Eating out? Wait a minute, it's crisis time

Eating out? Wait a minute, it's crisis time

By Rita A. Widiadana

JAKARTA (JP): The clock strikes 12 noon. Time for lunch.
Hundreds of workers, housewives and their children flock to
family restaurants in the city's malls or to more sophisticated
cafes in the basements of office buildings and hotels.

When they get there they are spoiled for choice. Menus are
diverse, ranging from local dishes and Japanese and Korean
specialties to fast food like pizza, fried chicken and cheese
burgers, and food is available everywhere.

That was the daily lunch time scene before Indonesia was hit
by the economic crisis.

Eating out became part of the lives of many affluent people in
Jakarta and other big cities in Indonesia during the boom times
which began in the early l980s.

McDonald's, Pizza Hut, Sizzlers, Kentucky Fried Chicken and
Hoka Hoka Bentos among are among a myriad of fast food
restaurants that have become household names in the country.

Indonesia is now going through an unprecedented economic
slowdown and the lifestyles of many people have changed in a
drastic way.

For many people these changes mean that they come straight
home from work and spend more time with their families. No more
lavish lunches or dinners.

"Since the economic crisis began, I've rarely taken my family
out for lunch or dinner. Under the present circumstances it is
not wise to spend extra money on food because the situation could
get even worse," said Djoko, a bank executive.

Nadia, 25, an employee at a foreign oil company, shared
Djoko's sentiment. "Now I have to think twice before entering a
restaurant. I bring a lunch box to work every day, something that
I would not have done a few months ago," commented Nadia, who
earns around Rp 3 million a month.

With the sharp fall in people's purchasing power and changes
in consumer behavior, the restaurant business is being forced to
swallow a bitter pill.

Bambang N. Rachmadi, president of McDonald's Indonesia,
admitted that the restaurant business is facing a difficult time
after the rosy days of the last ten years.

"We understand that some of our faithful customers are no
longer able to buy our products," said Bambang.

When the crisis started in July l997, economists predicted
that businesses would face severe difficulty when the rupiah hit
Rp 6,000 against the U.S. dollar, he said. Now the rupiah is
standing between Rp 12,000 and Rp 13,000 against the dollar.

"The rupiah's depreciation against the U.S. dollar has been
ridiculous, not to mention the high bank interest rates and
inflation. It is hard for any businessman to endure these
circumstances, " he complained.

It is just a matter of time before businesses start to "die"
one by one unless the government takes bold and swift action to
start an economic recovery.

"In this critical period, people, with only a few exceptions,
are likely to stop eating out," he said.

McDonald's, he said, must make an all-out effort to capture a
share of this very thin market.

One way it has attempted to do so is with the launch of the
RiceEgg, in addition to its value for money Paket Hemat (meal)
packages.

A RiceEgg consists of rice and a egg, with some vegetables and
shreds of meat which sells for Rp 2,000.

Rice is the staple food for most Indonesian people and egg is
high in protein, nutritious and still affordable, Bambang said.

"It is very inexpensive and we take a small profit margin from
this product," Bambang claimed. "You can compare our price with
the price of rice in other family restaurants which is about Rp
1,000 to Rp 2,000 a cup," he added.

The price of other McDonald's products have increased by an
average of 10 percent to 15 percent because of the soaring price
of ingredients.

In recent years McDonald's 80 percent of the ingredients in
its products have been local produce. However, many of the local
suppliers have gone bankrupt because of the economic crisis and
so the imported content of the food on sale has risen. This, he
said, would affect the companies production costs and filter
through to selling prices.

"A lot of businesses have already collapsed. We are now
entering a survival period which I think we will come out of by
the year 2,000 at the earliest," Bambang said.

Until such time as a recovery begins the company must cut its
profit to the minimum, slash overheads and production costs and,
if necessary, close unprofitable outlets and reduce its
workforce.

Bambang said that business flourished up until the early part
of l997. "We had plans to open a large number of outlets in
several cities but at that time nobody expected we would face the
economic crisis," Bambang recalled.

The company decided to press ahead with the plan in which it
had already invested considerable sums of money. "It was only a
few months later that rioting and the worsening social, economic
and political condition forced us to shut some of our outlets,"
he said.

McDonald's operates 14 major outlets in Greater Jakarta, some
of which are open 24 hours a day. Outlets can also be found in
Denpasar in Bali; and Surabaya, Cirebon, Yogyakarta and Bandung
on the island of Java.

The closure of certain outlets is part of the company's
survival strategy, which also includes sharp cuts in its
workforce.

"It is hard for us to do this. But we offer them (those laid
off) the chance to work at McDonald's restaurants in Kuwait, Oman
and other Middle Eastern countries," Bambang explained.

Demand for McDonald's Indonesia workers has been high in some
Middle Eastern countries in recent years. The workers are offered
a monthly salary of around US$300 (Rp 4,050,000).

At one time the amount was considered so small by our workers
that nobody was interested in taking up the offer, Bambang said.

Although facing difficult times, Bambang was upbeat about the
long term prospects for the company and spoke optimistically of
happier times. He added the company were trying hard to consider
the human effects of their retrenchment efforts.

"We will do our best to maintain our good relationship with
our employees and our customers," said Bambang.

However, Bambang's enthusiasm alone may not be enough to keep
the golden arches glittering. If the country's economic and
social condition continues to deteriorate then few people will be
lucky enough to bite into a BigMac, or for that matter a RiceEgg.