Fashion

Indonesia key market, production base for Adidas

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The Jakarta Post/Asia News Network

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Khoirul Amin

Indonesia, the world's fourth most populous nation, is both a significant market as well as manufacturing base for German sportswear company Adidas Group, a senior executive at the company says.

"For Adidas, Indonesia is the third largest manufacturer after China and Vietnam," said Adidas senior vice president John McNamara on Monday.

Adidas made more than 650 million product units per year, with over 100 million of them being made in Indonesia, McNamara said after the launch of Adidas' latest football boot, the Predator.

According to data from the Trade Ministry, Indonesia-based suppliers manufactured 24 per cent of a total of 257 million pairs of shoes that Adidas produced worldwide last year.

In 2013, the suppliers also accounted for 11 per cent and 20 per cent of the sportswear brand's apparel and accessory products, respectively. Adidas' apparel and accessory products sold 341 million and 54 million units, respectively.

"This shows that Indonesia plays a key role in the Adidas Group's supply chain," said the ministry's expert staff member on foreign trade policy, Arlinda.

Representing Trade Minister Rachmat Gobel, Arlinda said that Adidas had invested a total of Rp 124.6 billion (S$13.2 million) since its first presence in the country.

The German company currently produces its products in the country through partnerships with Indonesia-based manufacturers, PT Panarub Industry and PT Tuntex Garment Indonesia, among others.

McNamara said that his firm aimed to increase its output from the country to meet surging demand from the country's growing middle class as well as global demand.

"For manufacturing, our approach is basically to have a few big, good suppliers. So, we won't necessarily look at new suppliers here, but we would definitely look to expand with the suppliers that we have," he said.

Adidas aimed to boost its total production in the country to 158 million product units in 2020 from an estimated 104 million this year, he said.

Adidas to boost total production to 158 million product units in 2020 from an estimated 104 million this year Local partner plans to invest around $80 million to build two new factories in Brebes, Central Java and Majalengka, West Java The production composition in 2020 would be 80 million units of footwear, 62 million units of apparel items and 16 million pieces of accessories in 2020, McNamara added.

Panarub president director Hendrik Sasmito said that his company planned to invest around $80 million to build two new factories in Brebes, Central Java, and Majalengka, West Java, aiming to add to its output from its sole plant in Tangerang, Banten.

Philip Chen, president director of Tuntex, another Adidas supplier, in Indonesia, meanwhile, did not reveal any current plan to expand its production capacity.

He said, however, that his firm saw a surging turnover from its Adidas products to more than $18 million in 2011 from only $700,000 in its first year of operation in 1990s.

Adidas has officially operated a sales subsidiary in the country since 2006 through a joint venture with retail giant PT Mitra Adi Perkasa (MAP).

Adidas Group Indonesia country manager, Benjamin Handrajasa, said that he was optimistic that the demand for Adidas products in the country would continue growing, particularly as many more Indonesians have begun working out.

"There was a time when football boots made up 60 per cent of Adidas Indonesia's total business. This year, we managed to maintain it at around 30 per cent," he said.

McNamara said that his firm hoped to see a 52 per cent year-on-year increase in its net sales in 2020 in the country's market.

Adidas has recorded significant net sales growth over the last five years, from 16 per cent in 2009 to 31 per cent last year.

Adidas, which also owns the Reebok brand, competes with American brand Nike on the global stage.

McNamara confirmed that Adidas would continue to fully own its Reebok unit, responding to reports that the firm would sell the unit due to its declining performance.

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