Report from the Board of Directors
Dear Respected Shareholders,
To begin this report, the Board of Directors expresses gratitude to all parties who have been involved in the Company’s business journey.
Throughout 2022, the Covid-19 pandemic is not yet over. However, the Government’s role in continuing to reduce the spreade rate of the virus is still being carried out, and the importance of implementing health protocols is one of the priority factors in daily activities. With fewer Covid-19 cases and a faster national rollout of vaccines, it has also aided Indonesia’s economic recovery.
The Government continues to encourage economic growth through various financial incentives both in monetary and fiscal policies to the private sector, as well as gradually relaxing the Implementation of Restrictions on Community Activities (PPKM) in a number of areas. So the mobility can increase while maintaining awareness. Despite this circumstance, MPPA has excellent prospects to continue its consumerfocused retail strategy and operations in 2022. The company’s fundamental strategy to satisfy rising household demands for high-quality food products at affordable price continues to be a main focus on Fresh products.
The Company continues to strengthen its online business sustainably as part of its omni-channel strategy by increasing collaboration with major Indonesian marketplaces as well as native online businesses (Hypermart Online and Chat & Shop via WhatsApp) to provide the comprehensive online modern retail that the majority of Indonesian consumers need.
On its offline retail business, the Company successfully opened new 4 Hypermart, 2 Foodmart, 3 Hyfresh, 1 Boston and 1 FMX; closed 5 Hypermart, 1 Foodmart, 1 Hyfresh, 5 Boston and 2 FMX; renovated 3 Hypermart, 1 Foodmart and 2 Boston. . The Management team believes that standalone stores with efficient store size and adequate parking space at good locations will be the new choice for most consumers to do their household shopping activities. The Company will continue to review underperforming stores and replace them with smaller-sized yet efficient standalone store in the future.
Implementation of the Company’s Strategy
Throughout 2022, the Company will consistently focus on and implement the strategies that were implemented the previous year. The Company also does not rule out the possibility of implementing new strategies in response to various market, industry, and society developments that will make the Company more resilient and responsive to future economic dynamics. The Board of Directors always conducts additional monitoring of the implemented strategy so that the Company has a firm growth direction and its achievement can be measured on a regular basis.
Strategies that are implemented sustainably in 2022 include:
Best Of Fresh Products As Priority Focus On Consumer Retailing
The Company believes that its retail business sustainability depends largely toward its prioritized focus in extending and developing its Fresh products assortments to meet the great household demand for quality food necessities as the modern lifestyle of most Indonesian consumers are now changing toward healthy living amid the Covid-19 situation. The Company continued to strengthen its focus to Bringing Best of Fresh Products To Consumers as its business strategy fundamental. The execution of strategy realignment was continued as top priority.
To pursue this strategy, the Company’s has been improving the Fresh Product direct supply chain mechanism by working directly with local farms, fisheries, poultries and meat distributors for faster and fresher Fresh Products distribution to all stores. This led the Company to dominate the modern retailer fresh produce proposition nationwide, particularly in East Indonesia with the support of distribution center in Porong, East Java and distribution center in Timika, Papua.
To ensure the safety and quality of products offered to customers, MPPA has already received Halal Certification from Halal Product Assurance Agency (BPJPH) in 2022, makes MPPA as the first modern retailer in Indonesia to receive Halal Certificate for its 139 locations of multiformat stores, distribution centers and head office nationwide.
The Halal Certificate is in the categories of meat and processed meat products; fish and processed fish products; plant and processed plant products; beverage and beverage ingredients products; bakery and cake products; ready to eat products; services and retailer in all multiformat stores, distribution centers and head office with implementation status of HAS of “A” (excellent).
MPPA also received the Food Safety and Quality Guarantee System for Processed Food (“SMKPO”) certification from the Head of Indonesian Food and Drug Supervisory Agency (“BPOM”) in 2021 while the Company continues to maintain its ISO 22000:2018 - Food Safety Management System, and ISO 9001:2015 - Quality Management System.
As the results of these efforts amid prevailing Covid-19 market condition, a highlight of the Company’s Fresh product achievements in 2022 was:
|Fresh products achievement||FY 2022||FY 2021||FY 2020|
|Contribution to Total Sales||26.8%||27.5%||27.7%|
Fresh product sales continue to deliver good contribution to total sales although it decreased from 27.5% on the previous year to become 26.8% in 2022. The decline in the contribution of fresh product sales was due to the Foot and Mouth Disease outbreak, which affected prices and demand for Fresh products such as meat, seafood and processed dairy products.
Omni-Channel & Digital Payment Gain Traction As Key Consumer Retailing
In-line with the growth of consumer digital lifestyle in doing online transactions and mobile payment, the Company’s omni channel also gained traction in 2022 to become an important part of its overall consumer retailing strategy on sustainable basis beyond what can be realized by conventional offline stores. The Company will continue to maintain and expand collaboration with marketplaces platform in Indonesia. The Company continued reinforcing and expanding its organic online business, Hypermart Online and Chat & Shop by Whatsapp, which are available at 120 and 130 stores nationwide, respectively.
In addition, the Company also continued expanding and developing its collaborations with more marketplaces. By the end of 2022, the collaboration with these marketplaces already available at 849 virtual stores platforms, making the Company as a part of online platform FMCG retailer.
MPPA also continuously strengthened through partnership with one of the leading e-wallet platforms and integrated nationally integrated non-cash payment platform in Indonesia for further digital convenience.
|MPPA’s Online Business Highlight||FY 2022||FY 2021||% Change
2022 vs 2021
|Sales (billion Rp)||395.6||444.6||-11.01%|
|MPPA’s Online Store & Marketplace Partners|
|Chat & Shop||130||128||1.6%|
Along with the improvement of vaccination rates and the reduction of the spread of the COVID-19 virus, we find that online product sales have decreased in line with customer have more confidence to visit stores. However, the company believes that online sales can contribute well to total sales as part of its omnichannel role.
Network Operation & Expansion Through Standalone And Cost Effective Smaller-Sized Stores
As consumers move into the New Normal era, the Company also needs to adapt its network operation and store expansion strategy to anticipate the new shopping preference and renewed lifestyle. Along with that, the company carries out further monitoring regarding the performance of the store by closing the stores that do not contribute optimally and opening the new stores which are considered as needed.
By the end of 2022 the Company operates a total of 196 outlets operating throughout Indonesia consisting of 100 Hypermart, 20 Foodmart and Primo, 13 Hyfresh, 51 Boston, and 12 FMX.
Building Sustainable Retail Management
The Company focuses its strategy to maximize cost efficiency and supported by cross organization as the key fundamental in building sustainable retail management.Improvement of human capital capability also becomes another important focus for MPPA to develop sustainable, knowledgeable work forces through investments in a series of trainings and development. Gender equality in employment becomes another focus to promote and accommodate women roles in career path within the organization.
In-line with the global initiatives for environment sustainability, the Company has put tremendous efforts in socializing and educating customers in reducing the usage of plastic shopping bags and switching to reusable bags.
Strategy Plan in the Preceding Year
The Board of Directors and Management team worked closely with strategic management consultant to transform its operations in accordance with the MPPA strategy, focusing on Hypermart format, as the largest contributor to Company’s portfolio adapting to market condition. MPPA will also implement the cost efficiency and effectiveness policy in 2023.
The new strategies are outlined in four (4) key points, namely:
- Approach to the consumer value proposition
by providing daily Fresh food and family needs
at affordable prices so that customers will see
Hypermart as part of their daily routine.
MPPA will revamp the Fresh value proposition as costumers will visit Hypermart because the lowest price Fresh products with assortment and quality are equal or better than the nearest modern trade competitors were offered to them.
In addition, MPPA offers no-frills basic family needs such as softline, bazaar, and electronics products with compelling pricing and promotions.
- The company will continue to improve its financial
through a variety of methods, such as at the stage
of efficiency and effectiveness both in terms of
products and other financing, in order to provide
a better financial impact gradually and carry out
prudent investment activities in the future.
Several trial stages are carried out before the strategy is implemented thoroughly at all existing stores. MPPA will review if any fulfillment and improvement are needed. Cost improvement will accelerate the future positive impact when all stores could provide the fund independently.
Training and development of our human resources and institutionalize new capabilities within the Company will ensure sustainable goals.
- The process of mapping and transformation will be closely monitored so that it can be adjusted according to various existing implementation plans and recommendations. This stage will last for a period of 9 – 12 months by conducting a pilot project before the transformation being fully implemented.
- This transformation journey will require significant changes in the company's culture and way of working so that its implementation requires the capability, commitment and capacity of all employees.
We believe all those actions above are important foundation of transformation as the Company continues to build a sustainable retail management platform that is necessary to support future growth. We are optimistic that macroeconomic conditions that will improve in 2023, also with strong attention to consumer-focused retail strategy will positioning the Company to become a leader in the market.
The BOD worked closely with the Management under the guidance of the BOC and Audit Committee to deliver company-wide standard operating procedures, which in turn ensuring proper implementation of GCG aspects into daily business operations. Internal control measures were continually being strengthened to support MPPA’s businesses.
The function and importance of Internal Audit has also been further strengthened and a series of stricter audit control procedures to ensure higher credibility of audit findings.
Additionally, the existing Whistleblowing system has also been further elevated and enforced to ensure good governance practices are being executed following proper procedures.
In compliance with OJK Regulation No. 33/ POJK.04/2014, the BOD continued to enforce its guidelines and work conducts for each Board member. During the year, the BOD conducted 12 meetings among its members and 4 separate formal meetings with the BOC, in which all of the meetings were conducted via online video conferencing, emails and other online communication methods.
Results and further BOC’s guidance from those meetings were well communicated to the Management team to ensure proper and timely execution and reviews.
Performance Highlights In 2022
The Company's retail sales in 2022 have increased by 5.4% to Rp7.0 trillion compared to the previous year's achievement of Rp6.7 trillion. In line with the company's strategy of focusing on retail consumers, controlling the purchase of inventory and pricing also supported by cost efficiency, the Company was able to record a gross profit of Rp1.3 trillion, an increase of 7.1% compared to the previous year of Rp1.2 trillion.
|In Rp trillion||FY 2022||% Sales||FY 2021||% Sales||Y.O.Y Growth|
Despite lower sales contribution from online sales as a result of several marketplaces cutting back on their promotion spending, which in turn affected overall product sales, however cooperation with the different marketplaces was maintained so that could continue to support some of the company's products and satisfy customer demands. The removal of PPKM give customers more confidence while purchasing offline was another factor that contributed to the drop in online sales. When online sales fell but total sales rose as a result of the omni-channel strategy's deployment, several promotional and marketing initiatives kept getting better in accordance with services to customers by offering a wide range of goods and services.
The Company's retail sales in 2022 have increased by 5.4% to Rp7.0 trillion compared to the previous year's achievement of Rp6.7 trillion.
In line with the company's strategy of focusing on retail consumers, controlling the purchase of inventory and pricing also supported by cost efficiency, the Company was able to record a gross profit of Rp1.3 trillion, an increase of 7.1% compared to the previous year of Rp1.2 trillion.
In addition to the company's revenue and gross profit which have increased on annual basis, other increases have also occurred in selling and other overall costs, resulting in a continued loss impact on the Company annual basis.
In 2022 the company's net loss increased by 27.3%, related to this, the company will carry out several follow-up strategies to improve the company's financial condition and encourage sales while still reducing costs or efficiency.
The situation with Covid-19, which can be gradually overcome by continuing the periodic vaccination program and consistent implementation of health protocols by the Government, is anticipated to hasten the process of economic recovery.
We are optimistic about 2023 since it is predicted that the economy will recover despite the risks and difficulties that must be overcome due to the pandemic’s aftermath and changes in the global economic and geopolitical environment.
Some of the potential economic difficulties in 2023, like rising interest rates, inflation, and a slowing global economy, will have an effect on Indonesia’s economic growth performance.
The increase in US interest rates has the potential to have a significant impact on central banks all over the world, including Indonesia. To restrain capital outflows and maintain price stability, the Indonesian government raised interest rates in response to accelerating domestic inflation.
The inflation rate for 2022 of 5.51% is lower than the projected figure set by Bank Indonesia of 6.5% in September 2022.
Other sustainable strategic steps include cost efficiency both internally and externally; promotional pricing; a private label approach; optimizing store operations to drive maximum productivity; and providing training to existing human resources to increase competence, performance, and innovation at work. The company will continue to strive for revenue growth by focusing on the potential that an omni-channel strategy can provide.
It brings the Company in a better position to further implement both online and offline business operational going forward. The expansion of Indonesia’s middle class, the increasing rate of urbanization, the ongoing shift to modern channels as well as the accelerated adoption of digital lifestyle and online business are the key drivers to fuel a sustained rise in consumption that will support our business in the future.
We have strong belief for MPPA as it continues to strengthen its position as the Indonesia’s prominent homegrown hypermarket group supported by a strong national network of 196 multi format stores, an unparalleled world-class logistics infrastructure and employing directly 8,086 staffs and store associates. Looking to longer term, we view the Company will have a positive prospect with its aligned consumer retail strategy that will benefit the general retail sector.
Changes in the Composition of the Board of Directors
Based on the NRC proposal to the BOC as well as shareholders’ approval at the Company’s EGMS in December 2022, the BOD’s structure has changed to enable the Board to manage the execution of Company’s strategy more effectively.
The Company has received the resignation from Wirawan Winarto from his position as Director of the Company and approved by the Shareholders in Extraordinary General Meeting of Shareholders held on December 22, 2022.
In 2022 the Management team underwent changes with the appointment of Wim Nestor Maris as CEO replacing Elliot J. Dickson. This changes in leadership is a step forward in the next phase of MPPA’s growth and transformation to solidify the Company as the leading retailer of the future.
BOD extend utmost gratitude to Elliot J. Dickson and Wirawan Winarto for their relentless efforts and professional leadership throughout the challenging period during pandemic. BOD also welcomes Wim Maris as the new CEO with his clear vision and strong leadership and execution capabilities needed to build upon our market leadership to the future of this fastchanging environment.
The BOD would like to extend our gratitude for the dedication and hard work of the Company Management and staffs, and also to our many partners in the business community and government for its continuous support toward our business. We thank the BOC for their guidance and supervision and grateful for the trust and confidence exhibited by our shareholders and customers throughout Indonesia who trust their retail needs with us.
On behalf of the Board of Directors.