Report of the Directors

David Hidayat

President Director

Honorable shareholders and stakeholders,

For over 70 years, PT Industri Jamu Dan Farmasi Sido Muncul Tbk has been a preferred partner in providing high-quality herbal health products to the community. It is with great responsibility that we present the management report of the Company for the year 2023, as a manifestation of our accountability to our shareholders and all other stakeholders. The Board of Directors hereby submits the 2023 Annual Report of PT Industri Jamu Dan Farmasi Sido Muncul Tbk for the fiscal year 2023.


International Monetary Fund (IMF) has projected that global economic growth slowed from 3.5% in 2022 to 3.1% in 2023, a figure notably below the historical average of 3.8% for the period 2000-2019.1 This deceleration in global economic recovery is attributed to several factors, including high pressures in the financial sector, the impact of the escalating war in Ukraine, persistently high inflation levels, and prolonged periods of high interest rates.

Amidst this global uncertainty, Indonesia has been recognized as a country that continued to demonstrate strong growth in 2023, building upon the positive momentum of previous periods. The national economy experienced an annual growth rate of 5.05% YoY2 throughout 2023. This robust domestic economic foundation is partly due to the maintenance of relatively low inflation levels. Furthermore, the downstream processing of mineral exports and the primary sector's contributions have also bolstered the improvement in export performance, strengthening the current account balance.

The year 2023 was also notable for the climate challenges, we witnessed a series of simultaneous heatwaves, a phenomenon never before recorded in history, underscoring the tangible impact of climate change across the globe. This environmental shift has had a direct economic impact, notably causing a surge in rice prices by over 20% compared to 2022, driven by prolonged droughts and reduced production volumes due to El Niño.

As a producer of herbal health products and supplements, the rise in staple food prices has led consumers to become more selective, prioritizing essential purchases and affecting the demand for non-essential items, including health supplements.

Reflecting on our specific sector, the Prompt Manufacturing Index (PMI) for the Chemical, Pharmaceutical, and Traditional Medicine Industry witnessed a decline to 52.50% year-onyear in the fourth quarter of 2023.3 This indicates that, like our peers, we have faced consistent pressures due to the various external conditions of 2023.


This past year has been marked by a series of strategic maneuvers and policies aimed at reinforcing our position as the largest and most modern producer of herbal products and supplements in Indonesia. Our journey through 2023 has been one of both consolidation and expansion, underpinned by a deep understanding of our market and the needs of our consumers.

Our efforts to amplify brand awareness have been central to our strategy, especially for our newer product lines. This year, we proudly introduced Esemag tablet, Sari Kunyit Plus, and Female Balance in our traditional medicine segment. Additionally, we have also launched the Tentrem 3in1 White Coffee Instant Powder Drink, marking our entry into the instant coffee market.

Aligned with our commitment to growth, we have continually endeavored to expand our distribution network, both domestically and internationally. In the domestic market, we have aggressively added new distribution channels. As a result, by the year 2023, we have established more than 160 thousand registered outlets across Indonesia. The company is also intensifying its digitalization efforts by fully implementing the My SidoMuncul app, which will elevate the level of service to each outlet and unlock potential for gamification through various programs and incentives. Regarding the international market, we have initiated new distribution networks, particularly in the Philippines, which are expected to effectively impact sales in the upcoming periods.

In addition, as a measure to mitigate risks associated with the El Niño effect, we have proactively taken steps to secure raw materials, aiming to prevent supply shortages that could adversely affect our production.

The implementation of these strategies and policies has been a testament to the commitment and hard work of our Directors and employees. As we progress, we are committed to continuously improving our operational and financial performance. These efforts are not just about maintaining stability but are geared towards propelling our business forward, ensuring that we remain at the forefront of herbal and supplement industry.


Annually, the Board of Directors formulates business objectives, allocates financial resources, devises strategies, and establishes strategic directives through the development of the Company Work Plan and Budget (RKAP). This process is meticulously carried out with a thorough analysis of both external and internal factors. The RKAP is detailed, taking into account analysis of both external and internal factors. External conditions include economic growth projections, macroeconomic indicators, social environments, forecasts for primary raw material prices, as well as market conditions and business competition. Internal conditions, on the other hand, encompass historical performance data, the readiness of human resources, production capacity, and historical sales data. The Board of Directors will present the RKAP to the Board of Commissioners in a joint meeting for insights, recommendations, and approval.

Following the RKAP's approval by the Board of Commissioners, the Board of Directors and the management team will ensure realization of the work plans for each division within the Company as derivatives of the strategic objectives aimed at fulfilling the established business targets.


The Board of Directors is actively involved in the formulation of strategies and strategic policies and consistently provides guidance throughout the implementation process to align with the Company's vision and mission. Additionally, the Board of Directors monitors and ensures the precise implementation of strategies and evaluates the outcomes of these implemented strategies and policies.

Throughout 2023, the Board of Directors conducted meetings on a monthly basis, totaling 12 meetings, all attended by the Board of Commissioners. In these meetings, each Director and/or relevant division presented reports on the follow-up actions from previous meeting decisions, performance achievements, challenges faced, and market developments including competitor analysis.


In the fiscal year 2023, the Company's overall performance yielded positive results, although it did not meet the initial targets set. The Company recorded a total net sales of Rp3.6 trillion, a decrease of 7.8% compared to the achievements in 2022. This decline was primarily due to a decrease in purchasing power and consumer demand, partly caused by the extreme heatwave and the El Niño phenomenon in 2023, which led to a general increase in the prices of basic commodities.

The performance of the Food & Beverage segment increased from Rp1.09 trillion to Rp1.1 trillion. The Herbal Medicine & Supplements segment saw a decrease from Rp2.6 trillion to Rp2.4 trillion. The Pharmaceutical segment also experienced a decline, falling from Rp143.0 billion to Rp115.7 billion. Despite the downturn in several segments, the company successfully maintained its market dominance in 2023 with our flagship product, Tolak Angin, in the Herbal Medicine & Supplements segment, capturing 72% of the market share for cold herbal medicines in Indonesia.

Despite experiencing a decline in net sales, our gross profit margin increased from 56% to 57%. This decrease in the Cost of Goods Sold (COGS) demonstrates the Company's effectiveness in managing production cost.

The net profit for the current year was recorded at Rp950.6 billion, a decrease of 13.9% from the previous year's Rp1.1 trillion. This achievement was driven by cost efficiency initiatives and targeted use of funds, particularly for strategic Advertising and Promotion to support end-user purchasing power and maintain market share.


Initially, our growth target for 2023 was set based on the performance of the previous year, aiming to increase sales and net profit by 10% compared to 2022. However, a decline in consumer purchasing power had a direct impact on the sales of Sido Muncul's products, prompting us to revise our performance targets to a decrease of 10% in both sales and net profit. This target was strategically revised, taking into consideration the consumer purchasing power. The company rigorously monitored Advertising and Promotion (A&P) expenditures, ensuring these outlays were efficient and effective, particularly in programs designed to stimulate customer demand and maintain the market share of Sido Muncul products.

Throughout the course of 2023, the Company undertook numerous initiatives that culminated in a notable enhancement of performance in the fourth quarter. This period witnessed a sales growth of 70% and a net profit increase of 163% in comparison to the third quarter. This achievement was fueled by an improvement in consumer purchasing power, coinciding with the government's disbursement of social assistance in the last quarter.

Consequently, on a cumulative basis, the performance for the year 2023 experienced a decline of 8% in sales and 14% in net profit from the previous year.


Following the Annual General Meeting of Shareholders (AGM) held on March 29, 2023, the Shareholders approved the distribution of a cash dividend totaling Rp1,095,000,000,000, equivalent to Rp36.50 per share. This represents a payout ratio of 99% of the Company's net profit for the fiscal year 2022. The entire dividend was paid to shareholders through the distribution of an interim cash dividend on November 18, 2022, and a final dividend on April 28, 2023.


The performance downturn experienced in the first three quarters of 2023 was primarily attributed to the reduced consumer demand for health products. This decline was exacerbated by the extreme El-Nino weather phenomenon, leading to increased rice prices and consequently, a decrease in the demand for health products. Furthermore, the rising cost of raw materials and the devaluation of exchange rates in export target countries pose significant challenges to the Company's performance. The increase in raw material prices is putting pressure on margins, while currency devaluation carries the risk of exchange rate losses.

We continue to strive to enhance brand awareness for our new products as part of our product diversification strategy and to nurture a new generation of products that have the potential to succeed in the market and compete with our previous offerings.


Given that 2024 is a political year for Indonesia, this has sparked numerous speculations regarding the growth of the Indonesian economy. The International Monetary Fund (IMF) projects that the Indonesian economy will achieve a growth rate of 5.0% in 2024.4 Despite the uncertainty and performance decline in 2023, we remain optimistic and committed to recovery efforts. We have set realistic targets for a 10% increase in sales and net profit compared to 2023, supported by various planned initiatives and strategies.

To seize the opportunities at hand, the Company intends to build upon its prior achievements by enhancing production capabilities, widening its distribution channels, extending its reach into new export markets, and intensifying digital marketing efforts to attract new segments of consumers, especially those belonging to the millennial and Generation Z demographics. Furthermore, we are committed to continuously fostering strong and trustworthy brand equity and awareness within the community.


As a commitment to implementing sound corporate management, the Company endeavors to consistently and sustainably apply the principles of Good Corporate Governance (GCG) in its daily business activities. The Company believes that the adoption of GCG is foundational to creating a corporate governance culture system. This system is the Company's strength in conducting sustainable business, maintaining superior competitiveness, and providing value added to the Company.

The Company has demonstrated its commitment to Good Corporate Governance (GCG) by adopting the latest principles outlined in the General Guidelines for Corporate Governance in Indonesia (PUG-KI). The PUG-KI Guidelines include updates to the principles of GCG implementation. The GCG implementation principles focus on four main pillars: ethical behavior, accountability, transparency, and sustainability. The Company is also endeavoring to implement GCG practices at a regional standard in line with the ASEAN CG Scorecard, thereby positioning itself to compete effectively within the ASEAN regional environment.

In applying these principles, Sido Muncul upholds high standards of integrity and social and environmental responsibility. This approach underscores its dedication not only to maintaining an efficient and profitable business but also to ensuring ethical behavior and accountability. The Company fosters transparent and responsible relationships with all stakeholders, rooted in the belief that ethical considerations should drive every decision and action.


There were no changes in composition of the Board of Directors in 2023.


The year 2023 has presented an array of challenges, affecting not only Sido Muncul but the global community at large. On behalf of the Board of Directors, we wish to express our profound gratitude and appreciation to all our employees for their steadfast dedication and hard work. Our heartfelt thanks also go to the Board of Commissioners and our Shareholders for their vigilant oversight and the trust placed in us to steer the Company. We extend our gratitude to our business partners and devoted customers for their trust and belief in our products, as well as to all stakeholders who have played a part in enabling us to achieve optimal performance and make a meaningful impact for the advancement and common good.

1 IMF. World Economic Update, Oktober 2023
2 Bank Indonesia. Siaran Pers berjudul “Pertumbuhan Ekonomi Indonesia Triwulan IV 2023 Meningkat”, 5 Februari 2024
3 Bank Indonesia. “Prompt Manufacturing Index (PMI) Triwulan IV 2023”, 18 Januari 2024
4 IMF ”World Economic Outlook”, January 2024