages smokers to trade down to cheaper products rather than cut back or quit.
Kretek cigarettes—clove-based products that dominate the domestic market—continue to account for a large part of total consumption, reinforcing Indonesia’s distinct tobacco landscape.
Taken together, the data points to a market that remains firmly entrenched. Strong domestic demand, broad price segmentation, and steady affordability continue to sustain consumption, suggesting that structural factors—not pricing alone—drive smoking trends across the country.