About the Guest

Rinaldi Utama is the CEO and co-founder of Se’Indonesia, launched with a mission to redefine Indonesia’s quick-service restaurant landscape focusing on high-quality smoked beef rice bowls. He was previously CEO and co-founder of Lakuliner, a house of Indonesian-fusion culinary brands. Before that he was part of the legal team at Kopi Kenangan.

Follow Rinaldi on LinkedIn

Timestamps

(00:36) Introducing Rinaldi Utama decided to focus on beef rice bowls 

(03:47) Why Se’Indonesia also went into QSR business 

(07:48) How Se’Indonesia is approaching scale across Indonesia and across SKUs 

(14:15) Rinaldi’s Learnings from working at the start of Kopi Kenangan’s scale and starting from cloud kitchens 

(15:44) Future of F&B in Indonesia and advice for F&B entrepreneurs starting out

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Directed by Paulo Joquiño Produced by Paulo Joquiño

The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any ⁠⁠⁠⁠⁠⁠Insignia Ventures⁠⁠⁠⁠⁠⁠ fund. Any and all opinions shared in this episode are solely personal thoughts and reflections of the guest and the host.

Transcript

The Birth of Se’Indonesia

Paulo: A lot of things that we could discuss, but I wanted to start first with Se’Indonesia, which is this company that you’re currently building and that we’ve had the privilege of partnering with. Maybe you could share with our listeners how you decided to start Se’Indonesia and why you decided to zero in on beef rice bowls in particular as your kind of flagship SKU and really representing the whole brand itself as well.

Rinaldi: Thank you Paulo. I started my career in Kopi Kenangan back in 2018, and then in 2021 I saw the opportunity to build my own startup. Back then, grab kitchens were doing very well. There were some cloud kitchens growing very quickly and at the time of the pandemic, it made me think that people are gonna eat online every day and they will change their dining behavior.

In 2021, I built my first startup called Lakuliner. It’s a B2B Cloud Kitchen Services. We helped emerging brands to expand through a network of cloud kitchens, and then I founded Se’Indonesia at the end of 2022 because we wanted to build our own private label and we learned from our brand partners. We had around hundreds of clients back then, and surprisingly of the more than a hundred brand partners, most of them were doing chicken as their main protein. Chicken is a very mass market in Indonesia and the pricing is also very competitive with one another.

Back then I was thinking, is beef actually niche or because of the price, people don’t consume it more often? Then I found that there is no beef player in the restaurant industry focused on the mass market. If you go to Indonesia, or at least in Jakarta, you will find 20 to 30K rupiah for fried chicken, around $1 to $2 for fried chicken bowls. But then if you’re looking for a beef product, you will spend a hundred thousand, around $7 for steak. Even Yoshinoya here is $4 per bowl. It’s quite expensive actually, for the mass people in Indonesia. The idea is quite simple. We provide $1 beef bowls for the mass market.

Paulo: Why do you think nobody has really, you mentioned a brand like Yoshinoya, which is already, perception wise, mass market already in some sense, depending on the market that you’re in. But why do you think there’s been that gap for so long?

Challenges in the Beef Market

Rinaldi: Maybe the supply chain challenge. In restaurants, there are two significant costs for restaurants. There is COGS and operational cost. If you’re selling beef at $1 or $2, then most of the time people will be burning money. But then we do some different operational methods that allow us to sell $1 with healthy profitability.

Paulo: I think that’s probably really the secret sauce, I guess for Se’Indonesia, mastering that supply chain. Would you say that another interesting thing that Se’Indonesia did, compared to I guess this whole wave of cloud kitchen companies that we’ve seen, is that you’ve also gone into dine-in outlets as well. What was the decision behind doing that? Let’s get into the story of setting that flagship development.

Dine-In vs. Delivery Strategy

Rinaldi: After COVID-19 was over, we saw that people started to dine in and some of them still used online delivery. I think from that we can see delivery has a different market from dine-in as well. We decided to open more sales channels for us and the key learning is that dining and delivery have different challenges, different competition, different price points and so on.

In dining we learned that experience matters. Location is very important, but online you can open anywhere as long as the radius is good. For flagship dine-in, we need to be careful about the location because when the location is not really good, then probably people cannot see our outlet or even we cannot make a crowd, we cannot pull traffic.

Paulo: Maybe you can share a little bit about, since you mentioned the importance of finding the right location and driving the foot traffic, maybe you can share a little bit about how you decided on where to set up that first outlet.

Rinaldi: For us it’s pretty clear. We focus on the mass market. We always open in the tier two area. We focus on opening in tier two and tier three areas. We have some sort of competitors that also focus on the mass market. We always open the competition nearby. For example, KFC focusing on the mass market.

Paulo: Letting the competition do the work for you in a sense.

Rinaldi: Yes. They already spotted where the foot traffic is. Together we educate the market. I’m also curious to know, I guess when it comes to beef in particular, especially on the supply side, can you share a little bit more about what that’s like in Indonesia? Is there a lot of local supply of beef, or does it import more of its beef supply? How is the situation with beef in Indonesia?

Rinaldi: Actually there is a challenge in Indonesia for beef supply because it’s different from chicken or fish. We have a lot of local suppliers for chicken and fish. But then when we talk about beef, the local cows, the local meat is not really good in terms of the quality, availability and also the pricing. Surprisingly, if we import from Australia, Brazil, or anywhere in the world, it’s better even in terms of pricing compared to Indonesian local suppliers.

The most challenging part for us to provide $1 beef bowls is to procure beef from outside Indonesia. Then we cook everything in our central kitchen. We have to optimize our food costs to be able to sell at $1. Most restaurants produce their meats, their food in the outlet. But then what we are doing here is to centralize the production like a factory or central kitchen, and then our outlets have very simple operations. We don’t need a lot of costs to handle the food costs in the outlet.

Paulo: Quite interesting how you guys have married the best parts of these dark kitchens with outlets as well. What would you say is the relationship between delivery and outlets in terms of your business?

Rinaldi: I think people who order online sometimes go to our dine-in store, but then most of the time, like 90% or 80% of our dining-in customers are different from our online customers. Because online you want very practical service. You prefer to order delivery, online delivery and then use the app and so on. But in dine-in, they want the experience. I think it’s a different market there.

Paulo: So it’s almost like a completely different business in a way, trying to do two businesses or two revenue streams in a sense.

Rinaldi: Yes. I agree with that.

Scaling Across Indonesia

Paulo: How are you guys thinking about scaling? Obviously you’re not just serving in Jakarta, you’re serving the greater area, are you guys outside of that as well, in other major cities outside of Jakarta also?

Rinaldi: In terms of scaling, we have an interesting story. Before we decided to open 150 stores across Indonesia, because we’re targeting the mass market, our prototype is opening the store in the tier three areas, the most price sensitive place in Indonesia. Central Java, actually in Central Java, everything is very cheap. If you eat at Warteg, chicken bowls and so on, it’s only 9K. It’s half a dollar.

Very competitive price in Central Java. Then we tried to open three stores in Central Java. The penetration is good. Still performing similarly with Jakarta outlets, even some outlets are better than Jakarta outlets. Then we knew that we are really market fit with Indonesian consumers, especially for the mass market.

Then we decided to open everywhere in Java, Bali, Sumatra. They accept our product and the pricing as well, because I think for $1, $2 beef bowls from Australia with good quality, it’s still cheap everywhere across Indonesia.

Paulo: Quite interesting. So I guess your focus is a lot more on expanding the outlets as well, more so I guess, than the delivery. Is that correct to say?

Rinaldi: The biggest challenge is the price gap between Jakarta and Central Java. It’s two different areas, two different competitors. In Jakarta, if you sell around 40K, $2 to $3, it’s pretty common. It’s still not really expensive. But Central Java, in Semarang, Solo, 30,000, 40,000, $2 to $3 is quite expensive.

Paulo: So if you give a $1 rice bowl in Jakarta, it’s already like a miracle, but when you move to Central Java, people might still have some questions. I guess you guys are moving to Bali, basically moving eastward, seeing what the opportunities are, even East Java and beyond as well.

Rinaldi: For supply, I think it’s pretty clear. We use cold chain partners and because the shelf life of our product is quite long, we don’t have problems supplying across the nation.

Future Plans and Expansion

Paulo: Since you guys have been proving that, obviously before you started Se’Indonesia you saw this gap, but then you guys have proven that $1 beef rice bowls work. Obviously now you can expect other brands to figure out how you guys have done it and try to do it as well. How do you view Se’Indonesia’s competitive advantage? Does it really boil down to a pricing game? Is it more of the supply or where you guys are getting the beef? Or is it more speed? What do you think will be the defining factor for the brand that leads this space?

Rinaldi: Of course number one I think is pricing. It’s related to the production methods that I mentioned before. While other restaurants have chefs, they have cooks in their outlets, but then what we are doing is putting all of those production centralized. It can reduce the food cost a lot because most restaurants fail because the gross profit is too tiny or the COGS is too high. But then actually most restaurants fail because their opex is too high. They cannot sell that much and then the opex is huge.

In FMCG, in the factory business, labor costs or rental costs are part of the COGS. In retail, in F&B, labor and your outlet like chefs and everything, it’s opex. It’s a fixed cost. Actually, in my opinion, it’s still your production costs. When you connect it with the production costs, then you can win in the pricing as well.

Paulo: Great way to put it. I think you tend to underestimate these opex costs and they actually limit the scale at which you can grow. You guys have figured that out, which is why, I guess it’s only been two years I guess, since you guys first came into the market, two or three years already.

Rinaldi: We entered the market at the end of 2022. But then we focused on developing Se’Indonesia, and growing Se’Indonesia in the middle of 2023. So it’s two and a half years focused on Se’Indonesia. But then we launched it in 2022 because we were still in the cloud kitchen business in 2020.

Paulo: Got it. But still two and a half years, quite impressive. You have already gone outside of Jakarta, to Central Java, all these places. Obviously the growth isn’t stopping as well. I think at the time that we announced our partnership, you guys were doing like 2 million bowls monthly, which is already quite impressive.

Any plans on maybe you can share a little bit about how the SKUs are spread? We’re talking about beef rice bowls, but there are many different ways you can do beef rice bowls. What are the other SKUs you guys have been thinking about?

Rinaldi: Very good question, Paulo. Actually for the menu expansion, we think we can develop everything that we can produce in our central kitchen or factory. Because that’s our specialty, that’s our core, that’s our focus to run the proper factory and then we can sell it through restaurants. For example, for the past six months, we tried to educate people to eat beyond beef, the meat processing as well. We provide chicken, we provide brown cheese, and also meatballs.

Everything that we launch in the future, we can manage it in the factory. It won’t destroy our own advantage.

Paulo: So it always starts with whether you can actually produce this SKU at scale through the central kitchens and at a factory scale.

Rinaldi: In the big picture, actually we want to expand our brand outside Indonesia but maybe not to open on our own. We prefer to run our factory, sell franchises and then we support the franchisee by producing the raw materials in our factory and sending it to other countries.

Paulo: I’ve seen how there are a lot of folks in the Philippines, since I’m from the Philippines, they go to Japan and then they find these cheese breads and then they franchise those brands in the Philippines for example. So I guess it’s a similar model. Quite interesting, excited to see how you guys roll that out in the next few years.

Obviously you mentioned that this whole idea for Se’Indonesia came from your previous focus on cloud kitchens, but I’m also curious to know how your time, and you mentioned also you came from Kopi Kenangan, how did that experience as well impact the way that you’re building Se’Indonesia?

Learnings from Kopi Kenangan and Cloud Kitchens

Rinaldi: I think in Kopi Kenangan I saw the founders grow the business, scaling from 10 outlets to 500 outlets at least until I left Kopi Kenangan. Then I learned how speed is so important in retail business because the competition is quite intense. At the time there were three top players for coffee, and Kopi Kenangan as well. I saw Kopi Kenangan focus very much on opening more stores and the domino effect when you open more retail stores. The branding presence is very important for retail stores.

In the cloud kitchen, we learned to optimize opex. We need to simplify the operations in our restaurant, in our kitchen to be able to sell cheap. We really depend on the food delivery platform. We learned the algorithm, the marketing campaigns that work for online delivery. A lot of brands in cloud kitchen business focus on their advertisement outside the app. But then your customer is in the delivery app. Why don’t you put everything, your marketing in the delivery app? And it works.

Insights and Advice for F&B Entrepreneurs

Paulo: I wanted to ask your thoughts on where F&B is headed in Indonesia. Because I think from our part, the whole thesis, I guess with partnering with you guys is that obviously we’re seeing the shift in demand for more accessible food options. Not necessarily confined to outlets and not necessarily confined also to delivery, but being able to juggle both channels. Obviously you have things like inflation and I guess people want to spend on more accessible things. Where do you see F&B heading in Indonesia?

Rinaldi: Consumers are more critical nowadays and in this economic situation, they choose to buy good products rather than the branded product. They still purchase something that has brand trust, something branded, but then they value the product more. The competition is very tight now. We compete with the big brands as well as the local players, small, medium players. It’s gonna be challenging, but if you crack the supply chain side, I think you have a chance. We have a chance.

Paulo: I guess even IG brands maybe. Mini F&B brands. People are also looking for their own sources of income, so I guess that adds to the competitive landscape as well. People setting up their own personal brands online. To wrap up our conversation, I guess you’ve been emphasizing really the importance of optimizing supply chains. But apart from that, any other advice you have for founders or operators building in the F&B space in Indonesia?

Rinaldi: In my opinion, to be able to get the status of category leader is very important. Pick the niche. Category leader for F&B might be an opportunity because when you have a category leader position, everything will be efficient, including the supply chain. You have economies of scale and so on. You have the prestige for the restaurant. Crack the supply chain and get the product-market fit. If you have confidence to scale, then ride the momentum because as I mentioned, speed is very important.

Paulo: I think you guys have really established yourself as the $1 beef rice bowl player. I think it’s really testament to focusing on a product that works and scaling that rather than trying to do everything.

Thanks so much Rinaldi for coming on call with us. Really insightful talk and sharing what it is like on the ground in Indonesia. When you talk about the Indonesia market, obviously the scale potential is there, but at the same time, it’s always great to hear what are the challenges and the reality of actually scaling brands like Se’Indonesia. Super excited to see if maybe somebody might bring it to the Philippines with the franchise model that you mentioned, or other Southeast Asian countries. Should be interesting to see in the next few years. But thanks so much again, Rinaldi for coming on call with us. Looking forward to meeting you in person.

Also maybe in my next trip to Jakarta, I’ll visit one of your outlets and have a beef rice bowl there myself.

Rinaldi: Thanks so much Paulo. Thanks. Have a good day.