Montreal Gazette

Made bil­lions from clove cig­a­rettes

TOP OF FORBES LIST Fam­ily busi­ness once had 48% of mar­ket share

- ARI­JIT GHOSH and ALOY­SIUS UNDITU BLOOMBERG NEWS

SIN­GA­PORE – Rach­man Halim, the bil­lion­aire pa­tri­arch of one of In­done­sia’s rich­est fam­i­lies and chair­man of the coun­try’s sec­ond-largest cig­a­rette maker, has died. He was 60.

Halim died at Mount El­iz­a­beth Hospi­tal in Sin­ga­pore at 5:16 a.m. lo­cal time yes­ter­day, said Vidya Boediyanti, a spokes­woman for his com­pany, PT Gu­dang Garam. She didn’t dis­close the cause of death. Halim died af­ter a week of in­ten­sive-care treat­ment for a coro­nary ill­ness, Detik.com re­ported, cit­ing com­pany di­rec­tor Slamet Boe­diono.

Halim and his fam­ily were ranked In­done­sia’s rich­est by Forbes mag­a­zine for six straight years un­til 2006. Un­der Halim, Gu­dang Garam boosted its mar­ket share to 48 per cent in 1997 from 35 per cent in 1990. The com­pany lost its top rank­ing in In­done­sia in 2006 to Philip Mor­ris In­ter­na­tional Inc.’s lo­cal unit a year af­ter the world’s largest pub­licly traded cig­a­rette maker paid about $5 bil­lion to pur­chase PT HM Sam­po­erna.

“It was un­der Rach­man that Gu­dang Garam be­came a mar­ket leader,” said Is­manu Soemi­ran, chair­man of the In­done­sian Clove Cig­a­rette As­so­ci­a­tion. “His big­gest achieve­ment was in­tro­duc­ing tech­nol­ogy at the com­pany,” at a time when ri­vals re­lied on hand-rolling the prod­uct, Soemi­ran said.

Halim, who be­came a di­rec­tor of the com­pany in 1971, ran Gu­dang Garam for 17 years as pres­i­dent un­til 2000, help­ing the Kediri, East Java-based com­pany be­come In­done­sia’s sec­ond­most valu­able com­pany by 2002.

Ex­pan­sion by ri­vals and the lack of new prod­ucts re­sulted in Gu­dang Garam’s mar­ket share of clove-fla­vored cig­a­rettes, known as kretek, de­clin­ing one per­cent­age point to 27 per cent in 2007.

The com­pany’s growth was ham­pered by its re­luc­tance to sell more shares or bor­row money, Yuri Sato, a di­rec­tor at In­sti­tute of De­vel­op­ing Economies wrote in a re­search re­port ti­tled Cor­po­rate Gov­er­nance in In­done­sia in 2004: A Study on Gov­er­nance of Busi­ness Group.

The fam­ily may have been mo­ti­vated to keep a “firm grip on a core part of man­age­ment,” to keep the recipe of the pro­duc­tion of clove cig­a­rettes a se­cret, she said.

Nine out of ev­ery 10 cig­a­rettes smoked in In­done­sia are kretek, named for the crack­ling sound made by burn­ing cloves. The spice, which is na­tive to In­done­sia, is added to to­bacco, im­part­ing a sweet scent and emit­ting eugenol, a chem­i­cal that numbs the throat.

Kretek de­liver dou­ble the nico­tine and al­most triple the tar of con­ven­tional cig­a­rettes, ac­cord­ing to a 2002 pa­per in the jour­nal Phar­ma­col­ogy Bio­chem­istry and Be­hav­ior.

Halim’s death “opens the pos­si­bil­ity of Gu­dang Garam be­ing sold to an over­seas buyer,” said Mu­lia San­toso, a fund man­ager at Jakarta-based PT Syailen­dra Cap­i­tal, which man­ages about $109 mil­lion in as­sets.

Halim was the first son of Surya Wonowid­jojo, an im­mi­grant from China’s Fu­jian prov­ince. Halim, whose Chi­nese name was Tjoa To Hin, was born on July 30, 1947. He is sur­vived by his wife, seven chil­dren, two sis­ters and four brothers.

Gu­dang Garam, which means “salt ware­house,” was set up by Halim’s fa­ther in 1958.

The lack of gov­ern­ment rules to reg­u­late cig­a­rette ad­ver­tise­ments and sales helped make In­done­sia the world’s fifth- largest to­bacco mar­ket and the own­ers of cig­a­rette com­pa­nies among the coun­try’s rich­est peo­ple.

In 2007, Halim and his fam­ily ranked as In­done­sia’s eighth rich­est with a value of $1.6 bil­lion, while Budi Hartono, owner of In­done­sia’s third-largest cig­a­rette maker, Djarum Group, was val­ued at $3.14 bil­lion.

Halim’s funeral is sched­uled for Aug. 3 at his home town in Kediri.

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