Supra Boga Lestari IPO Public Expose
A long awaited IPO which at last come to realization, adding another option to modern retailer option in JCI consumer universe. Supra Boga Lestari (SPL) runs Ranch Market, a premium supermarket that serves high end customers, and Farmers Market, a mid to high segment supermarket which targets broader consumer base. Strategically speaking, SPL chooses to target a segmented market in middle to high end who prefer quality above price and avoid being a jack of all trades (hypermarket type that sold all of appliances which usually apply price war) by focusing only on food business, backed by management belief that the segment will be expanding rapidly (Nielsen’s surveys states that after GDP/capita reach USD3,000, consumer preferences will change toward quality).
The distinction especially seen in Ranch Market strategy which includes: 1) product; Ranch market focus on premium rare food products and fresh food products. Rare means management seek non generic brand such as high quality home industry products that doesn’t have access to mass market retailers because of its non sizeable scale. On the fresh part, in average around 50% of the revenue comes from fresh product which is need special practices to handle; 2) services; management emphasizes its employees to live a problem solving culture to serve customer. Ranch market also provides unique services such as open kitchen, fresh bakery, bbq services, and high class restaurant as an integrated part within its supermarket. 3) marketing program; SPL prefer to use a direct and personal marketing program including kids store tour and cooking class, and 4) location and design; SPL choose only a sweet spot which is in the center of middle high community residence.
The design of each stores are also distinct one after another based on the location. In simple term, SPL management differentiates itself by creating an enjoyable shopping moments within a cold functional image of modern retail markets. Farmer market which serve a broader market also using part of the strategy with a lesser extent. The company currently operates 14 stores in Jakarta and Surabaya. In this year they plan to add another four stores which include the one in Balikpapan.
SBL will sell 20% of its shares through this IPO. 21% of the proceeds will be used to repay debt, 60% for store expansion, and the rest for working capital. Valuation wise, the IPO price range is between 17.3x- 20.7x FY12 earnings based on underwriter’s calculation.
