Makro Indonesia to refocus on core business amid retail boom

The Jakarta Post, Jakarta

Makro Indonesia, the local subsidiary of Netherlands-based wholesaler Steenkolen Handels Vereniging (SHV), is to refocus its business strategy in response to the rapid growth in the country's retail industry.

Makro president director Kuswanto Gunadi said Friday that the firm was determined to regain its position as a leading wholesaler after sluggish growth over the past year resulting from the rapid expansion of modern retail outlets around the country, coupled with the adverse effects of 2005's double round of fuel price hikes.

"Looking at the supply-chain side, we actually have a massive market out there. Consequently, Makro will now refocus on its core business -- that is, being a wholesaler," he said.

Wholesalers sell goods in bulk to trade customers -- including both traditional and modern retailers, catering firms, hotels, cafes and restaurants -- who then supply them to third parties or the end consumers. This contrast with the business of a retailer, which sells directly to the end consumer.

Makro's new focus was being supported by a capital injection from the shareholders amounting to 25 percent of the company's total assets, Kuswanto said, while declining to disclose the actual amount of the capital injection.

The additional funds, he said, had been used in part to settle overdue accounts with suppliers.

"Our sales also increased by 30 percent during the first quarter of this year, compared to the corresponding period last year, thanks to the funding injection," he said.

Commenting on Makro's move, ACNielsen Indonesia retail services director Yongky Surya Susilo said that fast-growing modern retailers "have forced Makro to reinforce and refocus its business as a wholesaler."

Indonesian Retailers Association statistics show that the more than 5,500 modern retail outlets currently operated by its 86 members will help the retail business grow by between 15 and 17 percent this year on sales of some Rp 50 trillion last year.

According to Kuswanto, Makro management's was also determined to upgrade the companies human capital through training.

"Makro now has a new, solid management team, consisting of six new directors, excluding me, who are now ready to put the business back on the right track again," he said.

Makro currently operates 19 outlets in 13 cities in Sumatra, Java, Kalimantan and Sulawesi.

The wholesaler is more than 80 percent owned by Netherlands-based SHV. The remaining shares are owned separately by businessman Teddy Rahmat, the World Bank's private-sector arm International Finance Corporation (IFC), and Thailand-based agribusiness giant Charoen Pokphand.