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)