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

ICBP 2015

Company analysis 

ICBP is a part of Indofood sukses makmur Tbk, the company is producing consumer branded product which consists of noodles, Dairy, Snack food, food seasonings, nutrition and special food and beverages. In 2015 the company has launched more than 60 new products to the market.

ICBP is one of the biggest noodle producers in the world; it operates 16 factories across indonesia and one factory in Malaysia. It has 17 billion pack annual production capacity. At the same year, the company launched its new noodle product, Indomie my Noodlez and Sarimi gelas. Both of the products are created for children segment. Therefore the company increased 3 % of its production capacity in 2015.

For diary product, the company runs 6 factories across java island to produce various milk product through its subsidiary, Indolacto. It has more than 600 thousand tons annual production capacity. 

The company could increase its revenue 5,7% up in comparison with its revenue in 2014. 89 % of total sales in 2015 was contributed by noodles segment, 14.6 % was contributed by dairy segment and the remains of revenue was contributed by snack food, food seasonings, nutrition and special foods and beverage. 

The company was able to improve gross margin in 2015 compared to gross margin in 2014. Debt financing ratio (DFR) in 2015 decreased compared to DFR in 2014. The company tends to use internal source of fund to finance its capital expenditure and working capital. 

INDOFOOD CBP Tbk

Company analysis

Manufacture of food and beverage industry is interesting sector due to its steady growth over the last five years. In 2010 until 2014 the CAGR of the sector was 8.7 % (at constant price). The demand of the product may possibly at above the supply. Among of other sectors, manufacture of food product and beverages had the highest growth at that period. (source: BPS )

In 2014 the company attained double digit growth of revenue that stood at 19 % higher than sales in 2013. The impressing segment in 2014 was beverage segment that was growing more than 700 % compared to same segment in 2013. The decline was incurred in food seasoning segment in 2014 compared to the same segment in 2013. It decreased more than 26 %. The competition with another major player in food seasoning market such as unilever indonesia may be as the reason of the downfall. The increase of beverage segment was incurred due to acquisition of premium brand such as Asahi Brand and Pepsi Brand. The biggest part of revenue was contributed by noodle segment that was 55 % of total revenue.

As the result of that the company succeeded in increase its gross profit margin and reduced its cash cycle shorter.

Instan noodle was still dominated the company’s revenue in 2014. The demand of this product is high in indonesia. The company competes with wings corp in this noodle’s market at domestic. Besides it is selling to product for domestic, the company also exports the product to abroad. In 2014 Saudi Arabia was the biggest contributor in export segment.  

The company has collaborated with global company in producing food seasoning product, it developed joint venture with Nestle Indonesia to build Nestle indonesia Cita Rasa Indonesia. For beverage product the company collaborated with Asahi Corporation from Japan to establish Asahi Indofood Beverage Makmur.

The majority of revenue and receivable were with related parties, the company uses its subsidiary, Indomarco Adi Pratama, as main its main distributor. It was more than 71 % of sales was with related party.

Smart E-money Inc

Indofood as the part of salim group has affiliated company in Philippine which has launched mobile wallet. It collaborated with Citibank Philipine and Visa International to established Charge to phone (C2P). This product is a combination between card services includes visa credit card and provider as mobile wallet for transaction. (http://www.philstar.com/banking/2014/12/16/1403055/smart-citi-visa-team-mobile-digital-payments).

In the future it is possible that the company will use the product for transaction in its business segment such as indomarco adi pratama. 

ICBP

Since government decreased subsidy for fuel in last of 2014, the inflation rate started to hike in to higher rate. The circumstance has been worst as the Fed started to increase its fund rate in first quarter of 2015. The psychological effect damaged rupiah currency rate to US dollar. Now rupiah currency is approximately at 12,000 – 13,000 per US dollar. 

As the result of that, the price of goods and services commonly increase and the labor unions in several places ask to the government to increase minimum wages payment to improve their purchasing power.

 Since the average total cost exceeds the marginal revenue, there will be a gap which is its economic loss in the short run. There may be an economic loss for company in oligopoly market type when its average total cost increase due to higher total fixed cost and higher total variable cost.  The cost of fuel for energy plantation has increased and so did with the cost of wages.

INDOFOOD CONSUMER BRANDED PRODUCT - ICBP

The company has done several acquisitions of several brands such as club, Pepsi and the Ichi  Ocha, each of the products is reputable product in each market. The company is controlled by its parent company PT Indofood sukses makmur which is owned by salim group and families. The president director is Anthony salim which is also the hold the same position in its parent company.

The company used its fund from IPO for shareholder loan payment and financing the capital expenditure. According to annual report of 2013, the remaining balance of its fund was 1.97 trillion rupiah which was unused. 

Instant noodle is still the favorite product of the company, in 2013, its contribution to revenue was 67.8 % of total revenue. The second largest contribution was its dairy product with 18.6 % of total revenue. The new segment in 2013 was beverage segment which had given 0.9 % of sales contribution.

The key driver of sales growth is instant noodle product division. It is always introducing new taste and new product which is made based on demand from recent market. In 2013, the sales growth is 16 % up than sales of 2012. The sales growth in 2012 was 11.4 % and it was slower than 2013.

The gross margin of 2013 had fallen from about 27 % in to 26 % so did with net profit margin from about 10 % in to about 9 % as we can see those ratios in the table at below. The higher cost of fixed cost and variable cost may decrease the gross margin due to higher inflation rate.

The cash cycle ratio was slightly changing but it was still stable, it is indicated that the company has strong position in the market.

The acquisition of brands such as club and pepsi are expected increase the income growth and decrease its dependency to noodle sales segment for sales contribution which was more than 50 % of total sales.

	2012	2013	2014F	2015F	2016F
Cash	5,487,171.0	5,526,173.0	6,544,136.8	8,062,533.7	9,824,464.9
Short Term Investment	21,280.0	72,000.0	72,000.0	72,000.0	72,000.0
Trade Receivable	648,037.0	738,533.0	819,771.6	909,946.5	1,010,040.6
Inventories	1,816,459.0	2,868,722.0	3,222,130.1	3,576,564.4	3,969,986.5
Other Current Asset	1,949,715.0	2,116,287.0	2,349,078.6	2,607,477.2	2,894,299.7
Total  Curr Asset	9,922,662.0	11,321,715.0	13,007,117.1	15,228,521.8	17,770,791.8
NPPE	3,869,239.0	4,844,407.0	5,587,955.3	6,061,444.7	6,490,320.8
Other Non Curr Asset	4,027,983.0	5,101,348.0	5,662,496.3	6,285,370.9	6,976,761.7
Total Non Curr Asset	7,897,222.0	9,945,755.0	11,250,451.6	12,346,815.6	13,467,082.5
Total Asset	17,819,884.0	21,267,470.0	24,257,568.7	27,575,337.5	31,237,874.3
Short Term Debt	582,625.0	979,380.0	1,000,000.0	1,000,000.0	1,000,000.0
Account Payable	1,193,345.0	1,628,821.0	1,829,481.3	2,030,724.2	2,254,103.9
Curr Portion of Long term debt	39,745.0	157,370.0	200,000.0	230,000.0	250,000.0
Other Curr Liabilities	1,832,354.0	1,931,012.0	2,143,423.3	2,379,199.9	2,640,911.9
Total Curr Liabilities	3,648,069.0	4,696,583.0	5,172,904.6	5,639,924.1	6,145,015.8
Long Term Debt	640,613.0	1,383,292.0	1,500,000.0	1,700,000.0	1,900,000.0
Deferred Taxes	530,291.0	498,504.0	498,504.0	498,504.0	498,504.0
Other Non Curr Liabilities	1,016,550.0	1,423,360.0	1,579,929.6	1,753,721.9	1,946,631.3
Total Non Curr Liabilities	2,187,454.0	3,305,156.0	3,578,433.6	3,952,225.9	4,345,135.3
Total Liabilities	5,835,523.0	8,001,739.0	8,751,338.2	9,592,150.0	10,490,151.0
Minorities	572,186.0	678,949.0	678,949.0	678,949.0	678,949.0
Common Share	583,095.0	583,095.0	583,095.0	583,095.0	583,095.0
Additional Paid Up Capital	5,985,469.0	5,985,469.0	5,985,469.0	5,985,469.0	5,985,469.0
Retained Earning	4,837,947.0	5,978,662.0	8,219,161.5	10,696,118.5	13,460,654.3
Other	5,664.0	39,556.0	39,556.0	39,556.0	39,556.0
Share holder Equity	11,412,175.0	12,586,782.0	14,827,281.5	17,304,238.5	20,068,774.3
S Equity & Minority Interest	11,984,361.0	13,265,731.0	15,506,230.5	17,983,187.5	20,747,723.3
Total SE,MI & Liabilities	17,819,884.0	21,267,470.0	24,257,568.7	27,575,337.5	31,237,874.3
Revenue	21,716,913.0	25,094,681.0	27,855,095.9	30,919,156.5	34,320,263.7
COGS	-15,666,785.0	-18,351,931.0	-20,612,771.0	-22,880,175.8	-25,396,995.1
Gross Profit	6,050,128.0	6,742,750.0	7,242,324.9	8,038,980.7	8,923,268.6
Operating Expense	-2,920,894.0	-3,643,809.0	-4,044,628.0	-4,489,537.1	-4,983,386.1
Depreciation n amortization	-283,543.0	-364,569.0	-456,451.7	-526,510.6	-571,123.9
Other Income / - expense	235,840.0	399,592.0	443,547.1	492,337.3	546,494.4
Interest Expense	-53,697.0	-165,225.0	-208,801.7	-225,200.0	-243,200.0
Pretax Income	3,027,834.0	2,968,739.0	2,975,990.7	3,290,070.3	3,672,052.9
Taxes	-745,463.0	-733,699.0	-735,491.2	-813,113.3	-907,517.1
Net Income	2,282,371.0	2,235,040.0	2,240,499.5	2,476,957.0	2,764,535.8
Financial Ratio	2012	2013	2014F	2015F	2016F
ROA	12.8	10.5	9.2	9.0	8.8
ROE	20.0	17.8	15.1	14.3	13.8
Gross Margin	27.9	26.9	26.0	26.0	26.0
Profit Margin	10.5	8.9	8.0	8.0	8.1
Current Ratio	2.7	2.4	2.5	2.7	2.9
Debt to asset	0.1	0.1	0.1	0.1	0.1
Interest Coverage	62.7	21.2	17.4	17.9	18.4
Dividend Pay Out Ratio	47.9	-	-	-	-
Days Payable	27.8	32.4	32.4	32.4	32.4
Days Inventory	42.3	57.1	57.1	57.1	57.1
Days Receivable	10.9	10.7	10.7	10.7	10.7
Free Cash Flow		-264,387.0	838,005.8	1,288,396.9	1,541,931.2
EBITDA	3,365,074.0	3,498,533.0	3,641,244.1	4,041,780.9	4,486,376.8
EPS	374.0	382.0	384.2	424.8	474.1
Revenue Growth	11.4	15.6	11.0	11.0	11.0