President Director, Integragroup, Indonesia
Consumers and buyers are becoming more aware of the need for traceability in the raw materials being used in furniture products
Integragroup Indonesia is a leading Indonesian furniture manufacturer and specializes in the export of high-quality furniture to markets such as the United States, Europe, and Asia Pacific. What can you tell us about your company’s background?
background?
We began as a manufacturing company in 1989 and grew by around 30% every year. In the beginning, we focused on simple furniture products such as CD cabinets, mainly for the US market which was difficult at the beginning but we successfully penetrated the market. Two years later we diversified into CD cabinets produced from solid wood as part of an initiative to create higher quality goods; previously our products were made from MDF with a plastic veneer and were mass-produced, allowing us to manufacture 3-4 containers worth of cabinets a day. We were then approached by IKEA for our solid wood products. Our partnership with IKEA worked very well and they ordered more products such as table trays and small tables made from solid wood and this gave us the support to continue diversifying our product range.
After five years we entered into outdoor furniture production at a new factory as we saw the market potential for this and we have continued to develop this range of products. Now the company has four subsidiaries and over 5,000 workers. We also work with contractors for rattan weaving and employ seasonal workers during peak seasons.
As a company focused on tapping into opportunities in markets abroad, how has Integragroup Indonesia set about entering export markets and what are the company’s main strategies in doing so?
We have learned not to concentrate on only one market. IKEA gave us very large volume orders but we were careful not to put all our eggs in one basket. Over the last few years, Europe has slowed down so we have had to change our strategy to offer new products and be more flexible to penetrate new markets. We have thus moved from offering high-volume production and a limited product range to smaller volumes and a broad product range.
Going forward, I believe that the European market is currently undergoing the downside of an economic cycle but will bounce back once again. Our largest market remains the USA accounting for 60-70% of our export volume but there are new markets such as South Africa and Mexico which are very interesting that we have not yet really touched.
China will be an interesting market for us in the next five years as laborintensive production is declining there so we see an opportunity for us to export our products.
Indonesia implemented an export ban on raw rattan to address one of the biggest issues in the rattan-derived products industry, namely a shortage of raw materials. What are the remaining challenges faced by local rattan furniture producers?
One of the main issues is that manufacturers do a lot of subcontracting for components and do not handle the entire product. Sometimes the subcontractor is not committed to ensuring that high-quality standards are met, and this is an issue that is prevalent in the rattan industry. To make the most of opportunities in the rattan industry and continue to grow rapidly, we, therefore, decided to put all production processes under one roof so we can control the quality. However, many other Indonesian rattan producers in this industry do not have the infrastructure to handle every aspect of production.
Do you plan to expand your product portfolio and introduce new innovations in the near future?
We have been able to grow by 20-30% every year by adding new products. In knockdown products for example we have already created a large enough range, which allowed us to move into fully formed products and now we have developed a comprehensive range in this field as well. Rattan is another area that we are expanding into further as well as manufacturing doors as we see plenty of demand in the market particularly in the UK, which needs millions of doors every year. Next, we are looking to move into vertical blinds as there is a lot of demand as well.
In outdoor garden furniture, there is increasing demand but we also see potential in components for construction. Solid wood flooring is a further area that we see the potential to diversify our product range.
How is your company positioned to adapt to the increasing importance of responsibly sourced timber products to consumers in developed markets?
Consumers and buyers are becoming more aware of the need for traceability in the raw materials being used in furniture products and we have prepared for this by having control over the upstream side through our own forestry concessions, ensuring that our materials are fully traceable.
In the European market, they are ahead of the trend in demanding the use of green materials, particularly in the UK and Germany. In the USA I do not see such strong demand for this yet so it can be a challenge in communicating on our strength as a company that responsibly sources its timber. Indonesia already has a negative image in this area. That is why we are getting our concession certified so that this can be fully demonstrated but on the buyer side such as retailers there needs to be greater appreciation for the premium on environmentally sourced products. Green projects entail extra costs and if this is not understood then it will discourage manufacturers from doing it. Therefore, the responsibility is not just on producers but also on buyers and retailers.
Is Integragroup Indonesia open to working with foreign investors looking for an experienced local partner?
I am currently growing and expanding the business in a very aggressive way and therefore we are moving to the stage where we are inviting foreign partners. I am also preparing for the group to be listed within the next two years and we encourage foreign parties to participate and invest.
What we will be looking for is a partner that can provide synergy in all aspects; capital, expertise, and network. Our strength is that we know the market so a partner should be skilled in marketing and capable of providing capital as getting funding in Indonesia is still expensive.
What would you like our readers to remember about Indonesia as a final message?
In the last few years Indonesia has done a lot of homework to catch up so now is the time that the country should no longer be underestimated. There are a lot of opportunities to be explored as Indonesia has an abundance of raw materials and wide availability of labor which can be used to develop the country’s potential. In the future, we have the potential to be a major player in the global market.
