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n an attempt to grab a larger chunk of the growing economy, publicly listed retailer PT Matahari Putra Prima (MPPA) is expanding its presence outside of Java, targeting eastern Indonesia in particular.

“We are seeing growing purchasing power in the eastern parts of Indonesia,” MPPA director and corporate communication head Danny Konjongian said.

Danny said eastern Indonesia has also seen faster growth in retail businesses last year, at about 11 percent compared to the national average of 8.5 percent.

“The market in the retail-food industry in Indonesia is worth around Rp 53 billion, in which 89 percent is dominated by traditional retailers, while the remaining 11 percent is held by modern food-retail business. Meanwhile, hypermarkets such as Carrefour, MPPA’s Hypermart, Giant and Lotte, are representing only about US$2.5 billion of the total market,” Danny said, citing figures from market researcher Euromonitor International.

“This is why we are very expansive, particularly in eastern Indonesia, in which we saw faster growth in retail businesses in the last few years.”

The growing middle class, which is expected to comprise of up to 80 percent of the population in 2030 from the existing 40 percent, is also a reason why MPPA wants to expand.

MPPA aims to open at least 17 new stores of modern supermarket Hypermart, which is complimented by a health store called Boston, this year. Danny said the majority of the new stores will be located in the country’s east.

MPPA currently has 68 Hypermarts, with the newest store opening in Ambon in February.

“We will open our first Hypermart in Papua in June or July,” Danny said.

He conceded that the price of products sold in Hypermart in eastern part of Indonesia would be higher than those sold in Java.

“It is because of the costs of distribution. We have cooperated with various missions to secure supply. Meanwhile, we also provide bigger storage area in Hypermarts in outer Java island,” Danny said.

Danny said that each Hypermart would need around Rp 20 billion in investment. The company has set aside up to Rp 1 trillion in capital expenditure, supported by cash and banking facilities, to finance this year’s expansion.

The 17 new stores are expected to boost the company’s sales by 24 percent this year, according to Danny. MPPA reaped Rp 9.3 trillion in sales last year.

MPPA’s Hypermart, according to Danny, is currently ranked the second-largest food retailer, trailing industry giant Carrefour.

MPPA will maintain its focus to develop its food and consumer businesses through Hypermart this year, after selling part of its stake in PT Matahari Department Store last year. MPPA currently holds 20 percent of stock in the department store chain.

“The department-store business offers high gross margins of 40 percent, while the Hypermart business has only about 16 to 18 percent. However, the Hypermart business offers faster goods and money rotation,” Danny said.

Despite the expensive Hypermart business, MPPA plans to open one new Foodmart this year.

The Hypermart, Foodmart and Boston contributes make up around 97 percent of MPPA’s income.

In an annual shareholders meeting on Thursday, MPPA announced that it would pay out a total of
Rp 32.27 billion in dividends, representing 30.7 percent of the company’s Rp 105 billion in net profit last year.