To: Director of XYZ. From: Re: Strategic Analysis for PT. XYZ in fresh fruits industry. Date: 20 June Abstracts

Size: px
Start display at page:

Download "To: Director of XYZ. From: Re: Strategic Analysis for PT. XYZ in fresh fruits industry. Date: 20 June Abstracts"

Transcription

1 To: Director of XYZ From: Re: Strategic Analysis for PT. XYZ in fresh fruits industry. Date: 20 June 2016 Abstracts Currently fresh fruits industry in Indonesia is already competitive with many local firms ranging from small shops up to national scale fresh fruits distributor, while on the other hand the opportunity is still quite big that may attract many new players to enter this competitive industry. With the increase of GDP in Indonesia, people are more and more aware of healthy life style through the habit of consuming more fresh products and other healthy food, involving regular or occasional physical activities as well as improving their mental wellness in general. With this opportunity ahead of us, we need to build clear strategy to remain competitive in this industry. Competitive position Fresh fruits industry in Indonesia is one of industry that attracting many people with various of ages and consider as one of the prospective business due to latest consumer behavior and trend that might influence the future of the industry, such as: People trend, that changing people behavior to be more creative, connected, convenient, community, communicate & conversation (the C generation) Large market of middle class, demanding convenience and proximity Upper class go for Healthy lifestyle. Younger generation always feel time pressure more grab and go The next food is Ready to Eat Food As we know XYZ as one of fresh fruits marketing and distribution company in Indonesia is focusing on market - for both Modern Market (MT) and General Trade (GT) - and distribute fresh fruits that mostly come from the group as XYZ core products as well as local supplier/farmer and some imported fruits from well-known international brand. This is considering as one of the strength of the company which XYZ are able to secure their supply consistently. Other factor that also favor for XYZ in securing the competitive advantage is current government regulation: New import regulation such as port entry, quota restriction, SGS inspection at exporter s site and recent application of 10% VAT on some imported fruits (Trade Ministry) Government allow ownership of foreign investment on agriculture up to 30% Is a threat for new entrants

2 AFTA which will take in place end of 2015 will open opportunities for foreign exporter to enter Indonesia however Indonesia s government build tough regulation to secure local market So far XYZ considered as a dominant player in this industry with healthy growth of almost 30% for the last couples of years. XYZ position in the industry remain strong as XYZ have continuous supply from group and able to create unique product that other competitors are currently lacking. Within fresh fruits industry, XYZ also considered as one of the company who always strengthen their competitive advantages witch focus on high volume product, high value and available all year round. This position resulting many loyal customers who enjoy and value our products above industry average and at the same time able to takes advantage with higher prices than most competitors. On top of that, XYZ also have efficient and effective cold chain logistics process and facilities, high standard quality products, highly skilled sales team and supported by strong brand. If we look on Indonesian market size for fresh fruits and vegetable, the opportunity remains big and prospective, which also attract current and new competitor entering this industry see Exhibit 1. Despite Indonesia producing a significant amount of fruits locally and importing rising amounts of fresh fruits, Indonesian consumers are still lagging behind in fresh fruits consumption, with an intake per capita of 32.67kg/year. This is much lower than the 65kg per person recommended by the US Food and Drug administration (USFDA). Competition exist from competitor likes MR, PTPN, ATP and other smaller players. Most of them played in the same market segment which is Modern market and only small of them has capabilities to penetrate for the larger segment such as General trade. Exhibits 2 show a list of competitors with their current strategic focus. In Indonesian modern trade segment, especially for small convenient format such as minimarket are rapidly grow for up to 500% for the last decade and likely to continue for next decade. Mini market and convenient stores grew by 14% compare to 5% for supermarket. Minimarket is the self-service shop just like supermarket, with size of the store or outlet is not too large, approximately no more than 3 square meters, it has no more than three teller machines on, and it sell basic household products. Minimarket currently growing fast, offering convenience stores or outlets because of its location close to consumers in the residential area. see Exhibit 3,4 & 5. Nevertheless, for Indonesian, traditional retail market is still among the best destination to shop fresh fruits proven by many traditional fruits stores are built near residential area. The traditional market or retailing in Indonesia still has strategic value as there are the market s most frequent visited, as many as 24 times per month. Here are several advantages of traditional retail market, among others, is the easy to access for small supplier, including farmers. Also in traditional retail

3 markets, buyer can haggle, the places close to home, and goods is fresh, but in the traditional retail market has no place as comfortable as modern retail market. Detail of industry analysis, complete five forces analysis and market capability analysis can be found in Exhibit 6, 7 and 8 Changing Industry Indonesia s population is young, growing and rapidly urbanizing, making it one of the fastestgrowing consumer market in the world. According to McKinsey and Co. research of urban and rural populations, found groups of consumers, totaling about 70 million, who are optimistic about their future and becoming increasingly sophisticated in their spending habits and product choices. With the ubiquity of fast food and the innovation of various kind of instant food and sweets, many have developed eating habits that are believed to be part of a modern lifestyle. But today, more Indonesian people are determined to halt such habits and have started to change their eating pattern by consuming healthier food as they now understand the health risk involved in eating poorly. XYZ as local fresh fruit marketing and distributor, seeing this as opportunity to strengthen its brand position in the industry by active supporting for healthy lifestyles program and competition through sponsorship for a number of prominent running competitions in Indonesia. XYZ increasing support for annual running competitions epitomizes XYZ brand s philosophy of living fun and healthy hence helping to build upon its fruitaholic community. Summary XYZ are in a highly competitive industry and our competitors are remains very strong. To be able to remain competitive, XYZ need to focus on working continuously on enhancing our operational efficiencies on all of our operation facilities. XYZ need to make sure the key activities that taken place across our operation. XYZ also need to have a road map with clear focus on growth geographically with the clear sales strategy base on supply-market demand and latest consumer behavior. XYZ also need to continues to strengthen its brand positioning within Indonesian and has therefore become synonymous with freshness and quality for fruits.

4 Exhibit 1. INDONESIAN MARKET SIZE AND DEMAND FOR FRESH FRUITS AND VEGETABLES National demand (market) of fresh fruit is promising, growth +8%

5 Exhibit 2. INDUSTRY COMPETITORS Exhibit 3. GROWTH OF MINI MARKET FORMAT Source: Nielsen storecensus Exhibit 4. GROWTH OF MINI MARKET IN ASIA

6 Exhibit 5. SHOPPERS TREND INDICATOR Exhibit 6. INDUSTRY ANALAYSIS Industry Analysis Demographic Trends Indonesian population rising 6% to 270 Mio at Healthy grow since it supported by young generations those are very productive, 50% of population have 141 mllions people (52%) in MAC group, that is increasing 8 to million people per year Technological Development Increase Logistics Service Offering Growing Technology Implementation in Logistics Operation Domestics Infrastructure and Connectivity are rapidly improving Social Cultural Influences Upper class go for Healthy lifestyle Younger generation always feel time pressure more grab and go Political Legal Pressures Import of fresh fruit have fallen 36% when Indonesia applied new import regulation such as port entry, quota restriction, SGS inspection at exporter s site and recent application of 10% VAT on some imported fruits (trade ministry)

7 Government allow ownership of foreign investment on agriculture up to 30% Is a threat for new entrants such as dole to overcome import Anti-Dumping duty will expire September 2016 that eliminate 30% import duty Macroeconomic Impacts Small convenient format: 500% outlet grow in the last decade, likely continue for the next decade Mini market & convenient grew by 14% compare to 5% for supermarket Projection 2023, minimarket 30 % in trade channel contribution Global Trade Issues AFTA which will take in place end of 2015 will open opportunities for foreign exporter to enter Indonesia however Indonesia government build tough regulation to secure local market Strengthen ASEAN s as role hub in the East Asia Integration Exhibit 7. FIVE FORCES ANALYSIS FOR FRESH FRUITS DISTRIBUTION Potential Entrants High Barrier to scale nationally Government allow ownership of foreign investment on agriculture up to 30% Suppliers Industry Rivalry Buyers secured group supplies and opportunity to grow local partners Supply fulfillment forecast accuracy Intense rivalry with high volume and low margin, especially for imported fruits Many local company who fight for the same segment Modern Trade such as Hyper market and Super market Shopper are moving from monthly shopping to weekly shopping that change behavior more top up and less stock up Traditional market is still destination to shop fresh fruits proven by many traditional fruit stores near residential Substitutes Fruits Juice Fruits and Vegetable Salad Food Supplement

8 Exhibit 8. XYZ MARKET CAPABILITY ANALYSIS PEOPLE Modern and professional management team Hands on experience on Cold Chain Logistics Make people then make money strategy PROCESS Brand image and brand portfolio Logistics set up across Indonesia main islands Local suppliers and International brand SYSTEM High standard on product quality & freshness Sub Distributors and stock point strategy Comprehensive channeling strategy Exhibit 9 REFFERENCES Indonesia Import Regulation for Horticulture rising middle class incomes spur multi industry growth in Indonesia Deloitte Consumer Insights, Capturing Indonesia s latent markets Indonesian politician proposes full fruit import ban - Asosiasi Ekspotir - Importir Buah dan Sayuran Segar Indonesia (ASEIBSSINDO) Indonesian minimarket continue to grow at the expense of supermarket in.reuters.com Indonesia-retail-id, Minimarkets poised to win Indonesia's retail sector battle

9 Consumer Report 2014 blog.euromonitor.com Top 5 emerging markets with the best middle class potential BCG. perspective, Indonesia s Rising Middle-Class and Affluent Consumers asia.nikkei.com/business/consumers/indonesians-splurge-when-monthly-income-passes HEALTHY EATING TRENDS AROUND THE WORLD. JANUARY Meet the new Indonesian consumer class of