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. Additionally, the Company recognized the importance of e-commerce when it strategically invested and cooperated with MatahariMall.com, one of the leading online market place portal in Indonesia. This relationship will capture the benefits of the fast growing digital lifestyles of Indonesia’s modern consumers.
Following the new business strategy alignment, the Company also streamlined its operational organization structure for more effective yet efficient management structure and communication flows. Currently, the Company’s Hypermart, SmartClub and B2B businesses are grouped into Large Format Operation Division, while its Foodmart, Boston Health & Beauty and FMX are grouped into Small Format Operation direction.
Large Format Operations
First introduced in 2004, Hypermart continued to become the key driver of MPPA’s retail business in 2017 with 73.3% contribution to total sales. To-date, Hypermart has become an iconic modern retail hypermarket for the growing middle income Indonesian family nationwide, with an extensive product selection covering Grocery, Fresh Food, Bazaar, Softlines and Electronics merchandise. To cater to the demands of discerning shoppers, Hypermart is able to localize its assortments to meet the needs of customers across Indonesia.
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. Its competitive advantage results from our capabilities developed through intensive retail and 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.
Since its inception, Hypermart has had its evolution to the latest G7 format. However, the difficult market environment and changing customer shopping behaviors in 2017 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. Thus, the Company has confirmed in late Q4 2017 to perform a change to Hypermart’s paradigm from the previously company-centered into a more consumer-centric outlook with an enhanced approach to serve the consumers’ demanding needs. Significant focus would be 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 would also be revamped to the new standard for a more effective and efficient operation.
Additionally, a new one-shift policy has been tested in selected stores, with encouraging results, where cost reduction and higher productivity at store level would regain Hypermart’s labor productivity leadership. All of these initiatives would start to be implemented to the greater Hypermart network nationwide in 2018.
During 2017, Hypermart opened 3 new stores and remodeled 2 existing stores. 4 stores were closed while another store experienced a fire incident causing the store remain closed for the year. No injuries caused by this incident. By 2017 year end, the Company operated 113 Hypermart stores in more than 74 cities across the country.
SmartClub and B2B
SmartClub continued to be the format of choice for wholesale customers in 2017. This format attracts business owners, traders, HORECA (Hotel, Restaurant and Catering), offices and other service providers and offers “one-stop” and low cost shopping solution with a wide selection of fresh produce, groceries, and general merchandise. Additionally, its B2B function contributed more as it also successfully attracted to traders looking for volume purchases at competitive prices nationwide.
SmartClub’s Food Solution Center has successfully attracted more restaurant and culinary entrepreneurs with menu creation suggestions, kitchenware equipment usage and other food related businesses solutions. Additionally, its Office Solution Center, offering a complete range of office supplies, has also attracted more attention from business owners and offices for the one-stop shop solution.
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. Over the last several years, 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 dine-in or quick take-away meals, café and boutique bakery. In 2017, the Company opened 2 additional stores and closed 3 stores for a net total of 25 stores actively operating at year end.
Boston Health & Beauty
Boston Health & Beauty (“Boston”) continued to perform well in 2017 with strong revenue growth of 2.8% (same store sales growth) and solid profitability achievement. It is positioned to offer the Indonesian customers a modern, convenient health & beauty store with added services of in-store health clinics in selected stores.
During the year, Boston continued its solid operation of its 3 sub-formats:
- Boston Health is typically located inside hospitals, size between 80-120 m², offering various range of health products, personal care, food & beverage, gift and fruit basket for hospital visitors. Boston Health stores will take advantage of MPPA synergies with the Lippo Group by placing a store within Siloam hospitals and plan to expand to other hospitals in 2018 for wider service coverage and increased brand awareness.
- Boston Regular is a stand-alone outlet, size between 120 -200 m² located in the mall or near Hypermart. Going forward, stand-alone stores in the mall will be a major format, providing a wide range of health products such as health supplements, OTC products, medical devices and beauty products including cosmetics, skin care, beauty accessories and personal care. Basic food and beverage are also offered for customer convenience.
- Boston Combo is a complete Health & Beauty format with a full range of supplements, OTC products and a wider range of cosmetics, perfumery, beauty and hair accessories. With a size over 350 m², various service products such as optic shop, nail shop and hair-coloring are also available to complete the offering of a modern health & beauty center. At 2017 year end, Boston operated a total of 102 stores, including 7 new stores and 14 store closures during the year.
Launched at 2015 year end, the FMX convenient stores continued to roll out at strategic locations such as malls, apartments, offices, railway stations and other public places. This is in response to high demand of consumer needs for a convenient, fast, “grab & go” purchase within local communities.
With store size of 80-200 m², 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 not only through store expansion but also via franchise owners, collaborative partnerships and contract relationships in the future. At 2017 year end, the Company operated 15 FMX outlets.