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Jun 06, 2023

Innovation And Audacity Prove Winning Combination For Indonesia’s Impack

Apedestrian bridge over a busy street in Jakarta’s central business district used to be a dilapidated structure better known for street peddlers and pickpockets. Today, sheathed in a vibrant spiral

Apedestrian bridge over a busy street in Jakarta’s central business district used to be a dilapidated structure better known for street peddlers and pickpockets. Today, sheathed in a vibrant spiral design comprising white rectangular panels that are illuminated by colorful lights at night, the Gelora Bung Karno crossing draws people eager to take selfies. The renovated bridge, opened in February 2019, was created out of advanced plastic roofing material made by Impack Pratama Industri and metal.

It’s not often that a mundane building material becomes an Instagram sensation, but that’s what Jakarta-based Impack pulled off with proprietary plastic sheeting it calls SolarTuff, which is both robust and transparent and comes in a variety of colors. It is just one of the innovations the company is bringing to an industry not well known for being on the cutting edge. Besides being a leader in plastic roofing, Impack makes plastic ceiling materials, flooring, pipes and exterior cladding as well as aluminum-based paneling.

The interior and exterior of Gelora Bung Karno crossing bridge in Jakarta, which uses Impack’s SolarTuff plastic sheeting for its roof.

Impack’s products have proved resilient and allowed its earnings to keep growing even during the Covid-19 pandemic, winning it a spot on the 2023 Best Under a Billion List. In an interview at his office on the 38th floor of the Altira Business Park office tower in Jakarta in June, president director Haryanto Tjiptodihardjo, 60, says, “Trust, reliability, durability and brand play a very important role in the building-materials business.” Tjiptodihardjo, who has a majority stake in Impack, has an estimated net worth of $1.2 billion.

Impack’s net profit surged 50% last year to 307 billion rupiah ($21 million) while revenue gained 26% to 2.8 trillion rupiah, most of which came from roofing and ceiling materials. Three-quarters of its sales are domestic, largely in Java; the rest comes from exports to 12 countries, including Australia, Kuwait, Bangladesh and Thailand. The Indonesia-listed shares are down about 6% over the past year to trade at a recent 340 rupiah, but have almost tripled since 2020. Ezaridho Ibnutama, an analyst at Jakarta-based Henan Putihrai Sekuritas, says the recent decline reflects investor skepticism toward the basic-materials sector while noting the stock’s solid long-term performance.

Tjiptodihardjo expects net profit to add 27% this year on the back of an 18% gain in revenue. The company appears to be on track to reach that target, with first-half net profit jumping 46% to 213 billion rupiah as revenue rose 3% to 1.4 trillion rupiah. The growth is expected to come from inroads into the roofing market in Indonesia, where metal dominates, as well as from the untapped market for plastic roofing outside Java.

According to U.S.-based Allied Market Research, the global market for metal roofing will reach $33.5 billion by 2030, expanding at a CAGR of 3.5%. By contrast, the market for roofing made of polycarbonate, the plastic that Impack specializes in, is less than one-tenth the size, pegged at $2.6 billion by 2031, but growing at a faster 5.7% CAGR. Tjiptodihardjo estimates sales of metal-based roofs in Indonesia are around $1 billion a year. “If we could tap just 10% of the metal market, it is quite significant,” he says.

Impack is allocating capital spending of 280 billion rupiah for 2023, some of which will be used to build two new factories, one each in Java and Melbourne. Both are expected to start operating by the first half of 2024, adding to Impack’s 10 factories in Indonesia, Australia, New Zealand, Malaysia and Vietnam. Tjiptodihardjo says the company will also strengthen its distribution network by opening new branches and partnering with more suppliers. He adds that products sold outside of Java, Indonesia’s economic center and home to more than half its population, will be priced to suit the market.

Analyst Ibnutama says the new factories will help Impack “meet demand from post-pandemic construction and infrastructure development.” But he agrees that its plans to take further market share from metal roofing will depend on its ability “to add more suppliers who have extensive distribution networks outside Java.”

Impack's aluminum-based paneling is used for the facade of Ashta District 8, a swanky mall in Jakarta's central business district.

Innovation and daring have been key to Impack’s success, according to Tjiptodihardjo, who joined the company in 1987 after earning a bachelor’s degree in industrial and systems engineering from the University of Southern California and an M.B.A. from Woodbury University, California. At the time, Impack, founded in 1981 by his father, Handojo Tjiptodihardjo, 89, made packaging used in the printing, advertising, beverage and other industries. While working in the export division, Tjiptodihardjo encountered Sydney-based building-materials distributor Mulford Plastics, Impack’s agent in Australia and New Zealand.

At Tjiptodihardjo’s suggestion, Impack bought Mulford Plastics in 1990, gaining a distribution network in Australia and New Zealand. The range of building materials sold by Mulford also boosted Impack’s bottom line. One of those products was corrugated polycarbonate roofing made in Israel. Tjiptodihardjo was confident such roofing could replace metal in Indonesia. Plastic roofing has significant advantages over metal, being lightweight, translucent and heat-resistant. On the downside, it can be more expensive and may not last as long, depending on the quality of the product.

Impack started making polycarbonate roofing under the SolarTuff brand name in 1992 by extending an existing factory and adding new machinery. “Perhaps it was an audacious move,” says Tjiptodihardjo, “This was the first corrugated polycarbonate roof in Indonesia and Southeast Asia.” According to the company’s own market research, Impack now holds 90% of the domestic market for polycarbonate roofing, dominating its nearest rival, SBP, an Indonesian unit of Japan’s Sumitomo Bakelite.

Since then, Impack has continued to use plastic to invent home-improvement goods, not just roofing but also ceiling, flooring, piping and cladding. Plastic “can be made into any product or shape,” says Tjiptodihardjo, “depending on the tools and molds available.” The applications are endless, he adds, “the products you make are only limited by your innovation.”

In 2015 Impack acquired Jakarta-based Alderon, which sold roof panels made from a strong and lightweight type of building material called uPVC. Impack decided to make the panels in-house, using an existing plant. Alderon’s revenue skyrocketed to almost 1 trillion rupiah in 2022 from around 40 billion rupiah at the time of the purchase. Today, Impack says it has 70% of the domestic market for uPVC roofing, compared with 15% for its closest competitor, East Java-based Sumber Djaja Perkasa. Brian Tanudjaja, marketing director of Sumber Djaja Perkasa, declined to comment on his company’s market share, but noted by text message that the outlook for the overall market is positive, given “the actual market size of uPVC roofs in Indonesia is less than 10% of total demand for roofs.”

Tjiptodihardjo has three sons, the eldest of whom, Phillip, 28, is his heir apparent and director of strategic business and technology at Impack. Phillip says that while Impack’s offerings have a higher price point than some of its competitors, customers remain resilient. “Indonesians are very brand-minded, particularly for building-material products,” he says in a separate interview in June. “They would rather spend more money on goods that will last.”

Besides Impack, Tjiptodihardjo’s father founded Pabrik Cat Tunggal Djaja Indah, a paint maker, and Dolphin Food & Beverages, which makes candy and snacks. He has stepped back from day-to-day operations and passed Impack to Tjiptodihardjo and Tunggal Djaja Indah and Dolphin, to another son, Boediono, 55.

Tjiptodihardjo says he is “proud and happy” that the Gelora Bung Karno pedestrian bridge, made with Impack materials, is appreciated by locals and tourists alike. “I think this is key to preserving our business for the next generations,” he says, “ensuring it also contributes to our people and the nation.”

Correction: August 8, 2023

An earlier version of this story incorrectly stated 2023 first-half net profit was 121 billion rupiah. It reached 213 billion rupiah over that period.