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Indonesia Food and Drink Report Q2 2010
Market |
Food and Drink |
Report Type |
Market Research |
Country |
Indonesia |
Published |
19 February 2010 |
Number of Pages |
70 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Given the vast size of the country and the currently low levels of penetration, mass grocery retail (MGR) has very strong long-term potential in Indonesia. As discussed in our recently published Indonesia Food & Drink Report for Q210, the country has caught the eye of a number of international retailers who are looking to expand their presence in the country. As the Indonesian economy has developed, so has demand for MGR. Thanks to its reliance on domestic demand over exports, the Indonesian economy has outperformed most of its regional peers during the global economic slowdown, and is poised for solid growth in 2010 as it shrugs off the minimal side effects from the global slowdown in 2009. Bolstered by strong domestic demand, we now expect Indonesia's full-year 2009 real GDP growth to have reached 4.3%, considerably outperforming many of its export-oriented peers in the South East Asia region. Bearing in mind the economy’s healthy outlook, Belgium-based international MGR operator Delhaize announced in January plans to triple its expansion efforts in Indonesia. These plans are on the back of solid revenue growth in 2009, with an overall revenue increase of 4.8% at actual exchange rates, rising to EUR19.9bn (US$28.9bn), up from EUR19.0bn (US$27.5bn) in 2008. While the retailer experienced solid growth in its home market, it was emerging markets that really helped boost results, with year-on-year revenue growth of 15.5% in Indonesia, highlighting the importance of emerging markets.
French retailer Carrefour has also been expanding rapidly through its local subsidiary and is now the leading foreign MGR operator in the country. However, Carrefour’s rise has not been without its bumps along the way, as the retailer has had several run-ins with the country’s competition commission. Most recently, in November Indonesia's Business Competition Supervisory Commission (KPPU) ordered the retailer to sell the 75% stake it acquired in smaller rival Alfa Retailindo in January 2008. Following this acquisition Carrefour controlled around a third of industry sales, which the KRRU deemed uncompetitive, ordering Carrefour to offload its share of the business within the next 12 months.
Carrefour paid IDR674bn (US$70.9) for a stake in Alfa in an effort to consolidate its lead in the Indonesian MGR market and improve format diversity – Alfa's supermarkets are a different offering to Carrefour's vast hypermarkets. Carrefour could now struggle to recoup the sum it paid for its share in Alfa due to different market conditions and because it has already completed the conversion of the Alfa network to the Carrefour banner and paid out associated costs of folding the new company into its own. Nevertheless, despite the potential pitfalls of doing business in Indonesia, Carrefour is determined to plough ahead. Not only will the retailer contest the findings of the KPPU, but it is also planning on moving ahead with other planned expansions, such is the potential of the Indonesian MGR market.
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