Aqua sets modest growth target due to higher cost

Tony Hotland, Jakarta

Drinking water company PT Aqua Golden Mississippi has set a conservative growth target for 2004 despite a supportive ministerial decree due to higher projected operational costs.

Aqua's president Willy Sidharta said on Thursday that the company was relying on a regulation issued by the Ministry of Industry and Trade in November last year to boost the sales of its five-gallon container, a major contributor to total sales.

The regulation stipulates that mineral water bottles of one brand can only be commercially refilled by the company that owns the brand.

"Last year, we lost quite significantly in the sales of our five-gallon containers due to the mushrooming of non-branded drinking water refill outlets," he said.

Aqua reported a 3.4 percent drop in the sales of its five- gallon bottles last year. The bottles contribute 70 percent to total sales volume and 33 percent to total sales.

"However, we were still able to balance the drop since there were substantial increases in the sales of other types of water bottles," he said.

There are reportedly over 4,000 drinking water refill outlets, which have been blamed for a 30 percent drop in the overall sales of the five-gallon bottles. People can refill their five-gallon drinking water bottles at a much lower price at these outlets.

Aqua sells one five-gallon dispenser bottle of water for Rp 38,500 (US$4.52). For a five-gallon bottle of Aqua-produced water in exchange for an empty dispenser bottle, one pays Rp 8,500.

However, many people have started refilling their Aqua bottles at water refill outlets that offer filtered and "purified" water, since it only costs up to Rp 3,000 to exchange an empty five- gallon bottle with a full one. These stations also sell a five- gallon bottle of drinking water for only Rp 20,000 to Rp 25,000.

Overall, Aqua reaped Rp 1.07 trillion (US$126.73 million) in sales last year. Although the figure is marginally higher than in 2002, profit dropped from Rp 124.05 billion to Rp 107.28 billion due to higher operational costs.

"These costs are mostly from the higher price of materials used. On the other hand, we can't raise the price because it will make it difficult for us to compete with both existing and new competitors," said Willy.

He added that the company was also counting on the elections, hoping that more gatherings and events take place, which would jack up the consumption of bottled drinking water.

Indonesia held a legislative election on April 5, and is scheduled to hold its first presidential election on July 5, with a possible run-off on Sept. 20.

Willy said the publicly listed company would only make a little investment in 2004, mostly by adding more bottles and crates, office equipment and machinery.

The company dismissed around 270 employees in March as part of restructuring efforts by merging several factories. Currently, it has 12 factories across the country and one in Brunei Darussalam.