Dairy Farm exits Starmart Indonesia

 

Convenience store and grocery retailer Hero Supermarket is to exit the troubled Starmart Indonesia business.

Hero, a subsidiary of Hong Kong-headquartered Dairy Farm International, has announced the sale of 80 stores to Fajar Mitra Indah, a subsidiary of Wings Group, an Indonesian food conglomerate which owns the FamilyMart franchise in the country. The networks will be merged by the year’s end under the FamilyMart banner, taking that network to 80.

The sale follows the closure of 50 poorly performing stores in the network last September after a long-running strategic review. The balance of the stores – the number of which is undisclosed – will be shuttered.

The Starmart business had effectively been kneecapped by rapidly implemented Indonesian government policies, most significantly a ban on convenience stores selling alcohol which took effect last April. A general economic slowdown has not helped sales of other goods.

In a statement, Hero said it would withdraw entirely from the convenience stores business in Indonesia. No transactional details were revealed but the company said the closure would have no material impact on its trading figures this year.

Both Starmart and FamilyMart are relative minnows in the Indonesian convenience store sector – local chains Alfamart and Indomart – each about 10,000 outlets strong – dominate.

According to a report in the Nikkei Asian Review, Hero’s profit fell 90 per cent in 2014 and slipped into the red in 2015. Its supermarket business is under pressure from discounters and the company has also shuttered a number of unprofitable Guardian drugstores.