Interview with Mr Lal De Silva of The Harvest

Export | Joint Ventures

The Harvest | Mr Lal De Silva

Our industry is really in gifts rather than food and Indonesia has a giving culture which continues during times of economic difficulty therefore we have always managed to keep growing Mr Lal de Silva, President Director
The Harvest is a young company being established in 2004 and the first specialized European style pastry shop chain in Indonesia offering a wide selection of cakes, pastries, ice cream, etc. The company has quickly expanded throughout the country with several outlets in Jakarta as well as Surabaya and Bandung. What was the background to the founding of the company and the strategies being employed to date? We started eight years ago with 23 employees and my focus was not on money or success but rather putting into practice what I had learned working at hotels as a chef. Now we have grown to 17 outlets with one in Surabaya, Bandung and we will be opening one in Malang as well as Bali. Now we have 1,500 employees and around seven expatriate staff. Indonesia has gone through a lot of ups and downs but we have managed to grow by 35% every year and most years we have been able to open at least one new outlet per year if not more. My focus has been on developing the products and packaging as well as the interior of the shops and the retail experience. Around 90% of our clientele is women; they tend to be more emotional about their purchases and more concerned with gifts as well as being very loyal customers. Our strategy has been employing professionals and using excellent ingredients which are all sourced internationally. Keeping prices low is another area that we pay a lot of attention to; even when we make savings on our raw materials we transfer those savings to the customer to ensure that we do not price any potential customers out. Our products look expensive but they are very reasonably priced. With the growth of the Indonesian economy there has been a marked change in consumer habits and way of life in Indonesia. How do you ensure your appeal to the changing Indonesian consumer. Our industry is really in gifts rather than food and Indonesia has a giving culture which continues during times of economic difficulty therefore we have always managed to keep growing. Something that we consider really key is to keep changing and developing the products, our service as well as the interiors of our stores so it is different every time for the customer and they are attracted to that. Our ability to evolve is really our strength. My advice is to always evolve and change to keep customers returning in Indonesia. Do you have any international expansion plans for the brand The Harvest in the future? For Harvest we are looking at the Philippines and we have been there to study the market. At the moment the market only has one chain that offers something similar to us, the majority are small stores providing coffee and pastries.	Filipinos regularly buy packaged pastries rather than cooking at home so it is a very interesting market for us. The only issue is that below a certain amount of investment ($1 million USD) you cannot own 100% of your business as a foreigner however we have investigated and it may be possible if this amount is invested over 5 years so we plan on going in during the course of 2013. Harvest can also do well in Malaysia even though the population is lower they purchase more; our products are already being given as gifts in the market. Thailand is another country where we believe we can be successful. China is a very difficult market to enter now as costs are more expensive and it is difficult to find the right people. What I may consider doing is opening one shop and then entering into franchise agreements. For the restaurant brand, Negev, I am looking at Los Angeles, USA as there is a strong market for high end restaurants. Given the potential of Indonesia’s lucrative food, beverage and hospitality market, how is the company positioned towards joint ventures with foreign partners? Consumers are becoming more sophisticated and something I saw in Japan is the trend in using different brands for different products with individual shops for each one. This is what I want to put into practice here in Indonesia as consumers categorise you for certain products. I want to venture into opening macaroon shops and chocolate shops for example; this is what I would be interested in working with foreign companies for. I have approached international brands to come to Indonesia to work with us and an idea I had was to establish a tea boutique where we provide the cakes as this has not been done here before. We are open to discussion particularly in subsectors such as cakes, cookies and chocolates. We can work together and create new products for the market. Capital is not such a concern for us as we have already matured past that stage. What would be your final message to those interested in investing and doing business in Indonesia? People think that Indonesia is difficult to do business in as setting up and finding the right people is challenging. Now, local salaries have gone up but they are better trained and it is more competitive than hiring an expatriate as commonly done in the past therefore labour is not a problem. There are problems such as traffic and infrastructure but there are more pros than cons. I am not a local but a foreigner who has managed to do business here in Indonesia and I can say that it is easier to get things done here in consumer driven businesses than elsewhere.

Our industry is really in gifts rather than food and Indonesia has a giving culture which continues during times of economic difficulty therefore we have always managed to keep growing

Mr Lal de Silva, President Director

The Harvest is a young company being established in 2004 and the first specialized European style pastry shop chain in Indonesia offering a wide selection of cakes, pastries, ice cream, etc. The company has quickly expanded throughout the country with several outlets in Jakarta as well as Surabaya and Bandung. What was the background to the founding of the company and the strategies being employed to date?

We started eight years ago with 23 employees and my focus was not on money or success but rather putting into practice what I had learned working at hotels as a chef. Now we have grown to 17 outlets with one in Surabaya, Bandung and we will be opening one in Malang as well as Bali. Now we have 1,500 employees and around seven expatriate staff.

Indonesia has gone through a lot of ups and downs but we have managed to grow by 35% every year and most years we have been able to open at least one new outlet per year if not more.

My focus has been on developing the products and packaging as well as the interior of the shops and the retail experience. Around 90% of our clientele is women; they tend to be more emotional about their purchases and more concerned with gifts as well as being very loyal customers.

Our strategy has been employing professionals and using excellent ingredients which are all sourced internationally. Keeping prices low is another area that we pay a lot of attention to; even when we make savings on our raw materials we transfer those savings to the customer to ensure that we do not price any potential customers out. Our products look expensive but they are very reasonably priced.

With the growth of the Indonesian economy there has been a marked change in consumer habits and way of life in Indonesia. How do you ensure your appeal to the changing Indonesian consumer.

Our industry is really in gifts rather than food and Indonesia has a giving culture which continues during times of economic difficulty therefore we have always managed to keep growing. Something that we consider really key is to keep changing and developing the products, our service as well as the interiors of our stores so it is different every time for the customer and they are attracted to that. Our ability to evolve is really our strength. My advice is to always evolve and change to keep customers returning in Indonesia.

Do you have any international expansion plans for the brand The Harvest in the future?

For Harvest we are looking at the Philippines and we have been there to study the market. At the moment the market only has one chain that offers something similar to us, the majority are small stores providing coffee and pastries.

Filipinos regularly buy packaged pastries rather than cooking at home so it is a very interesting market for us. The only issue is that below a certain amount of investment ($1 million USD) you cannot own 100% of your business as a foreigner however we have investigated and it may be possible if this amount is invested over 5 years so we plan on going in during the course of 2013. Harvest can also do well in Malaysia even though the population is lower they purchase more; our products are already being given as gifts in the market. Thailand is another country where we believe we can be successful.

China is a very difficult market to enter now as costs are more expensive and it is difficult to find the right people. What I may consider doing is opening one shop and then entering into franchise agreements.

For the restaurant brand, Negev, I am looking at Los Angeles, USA as there is a strong market for high end restaurants.

Given the potential of Indonesia’s lucrative food, beverage and hospitality market, how is the company positioned towards joint ventures with foreign partners?

Consumers are becoming more sophisticated and something I saw in Japan is the trend in using different brands for different products with individual shops for each one. This is what I want to put into practice here in Indonesia as consumers categorise you for certain products. I want to venture into opening macaroon shops and chocolate shops for example; this is what I would be interested in working with foreign companies for. I have approached international brands to come to Indonesia to work with us and an idea I had was to establish a tea boutique where we provide the cakes as this has not been done here before.

We are open to discussion particularly in subsectors such as cakes, cookies and chocolates. We can work together and create new products for the market. Capital is not such a concern for us as we have already matured past that stage.

What would be your final message to those interested in investing and doing business in Indonesia?

People think that Indonesia is difficult to do business in as setting up and finding the right people is challenging. Now, local salaries have gone up but they are better trained and it is more competitive than hiring an expatriate as commonly done in the past therefore labour is not a problem. There are problems such as traffic and infrastructure but there are more pros than cons. I am not a local but a foreigner who has managed to do business here in Indonesia and I can say that it is easier to get things done here in consumer driven businesses than elsewhere.

Global Business Guide Indonesia - 2013