Learn the Successful Strategy for Regeneration of the Djarum Family Business

The number of giant family business groups in Indonesia remains quite substantial. Generally, these family businesses tend to decline in the third and fourth generations due to overly complex structures. Amid the prevailing sense of unease, family companies, such as Djarum, continue to strive for survival by expanding into various lines of business.

"If anyone asks why Djarum is expanding left and right, does that mean it is due to greed? You do not understand how restless we are? Essentially, we are a restless family that has experienced the loss of our industry. Did the (peanut oil) business disappear because of palm oil or because of Japan? It is gone. You do not know how restless we are," said Chief Operating Officer of PT Djarum Victor Hartono during a public lecture at Paramadina University, Jakarta, Saturday (26/7/2025).

At the Meet The Leaders event, "Djarum: A Story of Strategic Succession" at Paramadina University, Victor shared his family's anxieties, success stories, and the professionalism of his family business. Since its founding in 1951, Djarum has transformed from a cigarette company into a multi-sector company, spanning banking, cigarettes, property, electronics, culinary arts, hotels, consumer goods, technology, sugar, and even automotive.

The first generation of Djarum played a role in starting the family business, the second generation expanded it, while the third generation globalized it. As the third generation of Djarum, Victor has a strategic role in the successes that have been achieved as well as in Djarum's future plans.

In terms of revenue, Djarum's cigarette business currently contributes around 30-40 percent of the total business. "We've been afraid for a long time that cigarettes would become a sunset industry. So we've tried everything. We've entered Polytron. We've entered Blibli.com. We've entered Hartono Plantation. We've done everything," he said.

Victor began his presentation with the history of his family's business. He is actually considered the ninth generation from his ancestors who entered the business world since the Dutch colonial era.

Victor recounted that the beginnings of his family's business started with a peanut oil venture run by his great-grandfather in Lasem, Central Java. The peanut oil industry was subsequently overshadowed by the development of palm oil.

"My great-grandfather was the fourth generation. Martin (Victor's younger brother) and I are the ninth generation. The fifth, sixth, seventh, and eighth generations are in limbo because the peanut oil business is in decline. I'm the family cemetery administrator, so I know the fourth generation's grave is very large, the peanut businessman's, the fifth generation's is getting smaller, the sixth generation is getting smaller, and they don't have the funds. That's an indication of reality," he added.

Victor understands the structure of his family's burial site because he is the caretaker of the family grave located in Rembang Regency, which is land granted by Queen Wilhelmina of the Netherlands. "This means we are compradors (intermediaries) for the Dutch. We, well, who is the government, we adapt. That is also a family story. Whoever is in front of us, we adapt," said Victor.

After the peanut oil business went bankrupt, the seventh generation of the Victor family, namely the grandfather, Oei Wie Gwan, then opened the Cap Leo firecracker factory in 1927. However, this factory, which used gunpowder as its raw material, was subsequently closed by the Dutch to prevent it from being used to make bombs when the Japanese began to arrive in the homeland in 1942.

"So, this is a traumatic experience for my family. This is a livelihood that should be sustainable, while we were doing well (in business) in Rembang, what does it have to do with Japan, it was closed (by the Dutch)," said Victor.

Oei Wie Gwan then attempted to adapt by switching to contracting work. He was involved in constructing the runway of Ahmad Yani Airport in Semarang during the Japanese occupation era.

Oei Wie Gwan then established Djarum as the first generation. He has two sons, namely Oei Hwie Siang (Bambang Hartono) and Oei Hwie Tjhong (Budi Hartono). Victor is the eldest son of Budi Hartono.

Victor recounted that his extended family is descended from immigrants from Fuzhou, China. "We are gradually becoming more prosperous, even though those from Fuzhou were almost certainly impoverished. I see their graves are also well taken care of. I have been managing this since the first generation. I take care of everything. So I can see from the quality of the graves. This is gradually improving (his business success), slowly rising, over several generations," said Victor.

The Djarum family business format begins with the founder, followed by a partnership between siblings, and then a consortium of cousins. The family has a rule that brothers-in-law or sons-in-law are not allowed to interfere in business matters.

Family business matters must take precedence over other interests. Life partners are also regulated to be limited to one, and the number of children is kept to a minimum.

Victor continues to strive for the next generation of Djarum to develop better than before. According to Victor, there are several solutions for the continuity of the family business.

Companies in Japan, for instance, have implemented a policy of designating only the eldest male child as the successor. Other companies, such as Kikkoman in Japan and Samsung in South Korea, opt for division or separation of business. There are also those who choose to sell their companies in Indonesia, such as Kecap Bango.

Companies like Djarum choose to maintain unity among family members. Regarding decision-making, for instance, Uncle Victor, Bambang Hartono, decided to grant an additional 1 percent share to Budi Hartono in 1994. The allocation of this 1 percent share was to clarify who would be responsible for deciding which industry to enter, whether to raise prices, maintain prices, and the investments to be chosen.

"So there's clarity, don't let it be 50 percent 50 percent, and then there's no decision. If it's 51 percent, it's clear, but it also involves working (running the company). The one who holds 51 percent has to take care of everything. Nothing in life is free. This is giving work. So if there's a difficult situation now, my dad, Martin, and I are the ones taking care of it. My cousins are taking care of it. 'Report us, okay?' This is a real incident," Victor said.

In addition, recommendations for positions within the company should not be decided by parents for their children. When appointed as COO, for example, Victor received a recommendation from his uncle and was approved by his father.

"This means that it should not be the parents who provide recommendations to their children. This is what I advise to other families if they want peace," said Victor.

The Djarum Investment Board, for example, consists of cousins Victor Hartono, Martin Hartono, Armand Hartono, Stefanus Hartono, Vanessa Hartono, Natalia Hartono, and Roberto Hartono. Some of these cousins have chosen to focus on being housewives and no longer attend meetings. The system used is a village council model, which allows for differences of opinion but prioritizes deliberation and consensus.

There's also a family board that organizes reunions to unite families, arranges funerals, and even provides scholarships for extended family members. The key to the Djarum family's success also lies in simplicity. Victor emphasized that Confucian teachings state that a person's highest level is when they are moderate and modest.

Victor's parents, for instance, will not provide a monthly allowance if their children have not submitted a financial report. In business, they also rely on common sense.

Currently, the fourth generation of Djarum consists of 18 individuals. For family members who are unable or unsuitable to be involved in managing the business, they do not need to force themselves and can simply enjoy the dividends. Among this fourth generation, for instance, there are those who do not like smoking, and therefore, they are not compelled to participate in the tobacco company.

"But at this moment, we also have more business pillars. So there is a greater possibility for rotations. To determine where it fits best," he added.

Victor emphasized that Djarum does not aim to be at the forefront of technology or innovative products. "Our interest is to first build what is close to us. Then, to develop our country. Only then the world. I am still focused on helping the country. Whatever we can do for the country, we will do. In education, sports, the environment, culture, and others," he added.

When delivering his presentation, Victor was accompanied by the Chancellor of Paramadina University, Didik J. Rachbini, and the economist from Paramadina University, Wijayanto Samirin.

Wijayanto joked that he shares a hobby with Victor, but has a different solution regarding it. They both enjoy noodles; however, Wijayanto orders from Bakmi GM online, while Victor chooses to buy the Bakmi GM company.

According to Wijayanto, the anxiety experienced by the Djarum family will drive individuals to work hard and continuously improve themselves. A sense of comfort and security is, in fact, a recipe for a company to lose its competitive edge.

"In this world, nothing is static. Products change, tastes shift, technology becomes more advanced, and geopolitics fluctuates. Those who wish to survive must continue to move and innovate. This is a lesson from Victor Hartono," said Wijayanto.

Wijayanto added that many businesses in Indonesia originate from family enterprises. These businesses grow, expand, and ultimately cease to be family businesses by the third or fourth generation due to the overly complex structure if they continue to maintain the family business model.

Data frequently utilized by various international institutions, such as Price Waterhouse Cooper (PWC) and Harvard Business Review, indicates that 30 percent of family businesses survive into the second generation, 12 percent into the third generation, and only 3 percent into the fourth generation. Succession failures and family conflicts are the primary reasons for these failures.

"As Victor Hartono said, a solid family charter and open communication within the family are essential," he said.

According to Wijayanto, family businesses still represent an important form, but the current trend shows that the majority of companies, especially those initiated by Gen-Z, are established in a format that is not a family business. Shareholders are a collection of like-minded individuals, with the majority not coming from a single family. This is particularly evident in most start-ups.

Maintaining a family business is no easy feat. All success will continue to grow thanks to professionalism and open communication within the extended family.