Local pizza chains looking to expand

The Jakarta Post, Jakarta

Mamma mia, it's a pizza attack! If you believe the restaurants, at least 80,000 people a day in more than 20 Indonesian cities now prefer the round, thinly sliced Italian bread topped with meat, sausages and melted cheese, to a traditional rice-dominated meal.

The fast-food pizza industry, which first gained a foothold in Indonesia during the mid-1980s, has been rapidly growing. However, unlike similar food chains serving fried chicken and burgers, the number of players in the business has not increased significantly, with three chains -- Pizza Hut, Papa Ron's Pizza and Izzi Pizza -- dominating the market.

The chain that claims it serves "great pizza", the country's third-largest international fast-food brand, Pizza Hut, plans to expand further and will add 1,000 more jobs to the nation's economy this year.

The American-affiliated pizza franchise, which began its operation here in 1984, says it serves 70,000 customers a day at its 100 outlets in 22 Indonesian cities.

"We are planning to open 20 more restaurants across the country this year," Pizza Hut Indonesia president director said Stephen McCarthy. The company had experienced a steady 20 percent growth in sales over the last four years, he said.

He said the Indonesian market could support double the amount of Pizza Hut restaurants and a total of 200 would be completed in the coming four to five years.

Pizza Hut's holding company, the U.S.-based Yum! Brands Inc. runs over 33,000 fast food restaurants worldwide under global brands like KFC -- the second-largest international fast food chain in Indonesia -- A&W, Taco Bell and Long John Silver's.

While the business is foreign-owned, much of Pizza Hut Indonesia's supplies -- vegetables, food packages and uniforms for their 5,000 workers -- come from local businesses.

Lured by the growth potential of the domestic pizza sales, two other players entered the business after 2000.

PT Setiamandiri Mitratama opened its first restaurant under the name of Papa Ron's Pizza in Jakarta in 2001. "We are aiming to open branches in Malaysia, Singapore, the United Arab Emirates and China this year," said Papa Ron's director of marketing Ron Mullers.

"There are lots of international brands coming in. Why can't we establish our own local brand that can expand globally," Mullers, who is also one of Papa Ron's owners, said. Papa Ron's pizzas were adapted to local tastes and used 100 percent local ingredients, he said.

The company has opened 40 restaurants in 13 cities nationwide over the past three years.

"We plan to open 12 to 15 more this year," said Mullers, adding that each restaurant would need an investment of between Rp 1.5 billion (US$162,425) and Rp 2.5 billion.

Currently, the company, employing 1,600 people, runs only four of the restaurants, while the remainder are operated by franchisees. "Our sales reached Rp 200 million a month a branch this year," he said.

Another local pizza chain, Izzi Pizza, entered the market in 2002.

Izzi Pizza president director Robert A. Eskapa said Izzi Pizza aimed to satisfy the demand for casual-dining restaurants in Indonesia.

His seven restaurants in Jakarta targeted the middle- to upper-income bracket by pricing their food between Rp 60,000 per person, he said.

Izzi Pizza outlets serve up to 70,000 dine-in customers plus around another 11,000 in deliveries a month. Management plan to open two more outlets in Jakarta and others in Singapore, Malaysia and China in the near future.

"We will open international branches on our own," Eskapa said. To open an Izzi Pizza restaurant would cost between Rp 2 billion and Rp 3 billion with a payback period of one to three years.

"As for branches in Surabaya, Medan, Bali and Bandung, we are currently looking for franchise partners," he said.

Unlike its competitors, Izzi Pizza, employing 258 people, uses imported supplies for its key ingredients such as flour, cheese and sauce. "We want to maintain our standards," Eskapa says.

Aside from their differences, the three leading pizza players all agreed that opening pizza restaurants was a profitable business.

Although fast food chains have been criticized for endangering consumers' health, the industry is a big buyer of domestic products from local farmers and market gardeners, who employ 58 percent of the country's 220 million people. (003)