During the current inflation and weak consumer demand, the grocery retail segment in Indonesia only sees strong performance by the minimart (minimarket) segment, while the larger supermarket and hypermarket formats continue to struggle.
According to Fitch Ratings Indonesia, “We still expect market shares of small-format stores to grow, especially as supermarkets and hypermarkets were still struggling to recover. As such, we expect the combined (number) of Alfamart and Indomaret stores to exceed 40,000 by the end of this year.”
Already several supermarkets have reported poor performance in the first quarter 2022. PT Hero Supermarket saw its quarter revenue dropped 43% from the previous year, to reach only Rp 1 trillion (US$67 million) while its net loss soared to Rp 67 billion (US$4.46 million) from the previous year’s Rp 1.64 billion (US$110,000).
Fitch Indonesia projected that Alfa Group minimarket operator, PT Sumber Alfaria Trijaya and Indomaret retail operator Group PT Indomarco Prismatama will each expand by a minimum of 1,000 outlets this year, in spite of accelerating inflation.
According to Fitch, minimarkets like Alfamidi stores offered wider product diversification apart from being closer to residential areas. During inflation, consumers no longer prioritise brands but have shifted to ‘value for money’ when doing their regular purchasing. As such, promotions really work for these retailers. In addition, many minimarts also embrace new services such as fast food and self-service drinks that attract the middle class consumers.
