The iconic soft drink Coca-Cola has been produced in Indonesia for so long that it even predates the country. The US-based multinational corporation first set up shop in the archipelago 88 years ago, well before Indonesia’s statehood in 1949, and clearly is not going away anytime soon.
In late March, Muhtar Kent, chairman and chief executive officer of The Coca-Cola Company, visited Indonesia, during which he announced plans for $500 million in new investments in the company’s operations, aimed at accelerating growth within the next four years in one of the fast-growing markets of the global ready-to-drink beverage industry. During that same period the company expects its direct and indirect employment in Indonesia to more than double from 60,000 to 135,000 jobs.
While some American companies are complaining about economic nationalism in Indonesia and efforts to reduce foreign participation in the economy, Kent believes Coca-Cola will contribute to economic growth in Indonesia, which is at its slowest pace since 2009. The Turkish-American business executive took time away from his schedule to do a written interview with Strategic Review, in which he discussed expansion amid infrastructure challenges, government regulation and being responsive to the needs of Indonesian consumers.
Can you share with us The Coca-Cola Company's decision to invest $500 million in its operations in Indonesia, and give some background on where this new investment will go and over what period of time?
The Coca-Cola Company considers Indonesia a promising market and one of the growth engines to achieve our long-term vision. Indonesia, with a population of 250 million, made up of a growing middle class, is a very promising market and a growth engine for The Coca-Cola Company to reach our long-term vision.
The Coca-Cola Company, through Coca-Cola Amatil Indonesia, is investing $500 million into Indonesia to accelerate growth in the Indonesian market in the next three to four years. This incremental investment builds on the $1.2 billion the Coca-Cola system has invested in Indonesia in the last 25 years. This investment will include expansion of production, warehousing and cold drink infrastructure to ensure long-term growth and success in this key market.
Our vision is to always provide the best in class manufacturing, sales and distribution capabilities, and the investment will enable the business to broaden its product offering, develop new consumption occasions and offer a greater range of affordable packages.
Indonesia's GDP growth has steadily fallen since 2012. Does that concern you or have any impact on your business in Indonesia?
Indonesia represents one of the fast-growing segments of this global opportunity. With a population of 250 million people, the country boasts the world’s fourth-largest population and a large, emerging middle class with underdeveloped consumption rates of nonalcoholic ready-to-drink beverages. It is a very promising market and a growth engine for The Coca-Cola Company to reach our long-term vision.
The Coca-Cola system has been operating in Indonesia for 88 years, and this $500 million investment reaffirms our belief in Indonesia and will help us capture the growth opportunity in one of the largest and most dynamic countries in the world, as we enable our system to be even more responsive to consumer and customer needs. We believe by creating more jobs and, where possible, sourcing locally, we can promote the local economy and contribute to economic growth in Indonesia.
There is growing concern among American businesses in Indonesia about economic nationalism, tougher measures on work permits for foreigners and attempts to make foreigners take Indonesian language tests to work in the country. How concerned are you about economic nationalism in Indonesia and what would the impact be on The Coca-Cola Company?
As the world’s fourth-largest population and a large, emerging middle class with underdeveloped consumption rates of nonalcoholic ready-to-drink beverages, Indonesia is a very promising market. Investment into Indonesia will benefit the Indonesian economy and its people.
We will partner with the government to create a win-win business environment that promotes continued investment and job creation. The Coca-Cola system has been operating in Indonesia for 88 years. Currently, the Coca-Cola system markets 16 brands, operates 10 bottling plants across the country, directly employs more than 12,000 Indonesians with more than 200 sales and distribution centers, and serves directly more than 520,000 large and small retail outlets every week.
Given the concerns about an “anti-foreign attitude” in Indonesia, why is The Coca-Cola Company so confident about the country, given the $500 million investment announcement?
Between now and 2020 the global nonalcoholic ready-to-drink beverage category is expected to grow in retail value by approximately $300 billion. Indonesia represents one of the fast-growing segments of this global opportunity. The Coca-Cola system has been operating in Indonesia for 88 years. Therefore, Indonesia is not a new market for us. There are challenges, but we want to partner with the government to find the best solution.
Can you outline Coca-Cola's expansion plans in Indonesia and discuss them given local competitors, such as Teh Botol Sosro?
The $500 million investment will support accelerated expansion of production, warehousing and cold drink infrastructure. This investment will have a multiplier effect on local jobs, taking the Coca-Cola system’s total direct and indirect employment in Indonesia from approximately 60,000 to a total of 135,000 within three to four years.
Competition is good, but our focus is more to capture the growth opportunity in one of the largest and most dynamic countries in the world as we enable our system to be even more responsive to consumer and customer needs.
Do you see Indonesia as a strong market for Coca-Cola for the next 20 years?
Between now and 2020 the global nonalcoholic ready-to-drink beverage category is expected to grow in retail value by approximately $300 billion. We have been excited about Indonesia since we started here 88 years ago and are still very excited about Indonesia today. This $500 million investment reaffirms our belief in Indonesia.
What will be the biggest challenges – logistics, marketing and so forth – to selling your products in Indonesia in the coming years?
As in every emerging market, there are unique challenges that we face in Indonesia. There are infrastructure limitations that make distribution of our products quite challenging and expensive in some areas of the country. There are some challenges with the evolving regulatory environment. But we feel that with the proper planning, investment and engagement with government and civil society, we can overcome these challenges in Indonesia as we have done all over the world, and build a healthy, sustainable business that creates value and makes a positive contribution to the development of Indonesia.
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