Martha Tilaar has spent forty years convincing Indonesians that her products and services are just as good as any import.
Martha Tilaar’s first salon was called Martha Salon. It combined the latest imported technology, such as air conditioning, with Indonesian-made bamboo furniture. It was a choice of necessity, since Martha had only Rp 1.2 million in startup funds. “After buying the equipment, I ran out of cash. The furniture was made from bamboo because I couldn’t afford anything else. All the equipment was imported from the U.S. My first salon was a unique innovation, a blend of modern and traditional,” says Martha, 73.
Opened in 1970 just after returning from the U.S., Martha borrowed the funds from her three siblings. Her parents donated their garage, a 6 by 4 square meter space, for the location of the salon. Fortunately, her parents lived in Menteng, surrounded by the homes of ambassadors and embassies. Her salon took off, patronized mostly by expatriates.
Soon Martha and her one assistant Tupon, Gunung Kidul-born were overwhelmed, and Martha had to train new assistants at night after the salon closed, converting maids and other young women into beauticians. “I had to do it because I needed the additional staff,” she says. Her night-time training session for beauticans grew as well, and in 1972, she opened Puspita Martha beauty school. Now there are nine schools, with six in Java, one in Sumatra and two in Kalimantan.
Martha brought to the salon her selling skills honed in the U.S., where she had lived with her husband Henry Alexis Rudolf Tilaar, who was studying in Indiana University in Bloomington. While there, she had worked as a babysitter to earn extra income to supplement her husband’s meager $210 monthly stipend. She tried selling Avon products door-to-door. At one house, she got screamed at—and started crying. “I was so innocent, even though I was already 28 at the time. But that is the result of trying to learn new things,” says Martha.
To promote her new salon, she wrote fliers to be inserted in newspapers, written in English, which promised treatments by a U.S.-trained beautician (Martha), who could provide facials, manicures, pedicures and body treatments. Her salon, while small, was modeled after the most successful in Jakarta at the time, such as Venus Salon, Orlane Salon and a salon owned by Ibu Sabur, the first in the country with air conditioning, in Hotel Indonesia.
In an ironic reversal of fortune, her salon grew to occupy the entire house, with the family living in the garage. Soon after, she opened her second beauty salon Martha Griya Salon, also in Menteng, which also became the start of her traditional herb and cosmetics business. The salon business became the core of Martha Tilaar group, eventually growing into a network of 43 salons around the country, six wholly owned and the rest franchised.
Four decades later, Martha Tilaar is the undisputed queen of Indonesia’s beauty business, with an empire that spans salons, beauty products and spas. During those 40 years, she has demonstrated that her Indonesian made products and services can be just as good as the imported ones. Her latest success is her listing on January 13 of subsidiary PT Martina Berto, the first publicly traded company in the otherwise closely held Martha Tilaar Group, of which Martha is 66.8% owner. In the listing, Martha sold 355 million new shares, representing 33% of the company, holding rest within her group, at Rp 740 a share, raising Rp 262.7 billion. Trimegah Securities was the sole underwriter.
The beauty and personal care market was worth $361 billion in 2009, according to Euromonitor data. The market in Indonesia is both small and fragmented, with some 350 cosmetic makers in the country, most of them small producers of low-quality products. Thus Martha has a major opportunity to build on its lead, as a growing middle class has more discretionary income to spend on cosmetics and beauty treatments. In 2009, total spending on beauty and personal care products in Indonesia grew 16% to $2.2 billion.
At the moment, Martha Tilaar group’s cosmetics sales rank as the third biggest in the country with a 13.6% market share, its skin care products are number five with a 4.7% share, and its beauty and personal care products rank number nine with a 2.5% share. And customers are willing to pay more for Martha’s products, which include 12 brands at various price points. “Customers who used to buy [low-end brand] Sariayu, first switched to [mid-end brand] Caring, and now are buying premium products such as PAC. So even though our unit sales have not increased much, our sales have grown,” says Hartanto Santoso, 57, chief executive officer of the Martha Tilaar Group.
Martha has stiff competition from multinationals such as Unilever and Procter & Gamble Co, which have strong product lines, well-known global brands, substantial marketing budgets, and the benefit of the Indonesian perception that anything imported must be better than a local product. However, Martha Tilaar does have some local advantages. “Domestic producers such as Martha Tilaar Group and PT Mustika Ratu have reported significant growth in sales and market shares. This has been largely attributed to their focus on utilizing natural ingredients to produce herbal and chemical-free beauty products,” says Trimegah Securities strategist Handy Hutajaya and Fitriana Aghita in a recent report.
Martina Berto has been doing well. Martha is targeting 18% growth in sales this year, which were Rp 562 billion in 2010—in line with the average 19.8% growth for the last three years. The company’s name derives from four names: Martha, Theresia Harsini Setiady (known as Tina), Martha’s brother Bernard Pranata and Fransiscus Bing Aryanto. Tina and Fransiscus are the sister and brother of Boenjamin Setiawan, the founder and owner of the Kalbe group. Martha and Tina cofounded the company in 1977, with the Setiawan family originally owning 51% until Martha bought them out in 2000. Actually there has been few changes in the company’s shareholding. In 1980, Tina stakes shift to Max Parera, but then back to Tina in 1983. In 1985 the ownership shifted again to PT Hanoman Sakti Agung until then in 2000 Martha Tilaar took over.
Martina Berto is far smaller than other listed companies producing cosmetics, especially multinational giants such as PT Unilever Indonesia, at Rp 123 trillion, and PT Mandom Indonesia, at Rp 1.4 trillion. But Martina Berto is still bigger than listed local rival PT Mustika Ratu, which is valued at Rp 240 billion. Her goal for the company is for it to become one of the top three beauty treatment and spa firms in Indonesia, from the current number nine.
The company will use the listing proceeds to pay down debt, increase working capital and expand its production facilities. It will build a new plant in Cikarang, which will double production capacity from 2009’s output of 250 tonnes of jamu products and 3,218 tonnes of dry and liquid cosmetics. The plant is expected to be fully operational by 2013, and will become the center for all production. At the same time the company will also build a research and development centre for organic herbs called Kampoeng Djamu Organik, which planting various herbs to be studied in a botanical laboratory for potential commercial applications.
Martha has always practiced bonek, a short for the expression bondo nekat, or having strong determination. When Martina Berto launched Sariayu Martha Tilaar in 1994 as the country’s first modern herbal medicine and cosmetic brand, Martha insisted on opening the first outlet in one of Jakarta’s high-end malls. One mall refused to rent her space, saying her products didn’t fit the mall’s upscale image. The most expensive product she wanted to sell in her shop at the time went for only Rp 17,500 per unit. Another mall took her shop, even placing it next to a store selling imported cosmetics.
In 1997, Martha nearly shut it down, as sales weren’t covering the high rental cost and other overhead. Then the financial crisis hit Asian. The dollar soared from 2,500 to 14,000 rupiah. Imported cosmetics prices jumped fivefold in some cases in a few months. Suddenly customers flocked to her store, looking for cheaper local products to substitute for the now-expensive imports. This brand switching pushed her outlet’s sales up from Rp 8 million to Rp 200 million per month.
With her bonek spirit, Martha is not slowing down. She has turned down every offer to sell her company. Her children have taken management roles; her son Bryan David Emil is the President Director of Martina Berto.On her 73rd birthday, September 4, 2010, Martha opened a shop in Marina Square in Singapore. It was her first shop abroad and one of many the group plans to open in Asia, with Malaysia and Taiwan up next. As of December 2010, the group had 15,000 outlets and 20 Martha Tilaar shops, the most spacious and luxurious of her outlets. Despite 40 years of growth, Marth reveals her husband likes to pray that the company will keep growing for another 400.
MARTHA’S FIRST BEAUTY LESSON
When she was growing up, Martha liked to swim in a pool that had extra chlorine, which damaged her hair and skin. Her hair started to lighten and she got white spots where the chlorine burned her skin. As there was no sunblock at the time, Martha also started to get a suntan. Her mother Herna said she looked like dakko-chan, a black Japanese plastic puppet famous in the 1960s.
Being an elementary school teacher at the time, Martha was told by her mother to improve her looks, as she had to be a role model for her students. So the two went to meet her mother’s friend, beautician Titi Purwosunu. The meeting made a deep impression on Martha. “She looked like a goddess, very beautiful. I then realized that women should be beautiful like her. I agreed to study from her. I wanted to be as beautiful as her,” says Martha.
Martha took one year to study from Titi. She transformed herself, applying Titi’s lesson to her looks. Her colleagues at the elementary school were impressed with her change, so Martha gave them beauty treatment. When she went to the U.S. to be with her husband, she decided to take professional lessons to become a beautician. She enrolled at a school called the Academy of Beauty Culture. When she was close to finishing her program, Martha started offering beauty treatments by placing advertisements at supermarkets and shopping malls, saying she would like to serve them with beauty treatments: “The word ‘serve’ is a magic word in U.S. Many people invited me to their homes. I was asked to cut the hair of one big family of farmers there. They paid me a lot of money.”
APPRECIATING INDONESIA’S BEAUTY SECRETS
Ironically, one of Martha’s biggest lessons in learning to respect Indonesian culture came when she was living in the U.S. For her final paper at the Academy of Beauty Culture, she was assigned to write about indigenous makeup in Indonesia. Growing up in Jakarta, Martha knew almost nothing about Indonesian beauty practices used by traditional women.
Her classmate from Japan, Miyoko, tried to help by giving her some books about geisha and kabuki. Rather than write about Indonesia, Martha picked geishas as the topic for her paper. She learnt about the philosophy and beauty techniques of the geisha, realizing that the Japanese preserved their traditional culture, and studied and wrote about it, unlike Indonesia, where traditional culture wasn’t as respected. Martha’s paper on the geisha got the lowest grade in the class, and she was rebuked for not writing about her own culture. After that experience, Martha vowed to study and preserve the traditional beauty practices of Indonesian women.
When she returned to Indonesia, she started to seek out dukun, the practitioners of traditional medicine. Some of her friends found this strange, even calling her crazy since back from studying in US but go to dukuns. Her husband, a respectable educational professor, supported her by saying it is important to learn these traditional arts. He said one dukun died are like one library burned. From these dukuns, Martha learned about the herbs and other natural ingredients used by women to improve their appearance and feel healthy. This was the start of her interest in using jamu and other natural ingredients in her products.
* This story appears as the cover story on February 2011 issue of Forbes Indonesia magazine. Grey highlight are additional for the blog. All pictures done by Ahmad Zamroni/Forbes Indonesia.