Publicly listed PT Indofood CBP (ICBP) has signed agreements with Japanese beverage group Asahi to set up joint ventures to produce non-alcoholic beverages in Indonesia and market the products in the biggest market of Southeast Asia.
The two firms, slated to be established in September this year, will be manufacturing company PT Asahi Indofood Beverage Makmur, and marketing and distribution firm PT Indofood Asahi Sukses Beverage. ICBP will have a controlling stake of 49 percent and 51 percent in the companies, respectively.
ICBP and Asahi will set aside an investment totaling between Rp 1.8 trillion (US$190.8 million) and Rp 2 trillion for the two firms within the next two years, with the largest part to be poured into building a non-alcohol beverage plant, ICBP president director Anthoni Salim said.
“The synergies from the combined strengths of both companies will place us in a better position to become one of the leading players in Indonesia’s non alcohol industry,” he said after the signing in Bintan, Riau Islands.
The construction of the plant, of which the location was not yet to be determined, would begin this year Anthoni said, adding that it would begin commercial production in 2014.
ICBP has a strong ground in the domestic market with its wide-ranging consumer-branded items, such as instant noodles and dairy products under well-known brands including Indomie, Supermie, Indomilk and Orchid Butter.
Indofood director Thomas Tjhie said that his firm had also not decided on the financing scheme of the new investment.
“We will see whether we will finance this totally by our own cash reserves or by the combination of cash and a loan with a 50 percent ratio each,” he said.
As of the end of the first quarter this year, the firm’s cash reserves stood at Rp 5 trillion, Tjhie added.
Speaking at the same occasion, Naoki Izumiya, the president of the world’s leading food and beverage maker Asahi Group Holdings of Japan, said that for the initial phase, the planned plant would produce mineral water and tea products, and later expand to other kinds of drinks according to available demand in the domestic market.
Izumiya said that the newly-agreed joint ventures were strategic for the firm as they would help Asahi tap into Indonesia’s fast-expanding beverage market, enabled by its surging middle class, in the long term.
“The Indonesian beverage market amounts to $4 billion last year and by 2020, it will potentially double. This will be very prospective for our business in the future,” he said.
Asahi Group is one of the world’s leading food and beverage makers with businesses covering a wide array of products, including non-alcoholic beverages such as soft drinks and packaged food such as health food, functional food, baby food and freeze-dried products. It consists of more than 150 companies operating worldwide with products sold in over than 80 countries.
In the first three months of this year, Indofood reaped Rp 5.29 trillion in sales, a 12 percent increase compared to Rp 4.71 trillion in the same period last year. Despite rising sales, the company’s cost of goods sold only rose 10 percent to Rp 3.89 trillion during the January to March period from Rp 3.5 trillion in the same period last year.
Growth in sales contributed to the company’s surging net profit to Rp 591.13 billion in the first quarter of the year, increasing 36 percent from Rp 433.5 billion in the same period last year.
Shares in Indofood (ICBP) were unchanged at Rp 5,900 apiece on Monday. ICBP is 80.6 percent owned by PT Indofood Sukses Makmur, which is controlled by Anthoni Salim.