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.