A worker watches bottles of Coca-Cola pass by on a newly inaugurated production line at the Cikedokan Plant in Bekasi, West Java near Jakarta, on March 31, 2015. The Coca-Cola company inaugurated two new production lines as part of an investment package worth some $500 million to accelerate growth in the Indonesian market. (Reuters Photo/Darren Whiteside)

Coca-Cola's $500m Indonesian Expansion Starts With New Production Lines

APRIL 01, 2015

Jakarta. Coca-Cola Bottling Indonesia, the local unit of Sydney-based Coca-Cola Amatil, started operations of two new production lines at its plant in Cikedokan, Bekasi, West Java on Tuesday — part of the soft drink giant’s $500 million expansion in Southeast Asia’s largest market.

The Coca-Cola Company, the parent company of Coca-Cola Amatil, pledged last October $500 million in capital for a 29.4 percent stake in the Indonesian production and distribution units ­— namely Coca-Cola Bottling Indonesia and Coca-Cola Distribution Indonesia — that operate under the trading name Coca-Cola Amatil Indonesia.

Kadir Gunduz, Coca-Cola Amatil Indonesia’s chief executive, said that the company plans to add another production line Cikedokan this year. The three new production lines will make 250 million liters of soft drinks per year, adding 10 percent to Coca-Cola’s current total production in Indonesia. Kadir refused to provide more details on current production.

“The fifth line, which currently is under construction, will [be finished] very soon,” he said.

The Coca-Cola Company sees Indonesia’s 250 million population as a solid consumer base for its soft-drink products.

“We see Indonesia ... as one of our motor growth to reach our long term vision,” said Coca-Cola Company chairman and chief executive Muhtar Kent in a press release distributed to reporters.

The Coca-Cola Company’s investment will be used for production capacity upgrades at the Cikedokan plants and at eight other plants in Sumata, Java and Bali. The investment will also be used to increase warehouse capacity and develop more plant-related infrastructures.

Kent said the investment will lead to 75,000 new jobs in production, distribution and supply chain over the the next three years.

Currently Coca-Cola Amatil Indonesia provides 12,000 direct jobs and another 48,000 jobs are in its supply chain.

The investment could help stabilize Coca-Cola Amatil’s earnings in the long term as demand in Australia sags.

Coca-Cola Amatil’s net income fell 25 percent to $375.5 million last year for the second consecutive year, as soft-drink volumes continued to decline in Australia, the Sydney Morning Herald reported.

“I think it’s fair to say that 2014 for Coca-Cola Amatil, overall, was a very difficult year,” said Coca-Cola Amatil chief executive Alison Watkins.

She suggested that the recovery in earnings this year would be modest and would depend on the success of strategies, including the expansion in Indonesia.

“Unfortunately, it doesn’t usually work that you get strong growth and strong profitability. We are very comfortable with that,” Watkins said. “We are very willing to ride the ups and to ride the downs.”