DEAR SHAREHOLDERS,
The global economy this year has been characterised by
strong headwinds that slowed growth around the world
despite record low fossil fuel prices. The ripple effect from
China’s economic slowdown and devaluation of the Renminbi
combined with the global decline in commodity prices has
spread throughout the region and has made consumers and
companies take a more cautious outlook and hold back on
their discretionary spending.
In Indonesia, the government has boosted budget allocation for
infrastructure investment although it has gotten off on a slow
pace. The high inflation that persisted throughout most of the
year and low consumer confidence have curbed household
consumption and slowed GDP growth further. And the weaker
Rupiah to the US Dollar combined with increased tariff rates has
seen a sharp reduction in imports, especially for the expensive,
high-end product segment, and this represents an opportunity
for local companies and brands to regain their footholds.
In the Philippines, household consumption has gone up on the
back of low inflation, higher employment and upbeat sentiment
with the general election that is going to be held in mid-2016.
WRAPPING UP THE CHOCOLATE
CONFECTIONERY BUSINESSES
Chocolate has always been popular with consumers - as a
special treat for personal consumption, as a prized cooking
ingredient, and as a valued and versatile gift. It is an affordable
luxury and a sought-after delicacy, and this desire for chocolate
has seen it weather economic recession and growing health
consciousness among consumers worldwide. Growth is largely
drivenby incomeexpansion, newmarkets andproduct innovation,
while profitability is derived mainly from operations and supply
chain efficiency, branding and marketing effectiveness, and
category and product innovation.
Asia currently consumes about 17% of the world’s chocolate
production. The chocolate confectionery market as a whole
is highly income elastic with the mass-market segment being
particularly sensitive to price fluctuation. So although the
weakened Rupiah has dampened consumer sales in Indonesia,
demand for our premium brands has remained firm and
contributed to value sales in both Indonesia and the Philippines.
In Indonesia, there has been some increase in demand for
chocolate confectionery across all age groups, especially
amongst the youth and young working adults, both as a snack
and as a gift for special occasions. The overall market grew
modestly in 2015 and our Indonesian business has maintained
its market leadership with a retail value share of more than 50%.
A comprehensive branding, marketing and distribution strategy
supports a full range of brands and categories including our
flagship Silver Queen and Delfi products.
As for the Philippines, volume growth in the market was slow
at around 3% as moulded chocolate confectionery is generally
perceived by mass consumers as a treat or gift, and affluent
consumers would go for quality and superior taste offered by
premium brands. We continue to grow our market penetration
with our flagship Goya and KnickKnacks brands. Our strategy
is to capture the young consumers by offering affordable
alternatives to expensive imported brands.
As an ongoing strategy, we aim to move our chocolate brands
towards the premium end of the market and to develop strong
consumer affiliation and ownership. This will help us protect
our margins and insulate our brands against competitors’
marketing and product innovation as well as consumer lifestyle
changes. However the value end of the market will remain an
CHA I RMAN ’ S
The Group will continue to pursue
value and volume growth strategies
by scaling production and building
premium brands.
PEDRO MATA
Chairman
08
PETRA FOODS LIMITED
ANNUAL REPORT 2015
