ASEAN KEY DESTINATIONS
KFC franchisee sees growth amid weak purchasing power
Publicly listed Fast Food Indonesia (FAST), the local brand holder of Kentucky Fried Chicken (KFC), aims to boost its revenue by 10 to 20 percent this year, despite acknowledging weak consumer purchasing power amid the slowdown in the domestic economy.
The franchisee hopes to book up to Rp 4.71 trillion (US$352.4 million) in revenue this year from sales of food, beverages and music CDs, up from Rp 4.21 trillion last year, FAST director JD Juwono said after a recent shareholders meeting.
“Although the people’s purchasing power is getting weaker, FAST will still expand into potential areas in the country,” Juwono remarked, adding that it also planned to shut down nine stores due to those stores’ high leasing costs and poor financial performance.
To reach the goal, FAST, which has 498 outlets and five mini outlets, has allocated around Rp 350 billion in capital expenditures (capex), which is funded the company’s internal cash, to open more stores and maintain existing facilities, according to him.
Almost two-thirds of the capex, or Rp 225 billion, will be used to set up 49 new KFC stores this year and five KFC-Box mini outlets — which come with minimal space and focus on takeaways — across the archipelago, particularly east Indonesia, such as Bone and Kampar.
Indonesia’s economy is currently dealing with the lowest gross domestic product (GDP) growth in six years and high consumer prices resulting from a faster-than-expected annual inflation rate in May.
To maintain profitability in the face of these challenges, FAST has considered increasing its food and beverage selling price, Juwono said, as rupiah depreciation against the US dollar has spiked costs of its imported ingredients, including its secret recipe, which contains no local ingredients.
The hike will be between 3 and 5 percent, he revealed, without elaborating on the timing of the price hike.
“We are still holding [selling prices steady] while observing market conditions,” Juwono said, acknowledging the people’s weak purchasing power.
FAST was hardly growing during January to March, Juwono admitted. Revenue only grew 3.4 percent to Rp 1 trillion in the first quarter of this year compared with the same period last year, while net profit slumped 36.61 percent to Rp 8.86 billion.
Nonetheless, Juwono is upbeat that the upcoming Muslim fasting month of Ramadhan in Indonesia could boost its revenues by between 15 and 20 percent in the second quarter of this year from the same period last year.
Indonesia, the country with the largest Muslim population, normally sees domestic consumption peak during the holy month of Ramadhan and the subsequent Idul Fitri holidays that will take place from mid-June to mid-July this year, coinciding with school holidays.
FAST, which during the recent shareholders meeting agreed to disburse Rp 59.8 billion in dividends, which account for 39 percent of its net profit in 2014, opened 27 new outlets and three KFC-Box outlets last year.
As a result, it ended last year with a 6.31 percent increase in revenues to Rp 4.21 trillion. The moderate growth in revenue failed to compensate for the firm’s surging expenses, however, bringing down net profits by 2.7 percent to Rp 152.05 billion.
Shares in FAST rose 5 percent on Tuesday to close at Rp 1,550 apiece. The stocks have plummeted 26 percent so far this year, versus the broader Jakarta Composite Index’s (JCI) 6.26 percent drop.
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