Established in 1986, MPPA has successfully become a modern retail icon in Indonesia. The divestment of non-core assets at the end of 2012, poised MPPA to focus on its core FMCG modern retail business in order to capture and serve the large potential consumer market. Today MPPA has become an iconic shopping destination and successfully operates more than 259 stores across Indonesia supported by its own extensive distribution network.
In reaching its current position, a transformation began in 2014 with strengthening of the management team. In mid-2014, MPPA set its focus on becoming the dominant multi-format retailer and in doing so articulated a new business strategy. The first success of this transformation era was seen at the end of 2014 with the launch of a renewed Hypermart concept, which was very well received by customers.
The Company’s strategy to becoming a multi-format FMCG operator continued to unfold in 2015. Strategic Hypermart locations were remodeled to the new concept as well as new stores being built following this new concept. In addition, MPPA began launching new formats including the premium supermarket operating under the banner of Foodmart Primo, a new wholesale concept operating under the banner of SmartClub, a new convenience store concept operating under the banner of FMX along with a completely revamped Boston Health & Beauty. The large trader business was integrated into a new wholesale platform gaining increased focus on the size of this market. The launching of new formats along with a shift in accounting methods provided new insights into the strengths and weaknesses of the organization. This was useful as MPPA began the process of institutionalizing many back end processes to position itself going forward.
The Company made great strides at addressing its long term positioning with the most critical change being the implementation and switch to the cost method of inventory measurement technique in the 3rd quarter of 2016. This milestone was positioned to address the final obstacle impacting comparable sales which was the pricing factor, that was addressed in 2017 with the launch of its pricing strategy. It also placed MPPA in a position to better understand the profitability of its assortment thus enabling long term margin management/control at the SKU level while simultaneously addressing the pricing matters.
Within the continued, challenging market condition and increased competitive environment in 2018, the Company aligned its retail business strategy. It reaffirmed its key focus toward consumer retailing through its Hypermart and Foodmart formats, and reduced its exposure from the large, unprofitable B2B business. The key focus strategy is supported by new competitive pricings on daily basic necessity products, while the Company continues its cost efficiency efforts on all expenses, inventory management and more efficient store formats.
Large Format Operations
Hypermart continued to become the key driver of MPPA’s retail business in 2018 with 77.0% contribution to total sales. Hypermart is one of the Indonesia’s modern retail hypermarkets for the growing middleincome family nationwide, with an extensive product selection covering Grocery, Fresh Food, Bazaar, Softlines and Electronics merchandise. Hypermart has its competitive advantages as the results from our capabilities developed through intensive retail & customer studies, detailed sales and profitability analysis by SKU as well as a nationwide distribution network to move products from Distribution Centers and suppliers to stores.
The Company continues to strengthen its core Hypermart business with a goal to provide the international standards of retail offerings with a modern shopping environment and consistent shopping experience at every store throughout Indonesia. The challenging market environment and changing customer-shopping behaviors in 2018 led the Company to execute a series of adaptations and improvements to Hypermart in order to bring back its competitive strength within the industry and customers choice.
Hypermart has to remain competitive in the market while at the same time it is required to operate more efficiently to sustain its profitability. The Company realigned the Hypermart’s format and business model into a more consumer-centric outlook with an enhanced approach to serve the consumers’ demanding needs. Significant focus was given to a tighter selection of fast moving, primary basic household products needed by consumers daily coupled with aggressive pricing on all products. Hypermart’s store size were also under extensive review for the new standard for a more effective and efficient operation. The continuing cost reduction and higher productivity at store level were also driven to regain Hypermart’s productivity and profitability going forward.
During 2018, Hypermart opened 4 new stores and remodeled several existing stores. The Management also took prudent decision by closing several unprofitable stores in order to bring reduce unnecessary costs while maintain profitable stores within its store network. By 2018 year-end, the Company operated 107 Hypermart stores in more than 70 cities across the country
SmartClub and B2B
As an impact of new business alignment strategy to focus on consumer retailing, the Company further reduced its exposure from the unprofitable B2B business, including Smartclub, in 2018. It closed 2 Smartclub stores and the remaining 2 stores are still operating by yearend.
Small Format Operations
Foodmart Primo – Foodmart Fresh
Through its Foodmart Fresh and premium Foodmart Primo supermarket formats, the Company focuses on fresh foods, bakery, ready-to-eat (RTE) products as well as a wide variety of local and international products. The formats provide a convenient shopping experience with modern store atmosphere and cater to the needs of modern Indonesian customers who put value on convenience with quality fresh products.
The Foodmart format has been expanded further to increase the focus on high quality fresh foods and provides only the freshest products to customers. Foodmart Primo, as the premium supermarket format for refined customers, offers international products, more variety of quality fresh products and a large RTE section providing eat-in or quick take-away meals, café and boutique bakery.
In 2018, the Company opened 1 additional store for a net total of 24 stores actively operating at year-end.
Boston Health & Beauty
Boston Health & Beauty (“Boston HBC”) continued to deliver good performance in 2018 with positive sales growth and profitability. Boston HBC is positioned to offer a comfortable and modern health & beauty store concept with additional health consultation services at selected stores. Several larger stores at prime location were also added with pharmacy services in order to provide a total health solution for customers.
At 2018 yearend, Boston HBC opened 3 new stores, leading to a total of 74 stores actively in operation.
In response to high demand of consumer needs for a convenient, fast, “grab & go” purchase within local communities, the Company has FMX convenient stores located at strategic locations such as malls, apartments, offices, railway stations and other public places.
FMX differentiates itself from other Indonesian minimarket operators with modern layouts, large ready to eat and drink sections and a wide assortment of grocery with a focus on snacks.
Basic financial services such as ATM’s, cellular airtime top ups and bill payments are also offered within the stores. The Company is optimistic that FMX offers great growth opportunities through store expansion at good, crowded location to capture its maximum potential as modern convenient stores in the future.
At 2018 year-end, the Company operated 12 FMX outlets.
The new Hyfresh format
Towards end of 2018, the Company was in the final stage of developing a new supermarket format. This Hyfresh format is the Company’s latest interpretation for the future store should look like adapting from the changing market environment. The new format focuses on serving the middle class households located in community and offers great quality Fresh products and competitive Grocery products.
|Store||Contribution to Total Sales||Net Sales (Rp billion)|
|Boston Health & Beauty||0.7%||79|
|SmartClub & B2B||14.0%||1,498|