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W15407

7-ELEVEN INDONESIA: INNOVATING IN EMERGING MARKETS

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Marleen Dieleman, Ishtiaq P. Mahmood and Peter Darmawan wrote this case solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the

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permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.

Copyright © 2015, National University of Singapore and Richard Ivey School of Business Foundation Version: 2015-11-11

In April 2015, Henri Honoris, the chief executive officer (CEO) of 7-Eleven Indonesia, enjoyed a brief moment
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of respite as he looked back on what had been a rollercoaster year. During 2014, he had increased the reach of
7-Eleven (locally known as “Sevel”) by more than 30 per cent in Indonesia, rapidly expanding to 190 stores by
the end of that year. Honoris’ 7-Eleven stores had been built on a unique concept that was unlike any other
existing convenience store in Indonesia.

When introducing the 7-Eleven franchise to Indonesia in 2009, Honoris stumbled upon an opportunity to
introduce a new business model; he added a café concept into what was originally a regular convenience
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store. This innovative move turned the 7-Eleven stores into a popular hangout for youths and young adults
in Jakarta. By introducing more seating and services, as well as by serving more fresh food and beverages,
he created a space that was a pleasant hybrid of a restaurant, a coffee shop and a store. This new layout
became very popular — even his established competitors started to imitate his model.

Most of the revenue from the stores was derived from serving fresh food and beverages, so Honoris went a
step further and created a central kitchen on the outskirts of Jakarta to supply fresh food and beverages to
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all of his 7-Eleven stores. As a result, 7-Eleven’s growth in Jakarta had been exponential, and the company
was set to continue growing at a rapid rate throughout 2015.1 This was a significant achievement for a
latecomer in the competitive convenience store segment in Indonesia.

Although the rapid expansion of 7-Eleven filled Honoris with pride, he had some concerns. Various
logistical difficulties had emerged as a result of his innovation. He needed to expand the central kitchen as
he served more ready-made food and beverages in his stores. This was further complicated by the fact that
rapid distribution remained a challenge amidst Jakarta’s heavy traffic. Real estate prices were increasing,
and his concept required more floor space than regular convenience stores.
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In addition, the regulations for convenience stores were somewhat unclear in Jakarta. The 7-Eleven stores
initially operated under a restaurant license but local regulators had recently demanded that the stores apply
for convenience store licenses. These were not easy to obtain because the regulators attempted to protect
traditional grocery retailers.

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Furthermore, expansion required more funds and careful management of issues such as community relations and

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customer safety on the streets of Jakarta. As Honoris raced to expand, large competitors and new entrants alike tried
to imitate his new concept. Was his innovation sustainable? How could 7-Eleven continue to grow operations?

COMPANY HISTORY

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The Modern Group (PT Modern) was first established in 1965, when Henri’s father, Otje Honoris, a
businessman from South Sulawesi, Indonesia, started a business selling photographic equipment. As the
business grew, he expanded into wholesale while also offering various retail film services. In 1971, PT
Modern Photo Film Company was established as the Indonesian manufacturer and distributor of Fujifilm.
The business grew steadily throughout the 1980s and 1990s, and went public in 1991. In 1997, the business
expanded again when it was selected as the sole distributor for Ricoh document solutions, equipment and
photocopying services in Indonesia. During this period, Fujifilm remained the core business for PT Modern,

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with approximately 2,500 Fujifilm stores and 35,000 employees.

By the early 2000s, the photographic film industry faced strong challenges from the digital age. “We saw
the challenges of [the] digital [age] in the early 2000s, when the first digital camera with 0.3 megapixels
was released into the market,” stated Henri Honoris, who was working for Fujifilm USA at the time. He
continued, “We thought that there was no way that digital cameras would match the technology of film —
it’s been already over 100 years.”2
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Yet in the years to come, PT Modern would be forced to restructure and find new business. As Honoris
noted, “We had to restructure from 35,000 employees to 800 employees at our lowest. I even had to dismiss
one of our directors [who] had been working for us for 40 years, and he was crying in front of me; it was a
heart-breaking and very difficult moment.”
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In the years that followed, PT Modern closed approximately 1,500 of its Fujifilm stores. By 2006, it had begun
looking for other opportunities beyond those offered by Fujifilm. Acting upon advice obtained from his father,
Honoris approached 7-Eleven to become its master franchisee for Indonesia. This was not an easy task. 7-
Eleven’s last international expansion was in 1992, and it had not entered a new country since then. “So we
approached [the company] and we got rejected because at that time Indonesia was not on [its] radar,” said
Honoris with a laugh. However, Honoris persisted and continued to negotiate for two years, finally signing a
letter of intent with 7-Eleven in 2008. PT Modern opened its first 7-Eleven store in Bulungan, South Jakarta
in 2009. By the end of 2014, it had 190 stores in the Jakarta metropolitan area (see Exhibit 1).3
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This venture also improved PT Modern’s financial results. By the end of 2014, PT Modern’s revenues derived
from 7-Eleven rose to US$71 million (see Exhibit 2), which constituted 61 per cent of the group’s total sales.4

7-ELEVEN: AN INTERNATIONAL FRANCHISE

7-Eleven was established in the United States in 1946, and named after its original opening hours: 7:00 a.m.
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to 11:00 p.m. It subsequently grew into a more modern convenience store format, stocking and selling over
2,000 products in relatively small store layouts. Although the majority of stores began operating 24 hours
a day in the mid-1960s, the company retained its original name.5

During the stock market crash in 1987, 7-Eleven experienced significant financial difficulties. In 1991, its
Japanese franchisee, Ito-Yokado, acquired a controlling share of 7-Eleven’s holding company, Southland

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Corp. By 2005, 7-Eleven Inc. had become a fully owned subsidiary of Ito-Yokado, although it continued

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to run its international operations out of the United States.6

By March 31, 2015, 7-Eleven had a network of 55,801 stores worldwide, with 17,569 stores concentrated in
Japan. It operated in 16 countries, including Indonesia.7 Although its management team included both Japanese
and American managers, the company still used Japanese operations and information technology (IT) systems.

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This was a reflection of its Japanese ownership and 7-Eleven’s international franchisees had access to these
systems.8

To support its international franchisees, 7-Eleven provided operational models, systems, training and tie-
ups with global quality certification standards, including the HACCP and ISO 22000. It also had its own
proprietary quality certification program, and conducted monthly visits for quality checks and management
training sessions. An integrated IT system also enabled 7-Eleven to provide business analytics and store

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optimization support for franchisees. In addition, the company was able to use its scale to negotiate bulk
discounts for certain types of equipment used in all of its stores. As a result, franchisees were able to focus
their energy primarily on store expansion and store operations.

THE INDONESIAN MARKET LANDSCAPE

Indonesia was the largest country in Southeast Asia, with a population of 252.8 million and a gross domestic
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product (GDP) of $888.5 billion in 2014.9 Jakarta, the capital city, had a population of approximately 10
million, with 28 million people living in the greater Jakarta region.10

As an emerging market, Indonesia enjoyed significant growth in terms of both its GDP and the size of its middle
class. A 2014 Nielsen article reported that within Southeast Asia, Indonesia had the fastest emerging middle
class, which was expected to double in size by 2020.11 Like many emerging markets, Indonesia had a young
population, with 17.1 per cent of the country’s population between the ages of 15 and 24.12 The dual demographic
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forces of a growing middle class and a young population resulted in a corresponding increase in consumption
and demand for safe, high-quality products, particularly in the youth and young adult population segment.13

Despite undergoing rapid modernization, the majority of the retail sector in Indonesia was still dominated by
traditional trade, with 85.2 per cent of the $95 billion dollar retail grocery market derived from traditional wet
markets (which sold fresh meat and produce) and small street stalls. Just 14.8 per cent came from modern
retailers such as superstores, supermarkets and convenience stores (locally known as “minimarkets”).14
No

Traditional retailers were primarily made up of small street food stalls (warungs) and local mom-and-pop
shops (toko) (see Exhibit 3). These stalls retained a dominant market share of 54.3 per cent of total sales in
the retail grocery industry in 2013. Moreover, they constituted 94.8 per cent of total retail grocery outlets
across Indonesia in 2013.15 Among the modern retail businesses, the largest were Indomaret and Alfamart,
with 3.2 per cent and 3.1 per cent shares of the 2013 grocery market, respectively.

Indomaret and Alfamart had a much longer history than 7-Eleven, dating all the way back to the late 1980s.
Do

Together they operated around 18,000 outlets, both owned and franchised. However, the rapid expansion
of modern retail only began in the 2000s. In 2006, the government started issuing restrictive regulations to
protect traditional retail. Despite these restrictions, the growth of modern retail in urban areas was expected
to continue at an annual rate of 7.3 per cent between 2012 and 2017.16 The convenience store segment was
expected to be the fastest growing segment of all the grocery retailers with a forecasted compound annual
growth rate (CAGR) of 10 per cent.

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This high growth rate and forecast could be attributed to the growing size of the youth and young adult

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populations across Indonesia that fell within the lower to middle-income classes. As a result, new entrants
from foreign convenience store firms such as Lawson and Family Mart (both Japanese firms) established
their first stores in Indonesia in 2012 and 2013, respectively, because the potential customer market was
attractive. This increased competition in the already dynamic convenience store segment.17

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Indonesia’s business environment was complicated, particularly in regards to regulation and infrastructure.
In the World Bank’s 2013 Worldwide Governance Indicators report, Indonesia was given a score of –0.20
for its regulatory quality and –0.24 for its government effectiveness, while Thailand scored 0.21 for both
indicators. The former score reflected a lack of government policies in Indonesia that encouraged private
sector development, while the latter illustrated the country’s poor quality of public and civil service as well
as policy implementation. Both scores highlighted the challenging regulatory environment of doing
business in Indonesia.18 Furthermore, Indonesia ranked 53rd in the 2014 Logistics Performance Index,

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lagging behind neighbouring countries such as Vietnam and Thailand, thus demonstrating the distribution
and supply chain challenges that businesses faced in Indonesia.19

These emerging market issues were reflected in various areas of the Indonesian market landscape, from traffic
congestion to crime and public safety. Businesses that worked in the Indonesian market were thus required to
navigate their way through these factors. For some businesses, resolving these emerging market challenges
would provide them with a strong competitive advantage against both their existing and potential competitors.
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A NEW STORE CONCEPT

Before opening the first 7-Eleven store in Indonesia, Honoris faced a new challenge. The local Jakarta
government had stopped issuing convenience store licenses because they feared that modern retailers would
displace traditional markets. When presenting his new 7-Eleven concept to the local authorities, Honoris
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received a suggestion, as he described: “They told us, okay then, why don’t you focus on food, and prepare
tables and chairs?” Rather than a convenience store license, it was proposed that 7-Eleven should apply for
a restaurant license. As a result, a problem became an opportunity, and the idea of combining a restaurant
with a convenience store was born.

At this point, Honoris had already been searching for a way to differentiate 7-Eleven from existing
convenience stores like Indomaret and Alfamart. Looking for ways to be different, PT Modern surveyed
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customers for market opportunities illustrated by unfulfilled needs. Honoris stated, “What we found was
that in Indonesia, [people] like what we call ‘nongkrong.’” Nongkrong, which loosely translates to “hanging
out,” involved small groups of youths who would meet to talk, use their phones and eat. “So we combined all of
this, we [offered] tables and chairs, free Wi-Fi, lots of snacks, fresh food, value-for-money, convenience and a
safe environment [together] for our customers,” Honoris continued (see Exhibit 4).

In contrast to other convenience stores in Indonesia, 7-Eleven focused on serving fresh and ready-to-eat
food, with 50 per cent of store space dedicated to fresh foods and beverages. Best-selling products included
chicken katsu (a ready-to-eat, deep-fried, breaded and seasoned chicken fillet) as well as udon, sandwiches
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and a variety of pastries. Typically, its best-selling products were sold at prices below US$2 (see Exhibit
5). Overall, fresh food contributed to 28 per cent of sales, while proprietary beverages contributed to 21 per
cent of sales in 2014. In a 2013 in-store survey, it was found that over 39 per cent of customers visited 7-
Eleven to dine in, with another 28 per cent purchasing take-away foods or beverages, and 18 per cent
purchasing snacks.

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Besides convenience stores, 7-Eleven was also competing with the small warungs, which had a long-

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established presence in Indonesia and commanded a dominant position in the grocery retail industry. Even
in larger cities, some consumers preferred to frequent traditional retailers because they were more
conveniently located and usually near places of residence or work. Also, these vendors typically sold food
and beverages at very low price points that were customized to meet local tastes and preferences.

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The traditional food stalls thus provided a good place for nongkrong. Nonetheless, despite their strong
market position, the market share of these stalls had eroded over the previous few years due to the entry of
modern retailers like 7-Eleven. Traditional retailers commanded 56.1 per cent of total grocery retail sales
in 2008, as compared to 54.3 per cent in 2013.20

When compared to the warungs, 7-Eleven provided more convenience and comfort. In addition to being open
24 hours a day, 7-Eleven provided additional amenities such as Wi-Fi, air-conditioning and high-quality fresh

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foods and beverages. All of these features were popular amongst local youths and young adults. Although 7-
Eleven’s prices were not as low as small street stalls’ prices, its offerings were still cheaper than formal
restaurants or regular fast-food chains. This provided affordability to youths with limited disposable income
and made 7-Eleven more attractive to them. 7-Eleven also had a more “cool” ambiance that appealed to youths
more than the street stalls, as it was an international brand name.

Joe Biedenharn, a business development manager for 7-Eleven who was involved in the Indonesian start-up, noted:
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The first couple of stores were launched with fresh food focused on a “rice table” concept [that]
consist[ed] of rice and a choice of five or six different local Indonesian dishes, but customers did
not want something their mother would make at home. They wanted something different. So we
pulled out the rice table and focused more on hotdogs and chicken, more Western food . . . .”

7-Eleven added localized food products such as chicken black pepper rice balls, nasi goreng (Indonesian
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fried rice) and local varieties of hot dogs and fried chicken. Honoris confirmed, “Ninety-five per cent of
our products are local — made locally [and] developed locally with our vendors.”

The concept was highly popular, a success that Biedenharn attributed to the unique cultural model within
Indonesia: “The average time people spend in a [7-Eleven] store in the United States is maybe around 30
seconds. In Indonesia, it can be as much as one to two hours. It is a very different culture. The young people in
Indonesia have this nongkrong culture of hanging out and our stores are a perfect place for it.”
No

However, this was not always the case. In its early stages, 7-Eleven Indonesia did not offer as many tables,
resulting in a large number of customers hanging around the steps and sidewalks outside of the stores. Because
of this, 7-Eleven began adding more tables and changed its model to provide greater convenience and
comfortable amenities for customers to enjoy their purchases.

The tag-line used by Honoris was “hygienis, enak cepat,” meaning “hygienic, delicious and fast.”
“Hygienic” meant products had to be safe and healthy, particularly the fresh food and beverage products.
7-Eleven did not use preservatives, as was the case with other products with a longer shelf life. According
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to Honoris, “We follow the food safety and hygiene standards of the holding company.” 7-Eleven continued
to update its products and experimented frequently with new offerings. “Fast” meant that the products were
easy to prepare and the packaging was suitable for “grab and go” types of purchases.

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Adding More Features

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A unique feature of 7-Eleven Indonesia, compared with other convenience stores, was the central kitchen
that provided 60 to 70 per cent of the fresh food to the 7-Eleven stores in Jakarta. The central kitchen was
housed in a former Fuji plant on the outskirts of Jakarta, illustrating an innovative utilisation of PT Modern’s
previous business resources.

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This concept ensured product quality and uniformity across all stores. Food products were prepared in the
central kitchen and brought to a central warehouse before being delivered daily to all 7-Eleven stores in
Jakarta (see Exhibit 6). The delivery system required a chain of special refrigerated trucks, so the company
collaborated with Iron Bird, an affiliate of the Blue Bird Group, for delivery. Delivery of fresh food products
was conducted overnight to avoid Jakarta’s notorious gridlocked traffic during the day. Honoris noted, “In
Japan, deliveries are done three times a day but because Jakarta traffic is very challenging, we decided to
deliver the product once a day.” This solution emphasized Honoris’ creativity in meeting the challenges of

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operating in Jakarta’s unique environment.

7-Eleven began to offer new options to customers that ranged from food delivery to digital services. It
developed a digital kiosk (“Sevelin”), which allowed customers to purchase a variety of tickets (e.g. for
travel, entertainment, etc.) as well as various types of insurance (e.g. life, medical and travel). It also
provided a taxi-calling service in partnership with the Blue Bird Group, one of the largest taxi companies
in Indonesia. Honoris had noted that at night, it was potentially dangerous to wait for a taxi at the side of
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the road in Jakarta, particularly for female customers. In addition, it was difficult to call for a taxi without
providing an address. With Sevelin, customers could visit 7-Eleven, call for a taxi and safely wait for the
taxi to pick them up while having a drink or snack. Blue Bird would maintain electronic records of the
customer’s call, and the details of the taxi driver who was coming to pick them up, which resulted in safer
travel for customers.

By providing services that influenced customers to spend time in the store, 7-Eleven was able to solve unique
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customer problems while increasing sales. Because it was open 24 hours a day, 7-Eleven was able to partner
with telecommunications company Indosat to launch the iPhone 5 at midnight in 2012. The launch featured
local celebrities and movie stars, which helped to attract long line-ups of customers to 7-Eleven. The stores
also regularly hosted events such as soccer screenings during the World Cup, live band performances and
online game competitions. According to Honoris, these events were part of 7-Eleven’s efforts to bring the
community closer to the stores and to make them “community store[s].”
No

To maintain lower costs and higher profit margins, 7-Eleven promoted fresh products with its own private
brand. These products were items such as bottled iced coffee or tea. It tailored products to store demand
and regularly introduced new products.
Marketing was mostly one-to-one via new media or store-based event marketing. For instance, Honoris
pioneered location-based advertising agreements with telecommunications providers who would send
special offers to mobile phone users located within a minimum radius of a 7-Eleven outlet.

According to Honoris, community was a key aspect of 7-Eleven’s value proposition: “We believe in our
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[community’s] welfare and development — what we give to [the] community will eventually come back to us.”
In particular, the community ensured the safety of 7-Eleven stores and its customers. One issue was parking
spaces for motorcycles, the typical mode of transportation used by customers. By allowing parking attendants
from local community organizations to manage storefront parking, 7-Eleven provided informal employment,
using these parking attendants to ensure the safety of customers’ vehicles. “If a thief comes, these parking
attendants . . . will catch the thief,” noted Honoris. “[The attendants also] encourage them not to [steal] because
this is their community [too].”

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Growing Pains

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Honoris believed that the Greater Jakarta region alone could support 2,000 to 2,500 stores, and he focused
on achieving this by 2030. However, several factors limited the potential growth rate. First, the necessary
infrastructure had not yet been fully developed. In addition to the chain of refrigerated trucks and the
challenges of Jakarta’s traffic, the capacity of the central kitchen also posed a limit to growth. At the end

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of 2014, the central kitchen was able to support up to 150 stores. With an expansion coming in 2015, it
would be able to support up to 500 stores.

Another persistent obstacle involved the recruitment and retention of staff. It was difficult to find, train and
keep staff to run the new stores. A great deal of management time was spent on this problem. Not only were
employees hard to find, but labour costs were also rapidly increasing. For instance, in November 2014, Basuki
‘Ahok’ Tjahaja Purnama, the acting Governor of Jakarta signed a gubernatorial decree that increased

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minimum salaries in Jakarta by 12.5 per cent, from IDR2.4 million ($197) per month to IDR2.7 million ($221)
per month.21 Prior to this change, the last increase in minimum wage was at the end of 2012, when Governor
Joko Widodo increased the minimum wage by 44 per cent to IDR2.2 million ($228) per month from the initial
minimum wage of IDR1.5 million ($156) per month. The basic cost of living set by the Jakarta Remuneration
Board before the wage hike was IDR1.98 million ($206) per month.22

The increasing cost of real estate in Jakarta posed an additional challenge. Honoris’ innovative store concept
came at a price: the seating areas required a much larger space than a conventional convenience store. In
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light of this, Honoris had to consider that he was catering to the middle class and offer products that were
generally cheaper than those offered by competitors. Would the increasing sales volume continue to outpace
the price increases in labour and rental costs? Should he introduce smaller stores with less seating? These
were possibilities that Honoris needed to consider.

Further complicating matters for Honoris was a 2013 franchise regulation that limited convenience stores
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to owning no more than 150 outlets. This was in contrast to restaurant chains, which were only capped at
250 wholly owned outlets. Competitors such as Indomaret already owned thousands of stores, and the
Indonesian government introduced compromises that allowed those exceeding the limit to submit plans to
shift towards franchisees. As of 2015, there was no official deadline on the execution of these plans and 7-
Eleven was approaching the limit of wholly owned stores that were allowed by the existing regulations. In
light of this, Honoris believed that franchising was the way forward and he proceeded with sub-franchising
the brand. He said:
No

7-Eleven’s business is a franchise business. Amongst 7-Eleven stores around the world, 70 to 80
per cent are basically franchised to small [and] medium business owners . . . . [For] good sub-
franchisees who are managing the stores by themselves, sales usually increase by about 30 to 40
per cent, and net income will grow by 15 to 20 per cent [higher] than our own store.

PT Modern was not new to the franchise business model because most of its Fujifilm retail stores were
franchisee-owned and some could be converted to 7-Eleven outlets. However, franchising the brand to small
business owners held the risk of damaging the brand name if something went wrong. The existing Indonesian
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legal system offered master franchisers little recourse against aberrant franchisees. Furthermore, it was
difficult to quickly find and train new franchisees, so franchising could slow down the planned expansion.

It was also unclear whether or not the Indonesian government would issue more restrictions on mini-markets.
In the first quarter of 2015, the government prohibited the sale of beer and other alcoholic beverages in
convenience stores.23 It was also possible that regulators would require that 7-Eleven apply for a convenience

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store license. It was not unthinkable that the government would protect traditional retailers by further limiting

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the number of convenience store licences and taking action against those that did not meet tighter regulations.

7-Eleven had managed to carve out a competitive niche for itself within Jakarta, but its explosive growth
did not go unnoticed. Its competitors, both incumbents and new entrants (such as Lawson and Family Mart)
also started to add tables and chairs to their stores. 7-Eleven’s competitors had not yet copied the central

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kitchen concept, but it was a possibility in the future. Honoris believed that, to some extent, the central
kitchen and chain of refrigerated trucks provided a barrier to entry for the larger players. “If they don’t have
an integrated central kitchen, warehouse and logistics system, and they have to cook in the store, it’s very
difficult [for them],” he noted. Although expanding the central kitchen and improving the delivery system
was a challenge for 7-Eleven, it was an even greater challenge for competitors. Honoris reflected, “I guess
a competitive advantage [for] 7-Eleven is that we built the infrastructure from the beginning.”

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While its major competitors had yet to replicate the central kitchen concept, they had started to offer additional
store services. Indomaret partnered with a local travel agency to provide hotel and flight bookings. Alfamart
launched an online service24 and collaborated with Indonesia’s largest cell phone carrier, Telekomunikasi
Indonesia, to offer mobile payments.25

While matching expansion rates would be a challenge for Honoris, he noted that 7-Eleven’s brand equity was
strong. The company was familiar to many Indonesians, and did not require as much introduction as other
potential international competitors like Family Mart and Lawson.
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MOVING FORWARD

Standing up from his desk, Honoris smiled to himself. Although the future was uncertain, he knew that he
had strong competitive advantages and resources: a unique concept, the infrastructure to run it, strong brand
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equity and an adept marketing strategy. Regardless of what competition might arise, 7-Eleven would fight
back. Honoris still wondered how fast his model could be expanded upon without losing financial or
operational control. Would he be able to serve his customers better than those that would emulate his model?
It was all about sustainability, and Honoris knew that through analysis, he would be able to develop a lasting
strategy for 7-Eleven.
No
Do

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EXHIBIT 1: 7-ELEVEN INDONESIA KEY MILESTONES

Opens first 7-Eleven store in 2009. Annual
Report description of 7-Eleven stores’
competitive advantages states that it is:
“A unique concept and store layout that
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Modern plans to open 2,000 to 2,500
outlets in greater Jakarta over next 10
years, currently owning 161 outlets, and
aiming to open 200 new outlets by the end

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combines a convenience stores as well as
190
a destination of casual eatery.”
Concerns are raised regarding outlets at
7-Eleven’s business permits as the end of
Modern attains restaurants instead of minimarkets 2014
licence from 7- New regulations regarding franchise
Eleven, paying laws may also threaten 7-Eleven
$1.5m in initial
franchise fees
20th 7-Eleven Opens 57th
store in Jakarta 7-Eleven store in

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opens. Jakarta.

2009 2010 2011 2012 2013 2014

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Sources: Niskala Media Tenggara, “7-Eleven Continues Expansion Despite Uncertainties,” The Jakarta Post, September 8,
2012, www.thejakartapost.com/news/2012/09/08/7-eleven-continues-expansion-despite-uncertainties.html, accessed August
6, 2015; Modern Internasional, “Annual Report 2009, 2011, 2014,” www.moderninternasional.co.id/investor-
relation/financial_reports/3, accessed August 27, 2015; Bisnis Indonesia, “MDRN Added Possession at the Subsidiary Firm,”
Bisnis Indonesia, December 31, 2010; Reuters News, “Modern Internasional To Open 2000–2500 7-Eleven Stores in 10
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Years,” Reuters Limited, April 24, 2014, www.reuters.com/article/2014/04/24/indonesia-press-modern-

idUSL3N0NG0JG20140424, accessed August 6, 2015.
No
Do

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EXHIBIT 2: SALES AND PROFITS OF 7-ELEVEN, PT MODERN INTERNASIONAL

os
rP
Amount ($)

yo
op
Sources: Author’s calculations, based on Modern Internasional, “Annual reports 2011–2014,”
www.moderninternasional.co.id/investor-relation/financial_reports/3, accessed August 27, 2015.

EXHIBIT 3: MINIMARKETS IN INDONESIA

tC

2010 2011 2012 2013

Indomaret
% Market Share 1.5 1.8 2.6 3.2
# Of Stores 4,955 5,755 7,245 8,814
Alfamart
% Market Share 2.0 2.3 2.6 3.1
# Of Stores 4,812 5,797 7,715 9,302
7-Eleven
No

% Market Share 0.0 0.0 0.1 0.1

# Of Stores 21 57 108 176

Source: Euromonitor, “Grocery Retailers in Indonesia,” Euromonitor International, March 2015,

www.euromonitor.com/grocery-retailers-in-indonesia/report, p. 13, accessed June 25, 2015; W. Suzuki, “Indonesia Holds
promise, pitfalls for 7-Eleven,” Nikkei Asian Review, October 16, 2014, http://asia.nikkei.com/magazine/20141016-The-LED-
revolution/Business/Indonesia-holds-promise-pitfalls-for-7-Eleven?page=2, accessed August 5, 2015.
Do

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 Page 11 9B15M081

t
EXHIBIT 4: 7-ELEVEN STORE CONCEPT IN INDONESIA

os
rP
Source: Modern Internasional, “Annual Report 2010,” August 1, 2011, p. 38,

yo
www.moderninternasional.co.id/uploads/financial_reports/MDRN_Annual_Report_20111.pdf, accessed August 27, 2015.

EXHIBIT 5: SELECTED 7-ELEVEN PRODUCT OFFERINGS

op
tC
No
Do

Source: 7-Eleven Investor Relations Team; Authors.

This document is authorized for educator review use only by Bilal Chohan, National Univ of Sciences and Technology (NUST) until August 2017. Copying or posting is an infringement of
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 Page 12 9B15M081

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EXHIBIT 6: CENTRAL DISTRIBUTION CENTRE (WAREHOUSE) AND CENTRAL KITCHEN

os
(JAKARTA)

rP
yo
op
Source: 7-Eleven Indonesia Investor Relations.
tC
No
Do

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 Page 13 9B15M081

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ENDNOTES

os
1
W. Suzuki, “Indonesia Holds Promise, Pitfalls For 7-Eleven,” Nikkei Asian Review, October 16, 2014,
http://asia.nikkei.com/magazine/20141016-The-LED-revolution/Business/Indonesia-holds-promise-pitfalls-for-7-Eleven?page
=2, accessed August 5, 2015.
2
All quotes are from personal interviews with the authors unless otherwise stated.
3
PT Modern Internasional, Tbk., “Company Milestone,” www.moderninternasional.co.id/about-us/company-milestone,
accessed June 22 2015.

rP
4
All figures are in USD unless stated otherwise; US$1 = IDR13,316.4 on June 12, 2015.
5
7-Eleven Inc., “History,” 7-Eleven Corporate, http://corp.7-eleven.com/corp/history, accessed June 22, 2015.
6
Seven & i Holdings Co., Ltd., “Annual Report 2013,” July 7, 2013, www.7andi.com/dbps_data/_template_/_user_/_SITE_/
localhost/_res/ir/library/ar/pdf/2013_all.pdf, accessed June 25, 2015.
7
Seven-Eleven Japan, “7-Eleven Around the World,” www.sej.co.jp/company/en/g_stores.html, accessed June 22, 2015
8
Seven & i Holdings Co., op.cit.
9
The World Bank, “Indonesia — Country at a Glance,” www.worldbank.org/en/country/indonesia, accessed August 5, 2015.
10
World Population Statistics, “Jakarta Population — 2013,” www.worldpopulationstatistics.com/jakarta-population-2013/,
accessed June 22, 2015.

yo
11
The Nielson Company, “Meet the New Indonesian Consumer Class of 2020,” November 3, 2014, www.nielsen.com/apac/
en/insights/news/2014/meet-the-new-indonesian-consumer-class-of-2020.html, accessed June 22, 2015.
12
IndexMundi, “Indonesia Age structure — 2014,” www.indexmundi.com/indonesia/age_structure.html, accessed June 22, 2015.
13
The Nielson Company, op. cit.
14
M. Grazella, “Traditional Trade to Dominate Retail over Next 15 Years,” The Jakarta Post, December 13, 2013,
www.thejakartapost.com/news/2013/12/13/traditional-trade-dominate-retail-over-next-15-years-study.html, accessed June 25, 2015.
15
Euromonitor, “Grocery Retailers in Indonesia,” Euromonitor International, March 2015, www.euromonitor.com/grocery-
retailers-in-indonesia/report, pp. 10–11, accessed June 25, 2015.
16
Ibid.
op
17
F. Y. Rangkurti and T. Wright, “Indonesia Retail Report Update 2013,” USDA Foreign Agricultural Service, December 13, 2013,
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-13-2013.pdf, accessed June 22, 2015.
18
D. Kauffman, A. Kraay and M. Mastruzzi, “Worldwide Governance Indicators,” The World Bank Group, 2015,
http://info.worldbank.org/governance/wgi/index.aspx#reports, accessed August 5, 2015.
19
Logistics Performance Index, “Global Rankings 2014,” The World Bank Group, http://lpi.worldbank.org/international/global,
accessed August 5, 2015.
20
Euromonitor, “Grocery Retailers in Indonesia,” Euromonitor International, March 2015, www.euromonitor.com/grocery-
retailers-in-indonesia/report, pp. 10–11, accessed June 25, 2015.
21
tC

C. Elyda, November 20, 2014, “Ahok Approves Wage Hike to Rp 2.7 Million in 2015,” The Jakarta Post, November 20, 2014,
www.thejakartapost.com/news/2014/11/20/ahok-approves-wage-hike-rp-27-million-2015.html accessed August 5, 2015.
22
A. D. Arditya and N. D. Rulistia, “Jokowi Sets Jakarta’s 2013 Minimum Wage At Rp2.2 Million,” The Jakarta Post, November 21,
2012, www.thejakartapost.com/news/2012/11/21/jokowi-sets-jakarta-s-2013-minimum-wage-rp-22m.html, accessed August 6, 2015.
23
L. Yulisman and I. Harsaputra, “Beer to Soon Disappear from Minimarkets,” The Jakarta Post, January 24, 2015,
www.thejakartapost.com/news/2015/01/24/beer-soon-disappear-minimarkets.html, accessed August 21, 2015.
24
K. Amin, “Indomaret, Alfamart to Offer More Services,” The Jakarta Post, August 18, 2014,
www.thejakartapost.com/news/2014/08/18/indomaret-alfamart-offer-more-services.html#sthash.OwQFDB5X.dpuf,
accessed June 26, 2015.
25
W. Suzuki, “Telkom Indonesia Bringing Remittance Service to Alfamart Convenience Stores,” Nikkei Asian Review,
No

September 30, 2014, http://asia.nikkei.com/Business/Asean-Business-File/Telkom-Indonesia-bringing-remittance-service-to-

Alfamart-convenience-stores, accessed June 26, 2015.
Do

This document is authorized for educator review use only by Bilal Chohan, National Univ of Sciences and Technology (NUST) until August 2017. Copying or posting is an infringement of
copyright. Permissions@hbsp.harvard.edu or 617.783.7860