Corporate analysts said that the two companies’ competitors cut their profit margins to tap into growing demand amid a wave of panic buying among consumers due to fears that the partial lockdown imposed by the government might disrupt supplies.

“Consumers are paying more attention to the price of instant noodles [sold] at big quantities, and it shows that Indofood group’s competitors have become the winners,” BNI Sekuritas equity analyst William Siregar told The Jakarta Post on Tuesday.

He said their competitors were offering much lower prices, a business strategy that could undermine the market share of Indofood and its subsidiary.

William also said that both Indofood and ICBP would have a tough time using the pricing strategy to attract customers because the prices of raw materials had begun to increase due to a scarcity of supplies owing to transportation problems caused by COVID-19.

Indofood’s net profit margin increased to 6.4 percent last year from 5.7 percent in 2018. The company’s net profit jumped 18 percent to Rp 4.91 trillion (US$327.33 million) in 2019.  In the meantime, ICBP maintained a relatively stable net profit margin of 11.9 percent in 2019, during which it booked 10 percent growth in net profit to Rp 5.04 trillion.

In order to maintain a high profit margin this year, William predicted that both companies would continue their efficiency efforts, which have become an important strategy amid growing competition in the fast-moving consumer goods business.

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