It was recently announced that Ace Hardware, the American-based international retail chain, is set to exit the Indonesian market at the end of 2024. As noted by Indonesian news outlet Tempo, this comes just a few days after Coordinating Minister for Economic Affairs Airlangga Hartarto referred to Ace Hardware’s nearly three decades in Indonesia as a sign of the country’s strong purchasing power. But if the domestic retail market is so strong, why is a major international brand like Ace leaving?
Well, it’s not. Not really. Ace Hardware the international retailer does not own and operate the Ace Hardware stores in Indonesia. Instead, for the last 29 years it has licensed the use of its brand to an Indonesian company called PT Ace Hardware Indonesia.
PT Ace Hardware Indonesia is listed on the Indonesia Stock Exchange, with 40 percent of its shares held by the public. The remaining 60 percent is held by the Kawan Lama Group, a major conglomerate with interests in a variety of sectors, including retail and property.
If we look at the financials for PT Ace Hardware Indonesia, they do not indicate a company in trouble, or a softening of consumer purchasing power more generally. Net sales increased 12.6 percent in 2023, while net income was up 13.4 percent. Moreover, the company has very little debt and lots of equity. So what is going on here?
In 1995, Kawan Lama Group launched the first Ace store in Jakarta, under the previously mentioned licensing deal with the American retailer. Now there are around 240 stores around the country, and almost every Indonesian Ace Hardware shares a building with a local retailer called Informa.
I’ve always thought it was an odd arrangement, to have two stores that sell many of the same items in the same space. But it makes a little more sense when you learn that Informa is also owned by the Kawan Lama Group.
So it’s not really accurate to say that Ace Hardware is exiting Indonesia. It’s more like the Kawan Lama Group feels it doesn’t need them anymore. They may no longer want to pay the licensing fee or simply believe that after nearly three decades of growth (including growing their own Informa brand alongside their Ace Hardware stores) they are well-equipped to stand on their own without the American retailer.
A few months ago, PT Ace Hardware Indonesia officially changed the company name to PT Aspirasi Hidup Indonesia (which translates to something like the Indonesian Aspirational Life Company). It’s unclear if that will be the new name of Indonesia’s Ace Hardware outlets, but they are clearly getting ready to shift the brand away from Ace and toward a new corporate identity.
Another Indonesian retailer did something similar recently. The Johnny Adrean Group has for many years owned and operated a popular bakery brand called BreadTalk. BreadTalk is a Singaporean company, and many of the Indonesian stores were operated under a brand licensing agreement. In 2022, the agreement was not renewed and BreadTalk became MAKO. The MAKO brand belongs to the Johnny Adrean Group, and we are likely seeing something similar unfold as Ace pivots toward a home-grown brand that belongs more firmly to the Kawan Lama Group.
If we look at recent developments from this perspective, they do not signal weakness in the Indonesian retail market or with consumer purchasing power. In fact, the opposite. It suggests that big Indonesian retailers that once felt they needed to license foreign brands to grow their business are becoming more confident about their own financial and operational positions, domestic market conditions and their ability to champion and sell home-grown brands.