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Sumber Alfaria Trijaya, operator of Alfamart convenience stores in Indonesia, plans to add up to 200 units in the Philippines this year that will nearly double its presence there.
SAT began its Philippine business in 2014 with a 35% stake in a joint venture with SM Investments, the Philippine banking, retail and real estate conglomerate. In a press conference on Thursday, SAT President Hans Prawira said the company’s concept of “minimarkets,” which are smaller than traditional convenience stores and that sell staples, is untapped in the Philippines.
“The characteristics of the Philippines market are similar to Indonesia,” Prawira said. “The difference is that there are not many minimarkets in the Philippines. So it’s like a blue ocean.”
SAT said it had 210 stores in the Philippines at the end of last year, and that about 60 of the planned 200 new outlets were already added in the January-March quarter. The JV is still loss-making but can become profitable once it reaches 400 outlets, something it aims to achieve in two years.
Indonesian companies are increasingly targeting the Philippines, which has a large population, young demography and a growing middle class. Nippon Indosari Corpindo, Indonesia’s largest bread maker, set up a joint venture in the country last year.
For SAT, the overseas expansion could help offset a slowdown in consumer spending at home, where the company runs some 13,000 stores across the archipelago. Sales of fast-moving consumer goods, including food and home care products, increased by 3.9% year-on-year in the first quarter, a major slowdown from 11.3% a year ago, according to Nielsen data presented by SAT. The company also faces cutthroat competition with rival Indomaret, which is controlled by the Salim Group conglomerate and has about 14,000 stores.
“We experienced so many price increases … maybe this time there is this kind of stagnant period,” Prawira said.
SAT still managed to log a 12% increase in revenue for the first quarter at 13.76 trillion rupiah ($1.03 billion). Prawira said he expected spending to pick up during the Ramadan fasting period that begins later this month. The company plans to open more than 1,000 stores in Indonesia this year, similar to last year’s expansion rate.