Success Ingredients

10 months ago . 8 min read
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Ardian Wibisono
Author of forbes indonesia
Success Ingredients

Starting with a single nasi goreng (fried rice) stall in Bandung in 2013, award-winner PT Citarasa Prima Indonesia Berjaya, or more familiarly known as Cita Rasa Prima (CRP) Group, is now one of the fastest growing food chain companies in the country. The group now operates nine brands serving daily Indonesian dishes like nasi goreng, instant noodles and meatballs or bakso for 100,000 customers every day at over 200 outlets – franchise and self-owned combined – nationwide. Its popular outlets like Upnormal or Bakso Boedjangan are likely to be jam-packed with customers. Recently, the company entered into a strategic partnership with Anthony Salim’s Salim Group. The company has bold ambition as it aims for international expansion, starting with opening up outlets in Singapore next year. And so far, the company claims to have zero debts.

“Our vision is to become the largest food chain in Indonesia and someday the largest Indonesian food chain in the world,” says Nirmal Rajaram, CEO of CRP, at one of Upnormal’s latest and biggest outlets in Bandung, West Java.

Nirmal is not just boasting. Before he joined CRP the company was already growing steadily. But it was under his management that the group grew rapidly, from just over 20 outlets and only three brands in 2015. CRP was initiated by a group of young people, most of whom college mates studying at Universitas Parahyangan who had earlier started a brand consulting company. When tourism was on the rise in Bandung in 2013, they saw the opportunity to ride the trend by starting a food business as they also loved to eat. It also happened that the business posed relatively low entry barriers. With an initial capital of Rp 100 million, the group started their first food venture with a menu offering their signature brand Nasi Goreng Mafia aimed at university students – Bandung is home to several respectable universities.

Why choose to start with nasi goreng? Danis Puntoadi, CRP’s co-founder, says they basically got the idea from a CNN survey on the world’s most delicious foods: rendang and nasi goreng. But they ultimately opted for nasi goreng because prices of its raw materials are relatively cheaper than rendang’s.

“There are three factors that would attract students: price, portion, and taste. Our price meets their pockets. While others serve 200 grams of rice per portion, ours is 250 grams. We were confident that our product tasted better. Once they try it, they will come again. The thing is, how to make them try? Everybody loves freebies and Twitter was very popular at the time. So we created 1,000 free plates as promotion, asked them to pay with prayers and to follow our Twitter. The math is simple, if a customer has 500 followers the campaign will reach 500,000 potential customers. It worked very well as people started to queue at the outlet,” says Danis.

A similar strategy was applied on other brands like Upnormal and Bakso Boedjangan, which sells Indonesian daily foods with a twist to add value and appeal to growing millennial customers. Upnormal is basically similar to serious cafés like Starbucks - the company claims it only uses high-quality coffee beans and a standard double shot for its espresso-based coffee menus – except that it also serves varieties of Indomie instant noodles and toasts. Each outlet offers free Wifi and electrical plugs are aplenty. Some outlets are even open almost 24 hours to cater to students meeting deadlines. Meanwhile, Bakso Boedjangan serves varieties of meatballs. Both, however, have appealing and “Instagramable” design, which is important to millennial customers.

Brands under CRP Group

Nirmal joined the company in October 2015. He graduated from Loyola College in Bangalore, India, majoring in business and started his career at IT consulting company Infosys. He is also a business turnaround expert. He played a role in Bandung-based textile company PT Sipatex Putri Lestari’s restructuring program, saving the company from bankruptcy by settling its $50 million debt in just over two years. Nirmal also helped boost the revenue of Salgaocar Recources Africa Limited, a mining company in South Africa, from just $3 million to $250 million in just over a couple of years before starting his own consulting company. Nirmal initially planned to bring foreign food chain brands to Indonesia, but he changed his mind after being captivated by the lines of customers he saw at Bakso Boedjangan and other CRP outlets in Bandung.

He had intended to buy the master franchise for Jakarta and was surprised to receive only a one and a half page of agreement from the franchisor – a far cry from the tedious process one needs to go through to obtain an international food franchise elsewhere. Nirmal says with U.S. food chain franchisors, one is usually required to fill up a 20-page form followed by a post-evaluation interview in the States. “I thought something was seriously wrong here, so I asked my friend to introduce me to the founders. We had our first meeting and exchanged a lot of ideas in the first six months. I was hoping they would give me the master franchise but instead got an offer to join them as CEO,” says Nirmal, adding he immediately said yes on the basis of the good chemistry he had with the founders.

The first thing Nirmal did as CEO was to hold a meeting with the shareholders, all 35 of them, and laid the plan and vision for the company. And along the way Nirmal also simplified the company’s structure. Each brand was previously under a different company, so he merged them all under CRP. This allows efficiency in operation and better bargaining position for procurement. Nirmal also set standards and fundamental infrastructure like back office administration, supply chain, legal, finance, training center, and IT system. He oversaw the design of every outlet and even checked in detail the plumbing and the colors of the walls. His idea was that customers shouldn’t be able to differentiate between franchise stores and self-owned stores. It took two to three months of preparation for a new store as all employees underwent training and assessment to assure the same quality standards.

“Since the beginning our core DNA was speed, how to beat the competition and how fast we could improve. The co-founders are good at speed but growing fast from hundred to thousand employees was a different ball game. Nirmal helped us laid the path that enabled us to safely go from 40 kmh to 250 kmh,” says Stefanie Kurniadi, one of the co-founders of the company.

“Why is Starbucks Starbucks? Scalability makes your process simple, everything is done in a standardized manner. If a foreign brand can come to Indonesia and dominate the market, why can’t we at least be at the same level with them?” said Nirmal.

F&B business has huge potentials in the country as consumption significantly drives economic growth. Research from Roy Morgan published in June shows over 55 million Indonesians aged 14 and above (34.3% of the population) eat in family restaurants, buy take-aways or fast food from leading diners such as Restoran Sederhana, KFC, Solaria and McDonald’s. They also frequent local Padang restaurants, buy drive-thru foods or order home delivery from nearby pizza parlors. Patronage of restaurants and fast food stores in Indonesia is significantly lower than in southern neighbours Australia (84.5%) or New Zealand (84.8%). However, because of Indonesia’s vast population there are more than three times as many Indonesians that eat at restaurants or fast foods than the 17 million Australians that share the same habit. Data from Reuters also showed that the sales growth rate in the restaurant industry in the past five years is nearly 5% each year with a net profit margin of 7.5%, which is still big in the context of Indonesia’s huge population. 

Nirmal says 75% of the company’s business is contributed by franchises and partnerships based on management fee and a profit-sharing model. This explains how the company managed to have no debts to fuel its expansion. Outlets are grouped into two: big and small based on size. Small outlets are between 18 sqm to 28 sqm, while the large ones start with 150 sqm. A typical Upnormal outlet investment is around Rp 5 billion. Profit sharing percentage is based on capital investment contributed by each party, or alternatively the company just collects a management fee if the partner self-finances the investment. The company doesn’t disclose financial figures, but based on the claimed number of customers Forbes Indonesia estimates the annual revenue could be about Rp 2 trillion. Using the standard PE ratio of restaurant chain, the company is worth roughly Rp 2.4 trillion.

However, Nirmal feels uncomfortable to be compared with food chain valuation as he has more plans for the company. With branches across the country, CRP is also building a logistics network that can be utilized to add value. For example, empty refrigerated trucks coming back to the central kitchen could be used to carry fresh materials and the same thing goes for dry materials. The company could also leverage its central procurement to serve other companies with smaller stores and lower bargaining power. CRP also sees big potential in coffee not just by expanding more Upnormal cafes but also by making ready to drink, cold brewed products, and freshly roasted coffee vending machines. Nirmal says it aims to bring the company public once it has reached at least a half a billion dollar market cap valuation.


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Written By
Ardian Wibisono
Author of forbes indonesia
Topics
Entrepreneurs