Global Business Guide Indonesia

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Chitose | Mr Dedie Suherlan
Mr Dedie Suherlan

The country’s furniture sector in particular presents good opportunities to tap into a growing middle class while taking advantage of the still reasonable cost of production here as well as the AFTA, which opens the door to regional markets for export.

Mr Dedie Suherlan, President Director

PT Chitose Internasional Tbk was first established as a Japanese entity before becoming a fully domestic company in the early 2000s. Having evolved substantially from your original focus on manufacturing folding chairs, what can you tell us about your company’s background and its main strategies going forward?

Our company was founded in 1979 as a PMDN that held the license for the Chitose brand from Japan. Through this structure we were able to benefit from technology transfer to become a leading manufacturer, and in 2000 we took over the rights to the brand in its entirety. We now have an extensive portfolio of over 300 product categories and in June of this year [2014] carried out an IPO with the goal of implementing good corporate governance and setting up the platform for future growth.

Our company philosophy revolves around the concept of creating a better life for all – this includes our vendors, shareholders, employees and suppliers. It is thus our mission to achieve profitable growth through customer satisfaction and strong leadership. On top of this, we are guided by the principles of QCC; Quality, Care and Commitment and this shapes our strategy going forward. With this in mind, we are focusing on B2B opportunities, through which we have about 850 distributors from coast to coast. Our company is also going to prioritise the development of our school furniture category as well as products for the food services industry, in line with an emerging middle class creating greater demand in these areas. In addition to this, we plan to pursue portfolio diversification by moving into the manufacture of furniture made from eco-friendly wooden materials such as particle board and MDF [medium-density fiberboard], and also intend to provide racking for shop displays. Lastly, we will expand upon our B2C operations via the establishment of flagship outlets set to open in 2015.

As a longstanding player in the industry that has demonstrated an openness to adapting to new trends, what is your outlook for Indonesia’s furniture sector?

Indonesia continues to be a good market for furniture, with a population of 250 million people and a rapidly expanding middle class segment. It is thus not surprising to see that furniture companies such as IKEA have sought to enter the market. Within our specific type of furniture product, Indonesia’s main competitors are other ASEAN countries such as Malaysia, Thailand, and Vietnam, as well as China.

The challenge presently faced by companies looking to penetrate the Indonesian market is finding ways to fully reach out to the high potential consumer base, particularly those not living in major cities. As a local company with 35 years in the market, this is where we differentiate ourselves from competition and tap into an expansive network covering the entire archipelago. Based on this, our outlook for domestic opportunities is positive.

From an international point of view, we expect that the AFTA [ASEAN Free Trade Area] will be beneficial for us as a means of facilitating exports to neighbouring markets. To succeed in this regard we would need to develop a comprehensive distribution network in other Southeast Asian countries, much like we have already done in Indonesia.

What can you tell us about your expansion strategy as it relates to increasing production capacity?

Our manufacturing capacity currently stands at 1.45 million pieces per year. With funds from our recent IPO, we plan to increase this to 1.5 million pieces per year in the near future in addition to opening new facilities for our new line of wooden-based products.

These new products are to be primarily allocated towards export markets, and are not included in the aforementioned production capacity projection.

For the future, where do you see the most potential from an export point of view?

We are looking towards India as a market of big potential, and are also interested in newly emerging markets in Asia such as Cambodia and Vietnam. Our company has a long history of exporting to countries around the continent including Japan, Singapore and Taiwan.

With regards to opportunities on the international stage, we plan to explore collaboration with foreign entities to serve as a distributor for their products. For example, we work with Okamura, a publicly listed company in Japan, to produce and fit-out fixtures for their projects such as supplying the well-known retail outlet, Uniqlo.

One of the challenges often faced by export-oriented companies in Indonesia is the misperception among overseas consumers that Indonesian products are not of the highest quality. Is this the case for the furniture sector?

In Indonesia itself, we have been the holder of the top brand distinction for the last four years. For exports, all of our orders come from B2B and involve a close working relationship with clients to establish trust. As such, we actively work to dispel misperceptions about the quality of Indonesian furniture, in keeping with our aforementioned QCC guidelines. We also benefit from superior brand recognition on the international stage due to our heritage as a licensee for a well-known Japanese brand that was first established nearly 60 years ago.

How is your company positioned towards cooperation with international investors and foreign partners?

We are open to this type of cooperation, and this was one of our main reasons for setting ourselves up as a listed company. We therefore welcome foreign entities interested in entering Indonesia or looking for an Indonesian partner to serve as the production base for goods to be sold in their own country. Our company sees this as a step that needs to be taken to continue to grow, and plan to work with businesses that wish to grow in tandem with us.

We are most interested in cooperating with foreign companies with substantial market share that would like to increase their market share through increased production capacity. The new capacity can be set up here, with our company taking upon the role of manufacturing partner. In addition to this, companies with very specific products that they would like to sell in Indonesia are also encouraged to reach out to us.

As a final message, what would you like our readers to remember about Indonesia?

Indonesia is a country with immense potential in terms of its suitability as a manufacturing base and the size of the market. The country’s furniture sector in particular presents good opportunities to tap into a growing middle class while taking advantage of the still reasonable cost of production here as well as the AFTA, which opens the door to regional markets for export. Our company is a facilitator for companies looking to make the most of this potential and we welcome prospective partners from global furniture industries.