Kawan Lama-Ace Hardware split causes “uncertainties”

The decision of the Kawan Lama group to drop its partnership with American home improvement giant Ace Hardware raises “uncertainties”- but the restructured company will likely retain its top position in Indonesia, analysts said.

The group controls the company that holds the license to operate Ace Hardware stores in Indonesia until 31 December 2024. The company in late August confirmed DIY International’s earlier report on the impending split, stating that it was no longer renewing its license agreement with the American brand at the end of the year. The move will eliminate for the company IDR 40 bn (Indonesian rupiah, EUR 234.282 mio) in annual royalty expenses starting 2025, Indonesian securities firm BRI Danareksa Sekuritas (BRIDS) noted.

This followed a series of changes implemented in the company, starting with a name change, from PT Ace Hardware Indonesia Tbk to PT Aspirasi Hidup Indonesia Tbk. It also changed its logo, domicile, contact details, and identity, although it continues to trade on the Indonesian bourse using the “ACES” ticker. All its stores also still carry the Ace Hardware branding.

When ACES has to give up use of the brand following the license expiry at year-end, it is expected to introduce a new store brand. Until then, it remains to be seen how the Indonesian shoppers will take to the change, as well as how the company will perform after the Ace license ends.

"While we remain confident in the company’s strong execution and proven track record in merchandising, the termination of the agreement with Ace Hardware US… add[s] uncertainty. We believe the market will wait for further clarity and observe ACES’ performance post-license termination," Indonesian securities firm BRI Danareksa Sekuritas (BRIDS) stated in an analyst’s note.

It added that the massive rebranding campaign that ACES is expected to mount in early 2025, when it will also introduce a new name for its outlets, adds to the unpredictability.

PT MNC Sekuritas, another Indonesian broker, was likewise cautious. While noting that ACES will be freed up from paying royalty fees and the requirement of opening two stores a year when it stops being an Ace Hardware licensee,  the firm said it still wanted to do "further analysis regarding the impact on brand loyalty, operational challenges, and rebranding costs".

ACES is expected to allocate between one and three per cent of sales for the rebranding campaign, which is necessary for it to establish an identity separate from the US brand…