indonesia presentation ronnie
TRANSCRIPT
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Modern Market Growth and ChangingModern Market Growth and ChangingMap of Retail Food Sector in IndonesiaMap of Retail Food Sector in Indonesia
Ronnie S. Natawidjaja, Ph.D.
Center for Agricultural Policyand Agribusiness Studies
Padjadjaran UniversityINDONESIA
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Development of Supermarket
The first supermarket was registered in early 70s and there was no
further development within ten years.
The supermarket was growing very rapidly since 1983 along with
the early stage of economic growth and increase in income per
capita marked as the beginning of the green revolution era.
In the period of 1983-1987, supermarket grows with the rate of
85% per year. The growth was declining but remains increasing by
12% per year between 1993 and 1997.
Supermarket development in the period of 1978- 1992 was mostly
in Metro Jakarta and few large cities in Java Island.
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Early Supermarket Development
1 121
110
307
489
0
100
200
300
400
500
600
68-72 73-77 78-82 83-87 88-92 93-97
Year
Numbe
rofSupermarket
Source: BPS, 2003
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Development of Modern Market(1997-2003)
Source: DRI, 2003, Visidata, 2003 Average growth per year = 14,63%
6 8 10 153 8 4 0 4 9
4 4 2
3 8 5
4 4 0
4 9 4
53 8573
59 9
2 9 0 2 9 03 15
552
73 0
8 58
9 72
0
200
400
600
800
1000
1200
1997 1998 1999 2000 2001 2002 2003
NumberofStore
Hypermarket Supermaket Minimarket Expon. (Minimarket) Expon. (Supermaket)
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Minimarket Distribution in 2004
Source: Retail Indonesia, 2005
0
200
400
600
800
1000
1200
1400
JaBoTaBek West Java Mid. Java East Java Sumatra Others
Province
NumberofStore
Waroeng
Gelael
AMPM
Circle K
Alfamart
Indomaret
12.0%
3.0%
15.4%
0.1%2.3%
67.2%
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Supermarket Distribution in 2004
Source: Retail Indonesia, 2005
0
20
40
60
80
100
120
140
160
180
200
JaBoTaBek West Java Mid. Java East Java Sumatra Others
Province
NumberofStore
Naga
Hari-Hari
Club Store
Sogo
Goro
Alfa
Yogya
Matahari
Superindo
Ramayana
Hero
17.8%
7.2%8.9% 7.5% 8.9%
49.7%
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Hypermarket Distribution in 2004
Source: Retail Indonesia, 2005
0
5
10
15
20
25
30
JaBoTaBek West Java Mid Java East Java Sumatra Other
Province
Num
berofStores Hypermart
Indogrosir
Giant
Makro
Carrefour
10%
4%
14%
10%
4%
58%
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Unique Characteristic of SupermarketGrowth in Indonesia
Why is modern market development mostly
concentrated only in certain areas, particularly Metro
Jakarta and its sub-urban areas? What is the pull and push factor of its development?
What are problems, gainer and looser, from the
development of supermarket?
How to reduce the social cost of most likely the looser?
How to turn the threat and opportunity in to economicpotential?
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Scatter Plot of Income Per Capitaand Number of Stores
0
50
100
150
200
250
300
350
400
450
0 5000 10000 15000 20000 25000
Income Per Capita (Thousand IDR)
Numbe
rofSupermarketStores
Metro Jakarta
Kalimantan
Sumatera
Papua
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Scatter Plot of Number of Householdsand Number of Stores
0
50
100
150
200
250
300
350
400
450
- 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000
Number of Household
NumberofSupermarket
Metro Jakarta
M aluku
Papua
Bali
Nusa Tenggara
Kalimantan
Sulawesi
M id. Java
West Java
East Java
Sumatera
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Scatter Plot Population Size of Major Cityand Number of Stores
0
50
100
150
200
250
300
350
400
450
- 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000
Population Size
NumberofStore
Metro Jakarta
SurabayaBandung
Semarang
Medan
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Percentage of Foreign Investmentin the Modern Market
66.2%
9.8% 11.0%
33.8%
90.2% 89.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Hypermarket Supermarket Minimarket
Foreign Domestic
Source: International Business Strategies, 2003
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Marketing Strategy and Investment
Foreign investment mostly on hypermarket
and about 10% on supermarket and
minimarket, some of them are franchised Most supermarket is local investor. To face
tight competition, large supermarket develop
small convenient store (minimarket) and
more aggressively place the store closer to
the consumers
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Modern retail market is taking overtraditional market by 1-3% per year
3.6% 4.7% 5.0% 5.4% 7.6%
18.0%20.3% 20.4% 21.1%
22.0%
78.3% 74.9% 74.6%73.4% 70.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004
Minimarket Supermarket Traditional Provisions
Source: ACNielsen, 2004
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Even though the contribution of modern trade in the
number of stores is only about 1%, contribution interm of sales turnover is 25% of the total market
Source: ACNielsen, 2004
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Demonstration of Traditional Market TradersAssociation on Supermarket Development
Traditional traders
(wet market) asking
for protection to theDPRD (Local
Peoples Assembly)
Metro Jakarta from
competition withsupermarket
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Farm
Collector
Supply Chain of Horticulture Productsto Supermarket/Hypermarket
Importer
SmallFarmers
Large Farmer/Agriculture Firm
Agri ProductSupplierCompany
DedicatedAssembler
SUPERMARKETHYPERMARKET
Wet Market(Traditional)
35%
10%
65%
15%
10%
35%
30%
5%
60%8% 7%
10%10%
5%35%
40%
80%
15%
25%
5%
30%
40%
30%
70%
10%
100%
60%
10% 15%
5%
25%
Adapted from: DAI CDS IPB, 2004
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Key Element of Supply ChaintoSupermarket
Institutional Setting
Infrastructure
InputSupply
AgricProduction
Process
DedicatedSupermarket
SupplyerSupermarket Consumer
Information Flow
Product Flow
Financial Flow
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Problem for Farmers
Difficulties in responding to demand of agricultureproduct with specific quality, quantity, and time sustainably
Low technology investment
No extension service help on the technology andinvasion
Farmers group is only formally exist (govt. guidedprogram), but can not functionally responded to thechanging environment; farmers mostly work individually
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Problem for Dedicated SupermarketSupplyer
Payment of hypermarket and supermarket is not cash
and carry, paid in 10-20 days
Credit payment of supermarket cannot be used ascollateral for a loan from banking system
Difficult to find consistent quality and quantity of produce
sustain ably, buy 1 ton, 0,4 ton to supermarket and 0,6
ton has to be resale to wet market
Difficult to built long time working relationship withfarmers, always looking for short term gain
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Threat to Local Farmers
Share of hypermarket and supermarket in Indonesia is predicted
to grow continually. However, at the moment is only 10-15%, it
seem to be not too important. The picture may change if
supermarket grow and spread outside Java and kabupaten level Looking to the development in other countries the share can reach
80% of the food market, farmers will face very limited share if
cannot join the growth of supermarket If supermarket cannot find the product locally, will import from
some where else cheaper and better quality
Induce policy sentiment to protect farmers and politically sound
protectionism.
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Conclusion
The growth of hypermarket and supermarket is consumers demand
pull. For the time being, the growth is only strong in the Java island,
large urban area and metropolitan;
Minimarket is part of the market strategy of local large supermarket
to survive competition. Can penetrate deeper into a housing
complex in urban area. Threat mostly to the traditional and mom-
pop shop
Development of modern market can be effectively induced
agriculture product standardization, food safety and increase
farmer's welfare. But at the same time also it can be a threat tofarmers if they cannot meet the standard requirement.
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Future Trend
Modern market growth in Metro Jakarta, Bogor, Tanggerang, Bekasi willstill continue to grow for the next 5 years. However, the growth will soonsaturated and slowing down.
With the continue growth of the Indonesian economy, modern retail will
continue to expand with the growth between 15-25% annually. The picturemay change quickly if supermarket grow and spread outside Java andkabupaten level.
The share of modern market in Indonesia at the moment is only 10-15%, itseem to be not too important. If supermarket spread to outside Java andkabupaten level, it has potential to increase its share to 60% within lessthan 10 years.
Minimarket is part of the market strategy of local supermarket to survivecompetition, going deeper into smaller population in a housing complex.
The expansion of minimarket have more potential to penetrate down tokabupaten (district) and kecamatan (subdistrict) level.
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Policy Suggestion
There have to be a government policy preventing direct
competition of hypermarket and supermarket, with traditional
market according to local socio economic characteristics and
population density
Technology of farmers, SMEs, and traditional provisions
need to be improved, so that their product standard fit with
the supermarket standard Strengthen farmers and SME organization
Long term credit for investment and support of bridging
financial support to help actors of supply chain tosupermarket