Foreign firms eye brand-loving Indonesians

by The Jakarta Post, 30 Mar 2012

Published on The Jakarta Post (http://www.thejakartapost.com)

The Jakarta Post | Fri, 03/30/2012 5:24 PM |

Leather-goods producer Bonia from Singapore, sporting equipment manufacturer Li Ning from China and the Pho Hoa noodle chain from the US are among many famous foreign brands vying to set up franchises here to capitalize on Indonesians’ insatiable appetite for branded products.

Representatives from 11 foreign franchises presented their sales pitches to potential investors on Thursday, at a meeting held at the Mercantile Club in the World Trade Center building, courtesy of A.S. Louken, a Singapore-based branding and franchising consulting firm.

“The middle-class market here is going to grow threefold over the next few years,” Luke Kim, CEO of A.S. Louken told The Jakarta Post.

The eight other firms in the delegation were C-House (Italy), Mothers En Vogue (Singapore), Country Chicken (Australia), Physio Asia Therapy Centre (Singapore), Skin Inc. (Singapore), GoGo Franks (Singapore), Berrylite Frozen Yoghurt (Singapore) and Love & Co. (Singapore).

Their business propositions drew potential investors to the meeting, many of whom agreed about consumers’ preferences for quality brand names.

“There is a lack of confidence among consumers toward local franchises due to the lack of quality control,” said Sugiarto, one of the potential franchisees attending the event. “Indonesians love to consume and they’re brand-minded,” he added.

Amir Karamoy, chairman of the National Committee for Franchises and Licenses (WALI), predicted that foreign franchises, which largely target the middle class, would grow by 20 percent this year, while local franchises, catering to the lower end of the market, would grow by 15 percent.

WALI issued 1,114 local and foreign franchise licenses by 2011.

Thursday’s meeting comes hot on the heels of a Trade Ministry regulation that requires foreign companies to franchise their business with Indonesian investors rather than setting up their own operations in the country.

“The new regulation will limit the development of company-owned outlets and promote the development of franchise-owned outlets,” Amir said. This would create healthier competition and prevent the likelihood of franchisors becoming monopolistic, he added.

Most franchisees of foreign companies are controlled by a single “master franchisee”, resulting in a monopoly, as their partners cannot buy licenses to the business model. This new regulation bars foreign franchisors from building their own outlets.

The new rules have not deterred new foreign franchisors from opening and expanding their businesses in Indonesia.

“I have talked with them and they all agree with the new regulation. The ones likely to be reluctant are well-established foreign franchisors in Indonesia,” Amir told the Post.

Mothers En Vogue, a Singapore-based maternity fashion label, remains upbeat about its marketing prospects despite the regulation.

“If you find the right partner, it can be workable,” said its founder and director Sharon Ho-Norton.

“From market-entry, it’s not an immediate concern,” she added.

Neither is Sharon concerned with competition from other brands.

“I think competition is healthy for a brand. Competition keeps it on its toes. It forces us to remain inventive,” she said.

The presence of seven franchisors from Singapore did not escape the attention of A.S. Louken Indonesia’s country manager, Danny Anthosius, who contrasted the 5 million population on the island state to Indonesia’s 240 million people.

“Indonesia is a large and attractive market,” Danny said. (han)

— JP

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