Holcim’s branding dilemma

Holcim’s branding dilemma
Published: 04 May 2006

The recent switch by Holcim Indonesia to re-brand its local cement under the Semen Holcim name is apparently having mixed results for the world’s No 2 cement producer.

The first name change, made in January 2005, from PT Semen Cibinong, with its product names of Semen Kujang and Semen Nusanatra, saw Holcim move over to the Semen Serba Guna brand, before switching again to the Semen Holcim brand, some 15 months later, in April of this year.

This latest product launch was accompanied by a spate of national TV advertising, but apparently with mixed results. Locals in Jakarta say the Holcim brand is still hard to find with Tiga Roda (Indocement) and Semen Gresik very much the dominant names in local retail and construction circles.

When it comes to price however Holcim is reportedly RP1000-Rp2000 lower than its two competitors at Rp38,000-Rp39,000 per 50kg bag. Holcim even offering a free bag for every purchase of 20 sacks, but the downside is that quite a few local consumers still see the Semen Holcim brand as the old Semen Kujang, which for many years was regarded as a lower quality product.

Certainly Gresik and Indocement do not appear to be too threatened by the new look Holcim cement. Indocement (owned by HeidelbergCement and Salim) now promotes its products on TV via the Salim TV sponsored Tiga Roda show, while the Gresik name and that of its two subsidiaries Padang and Tonasa are very much the dominant brand throughout much of Indonesia, undoubtedly given a local publicity boost for the last five years, by Gresik’s desire to keep its business out of foreign hands, in the form of the multi-national giant Cemex.

Semen Gresik together with its two subsidiaries are said to have a nationwide share of around 46 per cent, Indocement has about a 30 per cent share while Holcim currently no more than 15-17 per cent, according to local reports.

Nevertheless Holcim is dominant in Central Java with Holcim’s marketing and sales team claiming a 60 per cent regional market share. No doubt this has been influenced by Holcim’s recent pricing policy changes, as well as by boosting the number of its retail outlets from 6000 to 8000 individual units.

With the local Indonesian market steadily improving Holcim has another advantage - at least in the short term - in that its production lines are still operating at around the 80 per cent utilisation level. By comparison Gresik is now operating at close to 100 per cent, while Indocement is slowly advancing closer to the 90 per cent level. This extra availability should allow Holcim to capture additional market share in the main consuming regions closer to the capital, Jakarta, giving an added boost to Holcim Indonesia’s bottom line.

Whether local Holcim strategists will be quick enough to seize this opportunity remains to be seen. Holcim Indonesia’s financial focus is still very much targeted on reducing its massive debt burden, which at the last count was still over US$450m, partly explaining why this major enterprise is still running at a loss.

Local executives for the world’s no 2 producer are no doubt confident that the new-look Semen Holcim holds the key to renewed prosperity. (Original reporting by Tempo Indonesia).