Charoen Pokphand Indonesia to Acquire Convenience Store 7-Eleven
Charoen Pokphand Indonesia, the nation's largest producer of poultry feed, day old chicks and processed chickens, is set to acquire convenience store (franchise) 7-Eleven from Modern Putra Indonesia, a subsidiary of Modern Internasional. The deal, which is worth IDR 1 trillion (approx. USD $75 million), now only requires approval from Modern Internasional's shareholders. Rumors about this take-over had been heard since late March 2017.
Tjiu Thomas Effendy, President Director of Charoen Pokphand Indonesia, said the acquisition will be financed using the company's internal cash reserves. Based on the agreement, the acquisition should be completed before 30 June 2017 provided all requirements have been met.
Charoen Pokphand Indonesia is an affiliate of Thai conglomerate Charoen Pokphand Group that operates the 7-Eleven trademark in Thailand (with more than 9,500 outlets).
As new owner of the franchise (if the deal is approved by Modern Internasional's shareholders), Charoen Pokphand Indonesia wants to create a new concept for the 7-Eleven chain in Indonesia in an effort to push the convenience store out of losses. Modern Internasional Director Chandra Wibawa said his company is eager to sell its 7-Eleven business segment because it had not contributed to any profit over the past couple of years. In fact it had become unprofitable business.
While originally being a convenience store, 7-Eleven outlets in Indonesia added a fast-food concept where the stores would sell ready-to-eat snacks (and drinks) under the ownership of Modern International. However, the 7-Eleven stores struggled to compete with other convenience stores (specifically industry leaders Alfamart and Indomaret that each run around 14,000 outlets across Indonesia). Moreover, 7-Eleven's ready-to-eat snacks and drinks segment struggled to compete with the many local food vendors on the streets of the bigger Indonesian cities.
Another setback for 7-Eleven was Indonesia's ban on sales of alcohol in the nation's smaller retail stores. Through Trade Regulation No. 06/M-DAG/PER/1/2015 on the Control and Supervision of Procurement, Distribution, and Sale of Alcoholic Beverages the Indonesian government implemented this ban in April 2015, hence making it much more difficult for consumers to purchase light alcoholic beverages. Sales of alcohol contributes about 10 percent of total sales of 7-Eleven stores.
In 2016 Modern Internasional closed down 25 under-performing 7-Eleven stores, hence per September 2016 there are 166 7-Eleven outlets in Indonesia (mainly the Greater Jakarta region).
Charoen Pokphand Indonesia President Director Effendy did not explain what the new concept for 7-Eleven in Indonesia would be. However, he did say that Charoen Pokphand Indonesia wants to add 7-Eleven outlets across the island of Java, especially in crowded areas such as gas stations.
So far this year shares of Charoen Pokphand Indonesia, listed on the Indonesia Stock Exchange, climbed 6.80 percent to IDR 3,300 a piece.
Stock Quote Charoen Pokphand Indonesia - CPIN: