Kopiko maker Mayora enjoys sweet success amid newfound fame

WHEN South Korean actors were seen peeling open packets of Kopiko coffee-flavoured candy on screen, TikTokers started to film their own first tastes of the sweet treat.

Kopiko is currently trending on social media. A video of Tesla chief Elon Musk giving it two thumbs up has racked up 1.8 million views and counting. Search for Kopiko on any social media platform, and you might find short clips from the South Korean TV series Vincenzo and recipes incorporating Kopiko candy or coffee powder.

Such global attention has been good for Mayora Indah, the Indonesia-listed food and beverage company behind the Kopiko brand.

Mayora’s revenue has increased gradually over the last three years: from 24.5 trillion rupiah (S$2.1 billion) in 2020 to 27.9 trillion in 2021 and 30.7 trillion rupiah last year. Profits have wobbled a little over the same period: from two trillion rupiah in 2020 to 1.2 trillion rupiah in 2021 and then 1.9 trillion rupiah in 2022.

The company’s bottom line growth appears to be back on track, however, with profit in the first nine months of this year up 89.9 per cent to 2.1 trillion rupiah. This was despite revenue growing only about 3 per cent year on year to 22.9 trillion rupiah.

Favourable price conditions

Mayora is in a sweet spot as the cost of some of its raw materials fall. In 9M 2023, its cost of goods sold fell by 4 per cent.

Besides its famous Kopiko range, the company also makes candies, biscuits and drinks. Some of its other well-known brands are Choki-choki, a chocolate paste; and Beng-beng, a caramel and chocolate wafer.

Indonesian wheat flour manufacturer Bogasari Flour Mills said that it would cut its prices by 10 per cent to 12 per cent this year, said UOB Kay Hian (UOBKH) analyst Stevanus Juanda. This boosted Mayora’s gross margin. Selling prices have also fallen, thanks to a normalisation of freight costs.

Mayora’s director-cum-marketing director Ricky Afrianto told media at its Jakarta headquarters last month that the company is aiming for a top line figure of 30 trillion rupiah and a bottom line figure of at least two trillion rupiah for the full year.

Those numbers are not ambitious, given what Mayora reported last year and what it has already achieved.

Afrianto did, however, hint at a catalyst next year in the form of the general election. Having worked in the fast moving consumer goods (FMCG) industry for more than two decades, he has observed that money spent on election campaigns often translates into higher purchasing power among consumers. He is optimistic of rising demand in the fourth quarter this year, and expects this trend to last till early next year. Indonesia’s general election is scheduled for Feb 14.

UOBKH’s Juanda is forecasting a 42.9 per cent increase in Mayora’s core net profit this year, and a 17.7 per cent increase next year, driven by improving purchasing power, higher gross margins and a potential appreciation of the rupiah against the US dollar. Juanda has a “buy” call on Mayora and a target price of 3,200 rupiah, which is 22.1 per cent above the stock’s close on Nov 6 at 2,620 rupiah.

Expansion plans

Mayora is expanding its capacity in anticipation of higher demand. In H1 this year, it began building two new factories in Indonesia. It also has plans for production lines in the Philippines for biscuits, wafers and instant coffee products.

Maybank analyst Willy Goutama expects the company’s production capacity to rise by 10 per cent in 2024 and 5 per cent in 2025 respectively.

Mayora has allocated 3.7 trillion rupiah for capital expenditure this year and next, and expects the new facilities to be ready in the second half of next year.

“Given its strong H1 2023 cash position of five trillion rupiah, we think these plans will not weaken its balance sheet,” Goutama said in a report.

After factoring in the company’s expansion plans, he thinks that Mayora’s sales could grow at a faster rate: his forecast is for compounded annual sales growth of 11 per cent between 2022 and 2025, up from 5 per cent between 2018 and 2021. Goutama has a “buy” call on the stock and a target of 3,700 rupiah.

Afrianto said that Mayora will ramp up marketing efforts to better appeal to younger audiences. “It’s not only how you (maintain) presence, (keeping) relevant – that’s the toughest,” he noted. “Our ambition is to be a good global food and beverage company… Maybe now we are among the top five FMCG companies in Indonesia. To become one of the biggest in Asia-Pacific – that’s what drives us.”

Mayora shares fell 0.4 per cent on Wednesday, losing 10 rupiah to finish at 2,540 rupiah.