ANALYSIS OF INDOFOOD CONSUMER BRANDED PRODUCT

SALIM GROUP

The salim group was established by an Indonesian tycoon, mr. Liem  Sio Liong aka Soedono salim, soedwikatmono and Ibrahim risjad in October 1976. Mr. Soedono salim was close friend of mr. soeharto.

Therefore, mr. soedono salim got advantages from soeharto, for example, the import regulation of wheat flour which was one of key success factor for salim group in advancing its business conglomeration in indonesia. Bogsari flour mill was built by salim group. It is the biggest flour mills in indonesia. Other key success factors of his success in business are his serendipity and personal charm in operating his business.

They have known to each other before soeharto became as president. They already did business cooperation since soeharto was a commander of some military district area located in semarang regency at central java.Soedono salim arrived in indonesia at 1938 before the nation announced its independency in 1945. Sudono salim was supplying medical things for indonesia army during world war against the enemies.

Sudono Salim has a biographic book of his life and his career in business published in 2004, he told a lot about his friendship with soeharto in his book. His book is Liem sioe liong’s salim group : The business pillar of soeharto’s indonesia.

Salim group has various affiliated companies across the world as the following list

Elevenia

Elshinta Media

PT Radio Elshinta (Elshinta Radio)

PT Elshinta Jakarta Televisi (Elshinta TV)

Elshinta.com

ElshintaShop.com

PT Nuansa Karya Berita (Majalah Elshinta, Tabloid Gaul, Majalah Kort, Majalah Story)

PT Indolife Pensiontama (Indolife)

PT Mekar Perkasa

PT Indocement Tunggal Prakarsa Tbk (Indocement) (co-owned with HeidelbergCement)

PT Dian Abdi Perkasa

PT Indomix Perkasa

PT Lentera Abadi Sejatera

PT Pionir Beton Industri

PT Mandiri Sejahtera Sentra

PT Bahana Indonor

PT Sahabat Mulia Sakti

PT Mineral Industri Sukabumi

PT Multi Bangun Galaxy

PT Bhakti Sari Perkasa Abadi

PT Cibinong Center Industrial Estate

PT Pama Indo Mining

PT Tarabatuh Manunggal

PT Terang Prakarsa Cipta

PT Lintas Bahana Abadi

PT Indoritel Makmur Internasional (Indoritel)

PT Indomarco Prismatama (Indomaret)

PT Indomarco Adi Prima (Indomarco)

PT Inti Cakrawala Citra (Indogrosir)

PT Indomobil Sukses Internasional Tbk (IndoMobil Group)

PT Suzuki Indomobil Motor (Suzuki)

PT Nissan Motor Indonesia (Nissan)

PT Panca Datsun Nusantara (Datsun)

PT Foton Mobilindo (Foton)

PT Hino Motors Manufacturing Indonesia (Hino)

PT Chery Mobil Indonesia (Chery)

PT Garuda Mataram Motor Audi Center (Audi)

PT Indotruck Utama (Volvo)

PT Auto Euro Indonesia (Renault)

PT Ssangyong Kontruksi Indonesia (SsangYong)

PT Garuda Mataram Motor (Volkswagen)

PT CSM Corporatama (Indorent)

PT Indomobil Finance Indonesia (Indomobil Finance)

PT Suzuki Nusantara Jaya Sentosa

PT Indomobil Nissan Datsun Indonesia

PT Swadharma Multi Finance (Swadharma)

PT Indofood Sukses Makmur (Indofood) (co-owned with First Pacific)

PT Indofood CBP Sukses Makmur Tbk (Indofood CBP)

PT Bogasari Flour Mills (Bogasari)

PT Salim Ivomas Pratama

PT Nestlé Indofood Citarasa Indonesia (Maggi)

PT Indofood Fritolay Makmur

PT Indolakto (Indofood Nutrition)

PT Asahi Indofood Beverage Makmur (Indofood Asahi)

PT Pepsi-Cola Indobeverages (PepsiCo)

PT Tirta Sukses Perkasa (Club)

Indofood Agri Resources Ltd (IndoAgri)

Salim Palm Plantation

PT Lion Super Indo (Super Indo) (co-owned with Delhaize Group)

PT Nippon Indosari Corpindo Tbk (Sari Roti)

PT Fastfood Indonesia Tbk (KFC)

PT Intikom Berlian Mustika

PT Mega Akses Persada (FiberStar)

BCA Group

PT Bank Central Asia Tbk

PT BCA Finance

BCA Finance Limited

PT Bank BCA Syariah (BCA Syahriah)

PT Central Santosa Finance

PT BCA Sekuritas

PT Asuransi Umum BCA (BCA Insurance)

PT Asuransi Jiwa BCA (BCA Life)

PT Asuransi Central Asia ACA Group

PT. Bank INA Perdana

Mahabharat motor manufacturing India

Soedono salim has two sons and one daughter, they are

1. Albert Halim, 
2. Andree halim,
3. Anthony salim
4. Mira salim.

Based on bisnis indonesia, soedono salim has arranged his sons and daughter in managing his business empire across the globe. Anthony salim was delegated for directing businesses in indonesia and its holding company in Hongkong, China.

INVESTMENT IN INDIA

Salm group is alsoaready participating in construction sector in india. Salimg group to gather with others Indonesian conglomeration including ciputra were involved in Kolkata west international city in west Bengal india.

In automotive segment of Kolkata, salim group has invested for building Mahabharat Motors Manufacturing Pvt Ltd, a motorcycle manufacturing company in india. Based on Bloomberg the company was incorporated in 2005. Currently, it hired ex-astra group executive, Mr. Gunadi sindhuwinata as chief executive officer of the company. In 2008, TVS was cooperating with mahabharat to produce motorcycles from TVS products.

Anthony Salim

Anthony is chairman of first pacific holding which controlled Indofood through CAB holding, share holder of Indofood group. First pacific has 51 % shares of CAB holding, parent company of Indofood sukses makmur Tbk.

Indofood group is also affiliated to PT Nippon Indosari Corpindo Tbk which produces Sari Roti brand. In automotive sectore, salim group is also affiliated to indomobil Sukses International Tbk. In financial sector, Anthony salim is share holder in BCA and he is also indirectly share holder of other financial and insurance company such as  PT Asuransi Central Asia, PT indolife Pensiontama and PT Asuransi Jiwa Central Asia. 

A securities company, Nikko sekuritas is also controlled by Salim group. Salim group has also participated in mining industries in indonesia through PT Nusantara Berau Coal and PT Itacha Resources.

Anthony salim has two sons, axton salim and alstom salim and one daughter, astrid salim.

Andree Halim

Whereas, andree halim is managing businesses in abroad, one of them is QAF limited located in  Singapore, QAF limited is operating in food industry including bakery at Singapore and other countries in south east asia and also australia. Andree’s son, Daniel halim is acting as director in QAF limited.

QAF limited is parent company of Ben foods pte ltd, Farmland central bakery pte ltd, bonjour bakery pte ltd , Gardenia food, Bakers Maison. It also has Subsidiaries Company in Malaysia, there are Baker Maison sdn bhd, Delicia sdn bhd. For Australia, QAF limited has established Hamsdale Australia, Rivalea pty ltd. Meanwhile, for Philippine, the company has operated in the country through Gardenia Bakeries inc and phil foods properties inc and Phild foods Fresh baked products inc.

Gardenia produced by Gardenia foods was ranked as no. 1 selling bread brand in Singapore by A.C.Nielsen for period of July 2015 to June 2016. For Australia business operation, Rivalea was the market leader in integrated pork production. The group invested in pork segment because the government has strict regulation in import of pork fresh meat and it has high cost for development of its infrastructure and facility. Both of them are barrier to entry for the industry.

QAF limited has also built several cow husbandries through its affiliation, oxdale dairy enterprise in australia. It was having more than 770 cows in its farm which is located on 733 hectare.  Andree halim has sons and daughters, they are Lin ke jin, Lin ke qin, Lin zhen jun and Lin yuan jin, Lin Yuan Fang, respectively. 

Albert Halim

Albert halim is owner of sentral plaza in the downtown of Jakarta, kembang goela restaurant in sudirman street Jakarta. in addition, albert has talent in music, he has expertise in playing guitar.

Based on Indofood’s executive staff, albert has business in wheat flour industry, coal mining and also office building.

Albert has sons; they are eric halim and Edwin halim. Ablert’s daughters are angelica halim and Michelle  Halim.

Mira Salim

Mira’s husband, franky welirang is one of the key persons in Indofood group and salim group.Franky holds various strategic positions in companies at Salim group. Mira salim has two daughters, Jessica welirang and Deynica welirang. Deynica passed away in accident at Singapore in December 2017, two days after she was celebrating her birthday. According to her father deynica passed away in an accident in Singapore. 

FOOD AND BEVERAGES SEGMENT

Based on information statista.com, the food and beverages revenue in indonesia will be estimated at USD 253 million or more than 21 % higher than revenue in the same segment in 2017 which stood at USD 208 million. 

INSTANT NOODLE MARKET SHARE

Indofood sukses makmur was the market leader in instant noodle market in indonesia at third quarter of 2016. It had 70.1 % market share, the second and the third were wings food and Jakarana Tama which had 17.2 % and 2.8 % market share, respectively.

Based on world instant noodle association, the instant noodle consumption in 2016 at indonesia was 14.8 billion packs. 

For Indonesian consumer, instant noodle is either a complement of rice and a substitute product for rice as basic food for consumer.

INDOFOOD CONSUMER BRANDED PRODUCT - ICBP

Indofood consumer branded product (ICBP) recorded low digit growth in its revenue at 2016 compared to its revenue in 2015. The global economic growth at 2016 slightly increased, therefore its revenue growth was in low rate. Its sales in 2016 rose 8.59 % higher than sales in 2015.

Nonetheless, there were segments which experienced significant volume growths, the dairy division and snack food division with 15.8 % and 17.6 %, respectively. Other segments were relatively flat in its volume sales. The incremental of sales occurred because of incremental of prices. Instant noodle was still as biggest contributor for its revenue in 2016, its contribution was more than 64 %. The second biggest contributor of revenue was diary division.

Accordance to its annual report the company has trade mark license agreement of Indofood trade mark with Indofood, it paid 1.5 % of net sales for its royalty fee. The same charge is also implemented for its affiliated company in over sea such as Indofood Food industries sdn berhad.

Net profit margin slightly rose in 2016, from 9.2 % in 2015 to 10.5 %. The company reduced its interest expense as it reduced its loan utilization. While, its gross margin  in 2016 was better than previous year, from 31 % to 32 %.

Majority of its buyer is its related parties, indomarco Adi Prima, a distributor company which is a subsidiary of Indofood sukses makmur Tbk.

Consumer centric innovation

The company maintains its sustainable growth through many ways including innovation. It put consumer centric mindset as the key factor for conducting innovation for the company. The innovation during the year were launching of Indomilk banana blast, first UHT (Ultra high temperature) with banana flavor in indonesia, chitato indomie goreng, combination of two well known brand from Indofood. Those two innovations were success in the food market.

Enter diaper market

Indofood started to extend its market in to non food segment. It has been already producing baby diaper in 2016.

source:
https://en.wikipedia.org/wiki/Salim_Group
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=45602906
https://en.wikipedia.org/wiki/Sudono_Salim
https://databoks.katadata.co.id/datapublish/2017/02/01/2016-konsumsi-mi-instan-di-indonesia-mencapai-148-miliar-bungkus

annual report of ICBP 2016

COMPANY ANALYSIS: GUDANG GARAM TBK IN 2016

History

Gudang garam Tbk was established on 1958 at Kediri regency by Mr. Surya Wonowidjojo. In 1979, the company built its first cigarette manufacturing machines in Kediri regency.  Currently, the company has been led by Mr. Susilo wonowidjojo.

Referred its annual report, the parent company is Suryaduta Investama. The company is also operating in other segments such as entertainment, transportation and investment.

Facilities

Gudang garam has maintained good relationship with stake holder including the tobacco and clove farmers. There have been more than 4000 farmers who supported raw material for the company.  Some portion of raw material was imported from oversea because of the prolonged wet season which affected harvest of tobacco and clove. The domestic farmers supplying for the company are located across archipelago.

Gudang Garam has two main factories, first facility is located at Kediri regency and second manufacture facility is in Gempol, Pasuruan regency. In 2016 the company was not extending its production facilities, the capacity was capable for producing cigarette as demand in kretek market. Other manufacture facilities are located at Sumenep and Karang anyar.

The company’s products are various kretek cigarettes low tar nicotine variant (mild and light) and traditional hand rolled kretek. The corporation has 4 major subsidiaries, they are Surya pamenang, Surya Madistrindo, Surya air and galaxy prime and Graha surya media .

Change in strategy, turning from contender to dodger

In 2017, its subsidiaries, karyadibya mahardhika and surya mustika nusantara have been acquired by Japan tobacco. 100 % shares of those subsidiaries have already owned by the japans company. Gudang garam followed strategy of its competitor in indonesia such as Djarum and Sampoerna. Djarum has already acquired by Galaher group and Sampoerna has been owned by Phillip morris international. 

Accordance to domestic electronic newspaper, kontan.co.id, those companies were purchased at USD 667 millions.

The acquisition is done due to its market share in 2016 which decreased compared to its market share in 2015. Its market share in 2015 and 2016 were 21.5 % and 20.8 % consecutively. Besides, the excise tax has been higher compared to tax in the last five years

Accordance to Wikipedia, Japanese government owns 33.35 % shares of Japan tobacco. It also has more than 66 % market share in Japan. Japan tobacco also has interest in Gallaher group.

Gudang garam possibly intends to increase its export through the acquisition as market share indonesia tend to drop as government increases excise tax once at every years. Many small tobacco factories indonesia has been closed due to higher excise tax.  On other hand, it also change its strategy in competing with multinational company in clove cigarette market in indonesia such as phillip morris and Gallaher group and also Japan Tobacco. Wismilak, another domestic competitor has also been controlled by Japan Tobacco. 

If we look at the matrix at above, we could conclude that Gudang Garam tbk acted as a dodger now.  The company sold its subsidiaries to multinational company to reduce competition to multinational company, at least the company is not competing to Japan tobacco and its affiliated company now.

The global pressure from phillip morris and Gallaher are high in tight market. The competition has become more strict as government regulation for tobacco industry is not friendly. It reflected on dropped market share in 2016 compared to 2015.

Gudang Garam would like to keep its position as market leader and it collaborated to Japan tobacco to get more access in global market value chain.

Macro Indicator

The economic growth in 2016 was batter than in 2015, it stood at 5.01 %, and it was higher than in 2015 which were at around 4.9 %. In line with Indonesia’s current account, it increased from us -17.51 billion to us -16.77 billion. The export of goods and service was improved, it reflected on its foreign exchange currency; those were IDR 13,864 and IDR 13,503 in 2015 and 2016, consecutively.  

Market share

Based on euromonitor in august 2016, the company had 28.8 % market share in local clove cigarette market. Meanwhile HM Sampoerno and PMI (Phillip morris international) had higher market share compared to Gudang Garam, it had 35.3 % market share in 2016. Another big competitor, Djarum was having 12.4 % market share at indonesia.

In Global market, gudang garam owned 1.2 % market share in 2015. The market leader of global market share for tobacco product was China National Tobacco Corporation with 42 % market share. China is the biggest market for tobacco in the world.

The market share of cigarette reflected as the following graph

In 2016, basically Gudang Garam has already been as market leader in clove cigarette market in indonesia if we split phillip morris international’s product from HM sampoerna brands. Since phillip morris international has acquired HM sampoerna, their product collaboration has been as market leader in the past three years.

Government Regulation for clove cigarette kretek and Vape

Government has already been implementing strict regulation for tobacco industry. The reason is protecting people to consume cigarette which was causing damage to people health. Many diseases are caused by tobacco.

In july 2018, government will also charge excise tax for vape product. government argues that vape damaged people health. It caused damage in lungs. The tax will be 57 percent equal to clove cigarette product.

Vape is possibly a substitute product for clove cigarette. it is unlike cigarette which is using fire to burn clove blended tobacco, Vape is utilizing vaporization of liquid tobacco which is heated by battery.

The excise tax is charged to tobacco product which is done based on regulation of UU no. 39 tahun 2007.

Company financial analysis

Revenue

Revenue of the company in 2016 slightly increased more than 8 % compared to revenue in 2015. The biggest contributor of revenue was contributed by SKM (sigaret kretek mesin) product which was sold at 68,620 million sticks of cigarette. Whereas, its SKT (sigaret kretek tangan) was sold at 8456 million sticks of cigarette. those numbers slightly dropped. The revenue incremental occurred due to higher pricing to skt and skm products.

The higher excise tax from government pushed the company to increase its product prices.

Profitability

Net income before tax in 2016 slightly increased than net income before tax in 2015, it occurred as revenue increased in 2016. The company also reduced its interest expense and it increased its net profit before tax. The utility of short term debt has been decreased.

The higher revenue and higher gross margin in 2016 compared to 2015 were also increasing EBITDA in 2016.

Liquidity

Current ratio in 2016 was higher than current ration in 2015. It increased from 1.77 to 1.94 in 2015 and 2016, subsequently. The ability to pay short term liability was improved.

The cash to cash cycle (DR + DI – DP) in 2016 was also improved compared to cash to cash cycle in 2015 from 246 days to 239 days. The company was able to make shorter its business operation.

Leverage

The leverage ratio (total asset to equity) decreased from 1.67 to 1.59. The current asset decreased especially its cash and cash equivalent. The company reduced its utility of short term loan. It paid some portion of its short term debt in 2016. Meanwhile the equity portion rose as the company was able to increase its revenue and reduce its cost.

Capital expenditure

In 2016, the company allocated its internal fund to purchased fixed asset amounted to more than idr 2 trillion. It purchased spare part of machine for production, raw material for building development and information technology product.

Credit Risk

Moody’s rating agency has given credit risk score for Gudang garam tbk at 6 of 1-10 score. The credit risk score is made based on company’s balance sheet and input from capital market. It is categorized in medium level.

Conclusion

Gudang garam turned its strategy from contender to dodger; it sold its subsidiary to Japan tobacco. As a result of that Gudang garam brand was also sold by Japan Tobacco at oversea. The new strategy is expected to increase its global market share at oversea. Djarum group claimed that it have more than 70 % market share of clove cigarette product at over sea.

Djarum group has collaborated to Gallaher group which is based on UK. Gudang Garam is expected to be able to access distribution chain at oversea such USA, Europe and other asian countries. 

TELKOM INDONESIA 2016

Referred to bureau of statistic center, economic growth of indonesia in 2016 was at 5.02 %, it was better than growth in 2015. Telecommunication industry was one of industry segment which experienced growth in the year, its growth stood at 8.87 % compared to previous year. Telecommunication industry started to transform to digital business. In addition, government supported to advance digital economy in indonesia.

Telkom indonesia, a state owned corporation has developed biggest infrastructure to support its business across the globe. It already has fiber optic connection over Europe until United state of America. It has SEA ME WE 5 from Merseille to dumai, it is 20.000 km length and SEA-US connecting Manado to Los Angeles with 15.000 km length. The total length of its fiber optic network was 106.000 km.

Based on its annual report it has 362.200 access point, 95.000 m2 gross facility data center, 129.033 unit BTS and tree satellites.            

Its cellular user in 2016 was 173.9 million people. It increased 14 % compared to cellular user in 2015.      

Development in infrastructure is functioned to maintain its double digit growth and also to support its technology and digital service across the world.

The leading telecommunication company, Telkom experienced double digit growth both in its income and its net profit. In 2016, its revenue was 116.333 billion.

In during 2016 the company succeeded in obtaining double digit growth in its revenue, the incremental was 13.5 %. Based on its financial statement, the highest portion of income in 2016 was contributed by revenue from data, service and internet segment. It was 51 % of total revenue. Subscribers start to consume more data and internet service as Telkom has been developing its IT infrastructure. It influences in velocity of data transfer and video streaming. Its net profit also grew higher in 2016, the company succeeded to increase its gross margin by reducing interconnection cost.