In many markets, including most Asian countries, key issues for foreign producers are market liberalization and overcoming government-controlled monopolies. Indonesia is different. It does not have a cigarette monopoly, but rather a large number of independent producers, including foreign companies that have been present since the colonial era. For the white cigarette manufacturers the challenge is in gaining market share, not against a dominant local producer, but against a completely different product. Moreover, both white and kretek producers describe brand loyalty as low, saying that customers switch smokes regularly and are motivated most strongly by price.
White cigarettes are primarily an up-market, urban product in Indonesia.
The economic downturn has exacerbated the price-sensitivity of relatively affluent consumers and driven them toward less expensive kreteks. As an example, in an attempt to make up for lost dollar revenue due to the weakened rupiah, in late 1997 Philip Morris increased the price of Marlboros from Rp 2000 to Rp 6000 a pack. The result was an 80 percent drop in sales volume. BAT has taken the opposite tack by recently bringing in Pall Mall and marketing it as an upscale brand. The Tax and Pricing Scheme 6.