Stores of Tycoons

Djoko Susanto. Photo by Ahmad Zamroni

Djoko Susanto through PT Midi Utama Indonesia is ready to compete with 7-Eleven by bringing Lawson and open 50 convenience stores per year starting this month.The company has signed a master license agreement with Lawson Inc in June 20, 2011. This agreement gives Midi Utama the exclusive right to use and acted as subfranchisor for Lawson’s trademark and knowhow in Indonesia for the next 25 years.

It is said that Djoko has been discussing the cooperation with Lawson for almost a year before the signing agreement. With the expansion, now Midi Utama holds three retail store brands: AlfaMidi, Alfa Ekspress, and Lawson. For Lawson, the company will roll-out Rp 2 billion-3 billion capital expenditure for each 200 square meter (sqm) store. Alfa Ekspress has the same-size store like Lawson, while AlfaMidi using 400 sqm. As of yesterday, Midi Utama has open 260 AlfaMidi and 167 Alfa Ekspress across Java. Djoko also own the majority stakes in PT Sumber Alfaria Trijaya to operates Alfamart, the second biggest retail store in the country with 5,200 stores.

Lawson is scheduled to open the first store in Kemang, South Jakarta by the end of this month. The convenience store targeting young generation market, 20-40 years old, in urban area. It will sell a lot more ready to drink and meal products, compare to the competitor, 7-Eleven. 70% of it products are food. Even though Midi Utama is planning to sprout tables and chairs for its customers, Lawson is going to be more like a store, rather than a place to hang out.

Lawson is a convenience store franchise chain from Japan, has 9,761 stores in Japan and 300 stores in China. It open the first store in Osaka, Japan in April 1975. The store originated in Ohio, USA. In 1939, a dairy owner named J.J. Lawson started a store at his Broad Street dairy plant in Cuyahoga Falls, near Akron, Ohio, to sell milk. As of February 2010, Lawson book 16,661 billion yen in revenue.

In order to gain knowledge directly from the source, Midi Utama has placed Lawson representatives in the board of commissioner and director. They are Masayuki Mizuno, Tetsuhito Matsuyama, Yuichi Hayashi, and Katsuhiko Aihara. The company also put an ex-police officer Commissioner General Dadang Garnida. Djoko acted as the president commissioner, while his second son Budianto Susanto a commissioner.

Even though there is no share swap in relation with the agreement, interesting to be taken note, in June 13, just before the signing date, PT Amanda Cipta Persada is selling 864,71 million shares of Midi Utama (stock code:MIDI) Rp 410 each for divestment purposes. At the same day, PT Cipta Selaras Agung bought the exact amount of stakes or 30% as an investment. Amanda Cipta and Cipta Selaras are closely related with Djoko family. Cipta Selaras holds 21% of PT Sigmantara Alfindo, the founding company of Alfa.

Djoko aggressively will open Lawson across Indonesia. Unlike 7-Eleven, which according to the agreement with Seven & I Holdings in 2009, will only opens in Java for 20 year ahead. Seven & I Holdings, controlled by billionaire Masatoshi Ito, operate the giant chain store in Japan. Lawson is the second biggest in the country, and FamilyMart is the third. All of the retail store brand will be open in Indonesia soon. After the Honoris family operates 7-Eleven in Indonesia, and Djoko bringing in Lawson, Wings Grup, owned by Katuari family, already agree to open FamilyMart first store early 2012. This will be their biggest step expand in the retail business.

This retail expansion has proves that Indonesia is a growing market. Consumption rate grow at a fast pace over the last decade. There are already 16,000 of minimart in the country, Indomaret own by Salim family still the giant. On the other hand, the government restricting the business, even though it absorbs many workers. Assuming each store hire 10 workers, the industry absorbs 160,000 employees. With those opportunities and challenges, is now the best time to shop (in convenience store)?

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