Cooperatives to get discount from producers

Cooperatives to get discount from producers

JAKARTA (JP): Manufacturers of consumer goods agreed at a
meeting yesterday to shorten distribution lines and sell their
products directly to cooperatives at wholesale prices.

However, manufacturers belonging to the Salim Group have
refused to join the scheme.

"Nineteen major producers have agreed to join the program and,
basically, only follow-up negotiations are needed to settle
discount prices and terms of payments," said Ricardo Gelael, the
president of the Goro wholesale center.

Yesterday's meeting was attended by Minister of Cooperatives
and Small Enterprises Subiakto Tjakrawerdaya and Coordinating
Minister for Trade and Industry Hartarto.

In their speeches to the meeting, both ministers encouraged
executives of the large industrial companies to join the program,
saying it was a good example of partnership between large and
small business and would be mutually beneficial.

Among the participants yesterday was Hutomo Mandala Putra,
whose Humpuss Group has shares in the Goro wholesale center.

The head of the Salim Group, Anthony Salim, who was expected
to pledge his company's commitment to the new scheme, failed to
attend the meeting.

The Salim Group, which has extensive upstream and downstream
businesses, has a dominant position in the consumer goods market.
It also has its own network of distributors.

Ricardo said that under the proposed scheme "cooperative
depots", to be set up by groups of cooperatives, will get their
supply of goods directly from manufacturers.

The goods will be sold by the manufacturers at wholesale
prices with discounts of between three percent and 4.5 percent,
depending on the terms set between the producers and the
cooperatives, he added.

These activities will be coordinated by Goro, which will act
as the guarantor of payments to the manufacturer and of supplies
to the cooperative depots.

Currently, retailer cooperatives cannot get supplies directly
from manufacturers. Their chain of suppliers includes several
wholesalers, distributors and sub-distributors.

Ricardo said that Goro, which will also provide technical
assistance to the cooperatives, will obtain a fee of between 0.3
and 0.5 percent for its pre-financing and factoring services.

Among the producers which have agreed to join the scheme are
Unilever, Nestle, Coca Cola and Gudang Garam.

Ricardo said 27 cooperative depots will be set up in Java next
year. Others, outside Java, will be established the following
year.

Ricardo said negotiations with manufacturers in the Salim
Group, which has extensive distribution lines of its own, have
yet to be completed.

"They did not give explicit reasons for their refusal to join
the scheme," he said.

He added: "What the producers fear most may be that the scheme
will damage their distribution networks -- for those that do have
such networks," Ricardo added.

However, the scheme will be implemented even if the
manufacturers in the Salim Group, such as Indofood, refused to
join.

Ricardo said further negotiations with Indofood, which
produces instant noodles and a variety of other food products,
may result in a compromise on the size of the discounts to be
extended to cooperatives.

"But we have to make sure that (compromises) don't cause
financial disadvantages to the cooperatives. They must still make
a profit out of the scheme," he added.

"The only disadvantage cooperatives will suffer if Indofood
doesn't join the scheme is that their retail stores will lack a
variety of brands. But there are many other brands which can
substitute for Indofood's products," he said. (pwn)