Indofood CEO sees bright future ahead for food company<\/p>\n
Publicly listed food conglomerate PT Indofood Sukses Makmur
\nfaces tough challenges this year, ranging from a possible
\ninvestigation by the Business Competition Supervisory Commission
\n(KPPU) over alleged violations of anti-monopoly legislation, to a
\nbrand dispute.<\/p>\n
Indofood, he largest instant noodle maker in the world, is 52
\npercent owned by Hong Kong-listed First Pacific Co. Ltd., while
\nthe remaining shares are held by the public.<\/p>\n
Indofood's sales last year increased by 12 percent, to Rp 16.5
\ntrillion (about US$1.9 billion), with net profit rising 8 percent
\nto Rp 802 billion. The company's total assets are worth Rp 15.3
\ntrillion.<\/p>\n
Noodles are the main pillar of Indofood's business, with a 55
\npercent contribution to net profit, followed by flour (22
\npercent), edible oil and fats (19 percent) and miscellaneous
\nitems, such as snacks and baby food (6 percent).<\/p>\n
The Jakarta Post's Rendi A. Witular interviewed last week
\nIndofood chief executive officer (CEO) Eva Riyanti Hutapea. The
\nfollowing is an excerpt:<\/p>\n
Question:How do you anticipate a possible probe by KPPU over
\nallegations of monopolistic practices? How will it impact on
\nyour business?<\/p>\n
Answer: We are always ready to be investigated by them because
\nfirst of all, we have never indulged in unfair (business)
\ncompetition nor unscrupulous business practices. And second, the
\ndomestic market for the food sector is still large.
\nThe impact? ... For sure we are still thinking positively that
\nnothing will happen.<\/p>\n
Q: What about the brand dispute?
\n(In December 1998, one-time partner of Indofood, businessman
\nDjajadi Djaja, filed a lawsuit with the South Jakarta Court
\naccusing Indofood in 1984 of having forced him to sell his 11
\nbrands to the company very cheaply. Among the brands were
\nIndofood's now famous Indomie instant noodles and Chiki snack.)<\/p>\n
A: That is just an attempt by a certain party, which is not true.
\nIn 1994, before our initial public offering, we made an
\nannouncement in the media that anyone who had problems, such as
\ndebts or disputes with Indofood, should come to us and settle the
\nmatters.<\/p>\n
However, no one came and thus it was clear that there was no
\nproblem.<\/p>\n
In the first round of the trial, we won the case; now we are
\nstill awaiting the result from the higher court as the party
\n(Djajadi) made an appeal.<\/p>\n
Q: What if you lose the case<\/p>\n
A: We are optimistic that we shall win it.<\/p>\n
Q: About Indofood's debt level: How manageable is it, as most of it
\nis in U.S. dollars?<\/p>\n
A: As of March (2003) our outstanding debt was $435 million and
\nRp 3.4 trillion.<\/p>\n
It is still manageable because we have provided hedging for
\nour U.S. dollar loans. Indofood has a principal-only swap (POS)
\ncontract of $310 million with Credit Suisse First Boston and Bank
\nof America Asia Limited, in addition to export revenue last year
\ntotaling $259.<\/p>\n
Q: How do you view this year's market prospects for your products?<\/p>\n
A: In any kind of situation, people need food. Indofood's
\nproducts are still affordable, even for the poor, compared with
\nother kinds of food, such as from Tegal and Padang warung
\n(street-side restaurants), which sell meals at an average price
\nof Rp 3,000, while Indomie sells for only about Rp 1,000.<\/p>\n
For cooking oil, in terms of brand, the price is likely to
\nrise; however, consumption is still low in comparison with other
\ncountries. Annually, the consumption here is no more than 10
\nkilograms (kg) per capita which is equal to Rp 50,000. That is
\nstill small.<\/p>\n
The same situation is true for flour: Our consumption is still
\nlow, at only 14 kg per person per year.<\/p>\n
Our domestic market, with 220 million people, is still huge.
\nWe are targeting to grow by 15 percent this year.<\/p>\n
Q: What is Indofood's focus this year?<\/p>\n
A: This year, our focus is on developing products for high-end
\nconsumers. The current situation is that rich people eat the same
\nIndofood products as consumed by lower- to middle-income people.<\/p>\n
This shows that the rich have accepted our products well. But
\nif we packed the products exclusively and gave them some added
\nvalue, the rich would accept them at a higher price.<\/p>\n
Producing high-end items is all about small volumes, but high
\nspending. We estimate that there are 16 million high-end
\nconsumers in the country.<\/p>\n
This is a long-term aim: Our target is 30 percent high-end and
\n70 percent medium-to-low (market composition) by 2010.<\/p>\n
For this year, we shall also focus on improving our
\ndistribution chains.<\/p>\n
Q: What kind of high-end products are you planning?<\/p>\n
A: Our main pillars are still instant noodles, flour and cooking
\noil, but we are also developing other products, such as snacks
\nand baby food.<\/p>\n
We shall develop food for infants aged from four months to
\nfive years, and also for elementary school children up to the age
\nof 12.<\/p>\n
As for snacks, we shall produce indigenous snacks from all
\nprovinces. We estimate a maximum of 30 products this year.<\/p>\n
For high-end noodles we shall launch about 30 items this year.<\/p>\n
Q: Are you planning any acquisitions this year?<\/p>\n
A: Well, we'd like to, especially in the food sector, but there
\nare no suitable candidates yet.<\/p>",
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