We have sales and distribution capabilities in Indonesia, Singapore and Malaysia. Our most established distribution network is in Indonesia. In Indonesia, our distribution strength is based on our established infrastructure and distribution network across the Indonesian archipelago. We also sell our chocolate confectionery products in countries in which we do not have our own network, through the use of sales agents. These countries include Thailand (since 1987), Japan (since 1995), the Philippines (since 1999), Hong Kong (since 1993), Australia (since 2003) and China (since 2004). We believe that our strength and experience in the Indonesian market (particularly in relation to the modern trade channels such as supermarket chains and in dealing with owners of third party brands) provide us with a good base to strengthen our distribution capabilities in other Asian countries.
Our third party distributors and sub-distributors have their own delivery vans and storage facilities, or stock points. Our distribution network covers all the provinces of Indonesia and most types of distribution channels. This enables us to effectively penetrate the consumer market across Indonesia.
We distribute our Branded Consumer Division's products (which include third party brands) through these main channels, namely the modern trades (approximately 30% of our sales) and traditional outlets (approximately 70% of our sales). Some of our sales through traditional outlets (namely distributors) may also subsequently sell our products to the modern trades. Modern trades in Indonesia include hypermarkets, supermarkets, minimarts, and drugstores, which have proliferated in Jakarta and to a lesser extent, Bali.
We also distribute third party products (namely PT Freyabadi Indotama's industrial chocolate) to professional food service businesses such as bakeries, hotels and restaurants throughout Indonesia. In addition, we have a food service team comprising eight professional chefs to provide value-added total food service solutions to our customers by providing consultancy services. The strength and coverage of our distribution network has been integral to the significant market share we enjoy in Indonesia.
Our modern sales channel involves the distribution of products to modern retailers comprising hypermarkets, supermarkets, modern wholesalers and chain stores directly through our own distribution team in Jakarta and Bali, and through third party distributors elsewhere. Examples of our modern sales customers include Carrefour, Giant, Hero, Makro and Indomart. We generally receive payment for such supplies within 30 days of the date of delivery. In order to incentivise our customers, we offer sales incentives, bad stock allowances and rebates (which are generally linked to the volume purchased).
We allocate a key account manager to each of the major customers of our Branded Consumer Division who is responsible for managing the customer's entire distribution chain. For the Hero chain of supermarkets, we provide category and sub-category managers who manage the confectionery or chocolate confectionery shelves and turnover of chocolate confectionery for our customers. This arrangement enables us to better position our products and provides us with valuable direct information on customer behaviour and buying patterns.
The diagram below illustrates the structure of our distribution network in Indonesia:
Based on data received from our distributors, as at 30 June 2004, we had access through our distributors and sub-distributors to over 70,000 modern and traditional outlets. This extensive coverage was supported by:
We are continually strengthening our existing long-term relationship with our distributors through frequent communication, delivery van purchase incentive programmes and sales performance incentives. In addition, the Company has implemented a "Good Distributor Practice" program, which provides for clear objectives, sales targets, customer service levels and key performance metrics, so as to increase the performance and efficiency of our distributors. In order to further improve the efficiency of our network, we have commenced rolling out an electronic remote-connect ordering system, which enables our distributors to place orders with us electronically instead of by faxed order forms. This system will enable us to track sales more efficiently.
We sell products to our distributors at a discount to our recommended selling price. We effectively subsidise the cost of transporting our products to certain outlying areas in order to maintain fairly uniform selling prices throughout Indonesia. Our distributors are largely exclusive to us and generally distribute only our products and the third party brands we distribute. We allow our distributors to return a small percentage of damaged products, on the condition that our distributors have not contributed to the cause of damage. We have managed to minimise the level of damaged products returned by our distributors through regular inspections of our distributors' facilities as well as proper handling of our products. We also allow our distributors in Indonesia to return products that have festive packaging which we repack for re-sale, because our products have relatively long shelf-lives.
Our distributors are generally granted 14 to 30 day credit terms and modern trades, 30 days.
The chart below highlights the number and geographical spread of 103 stock points maintained primarily by our distributors as at 30 June 2004:
Our distribution network is divided geographically into four main regions: West Indonesia, Greater Jakarta, Central Indonesia and East Indonesia.
Our most established network and our largest number of distributors is on the island of Java, whilst our newest and smallest network is located in West Papua. We continue to review and re-configure our network in order to achieve optimal results. Our current focus is on the network in the Greater Jakarta area which is home to over 20 million people. We are considering ways of re-configuring current distribution areas and adding distributors in order to ensure our products reach as many outlets as possible, and to ensure that re-stocking delays are minimised.