Feb. 20 (Bloomberg) -- Irwan Hidayat had to hold back his tears when PT Industri Jamu Dan Farmasi Sido Muncul sold shares in an initial public offering in December.
His mother, Desy Sulistio, the matriarch of Indonesia’s biggest maker of traditional herbal medicine, couldn’t witness its trading debut on the Jakarta stock exchange. It would have been difficult for the 86-year-old, who relies on a wheelchair and a nurse to get around, to travel the 250 miles from her residence in Semarang, Central Java, to Jakarta. Irwan also regretted that his late grandmother, the founder of the company, and his father, who died in 1994, weren’t present.
“I was very emotional,” Irwan, the 66-year-old head of Sido Muncul, said last week in an interview in Semarang, where the business is based. “It was a golden moment and they couldn’t experience it.”
Sido Muncul has surged more than 50 percent since the IPO, making his mother a billionaire, according to the Bloomberg Billionaires Index. The matriarch and her five children, including eldest son, Irwan, control 90 percent of the company, according to regulatory filings. Desy, whose Chinese name is Siem Giok Hwa, has never appeared on an international wealth ranking.
The company’s herbal products -- known as jamu -- are made from roots, herbs, spices and fruits, and come in the form of a drink, capsule or paste. Sold as traditional medicine for hundreds of years in the world’s fourth-most populous nation, Indonesians revere it for its perceived power to heal ailments such as arthritis and sexual dysfunction.
Sales of Indonesian traditional medicine are expected to increase 55 percent to about $800 million by 2017, from about $500 million in 2012, according to a June report by Euromonitor International.
“It is becoming quite popular,” said Harry Su, PT Bahana Securities’ Jakarta-based head of research. “The perception of herbal is that it’s more natural and healthier to consume.”
Sido Muncul makes the country’s best-selling herbal cold remedy, Tolak Angin, which means “repel the wind” in Bahasa. Small yellow bags of the concoction sell for about 25 cents each at street stalls, pharmacies and supermarkets. Indonesians also take it for flatulence, nausea and jet lag.
Desy’s mother, Rahkmat Sulistio, came up with the formula for Tolak Angin when she started a jamu business in 1940 in Yogyakarta, Java. She moved to Semarang in 1949 and rented two rooms, which served as a home for the family and a plant to pound herbs. She set up Sido Muncul, which means “a dream comes true” in Javanese, in 1951, and moved to a bigger factory the following year.
Her daughter and China-born son-in-law, Jahja Hidajat, joined the company in 1953, taking a 50 percent stake. They began running the business when Rahkmat retired in 1970.
Jahja died in 1994. When Desy’s deteriorating health slowed her down about a decade later, she handed the reins to her children. Irwan, the eldest, became president director just before Sido Muncul’s initial public offering last year.
“If Sido Muncul collapses, the eldest child is to be blamed,” Desy said in an interview last week at her daughter’s hilltop restaurant in Bahasa. “You must be wise in dealing with your siblings,” she said to Irwan, her voice choked with emotion.
She also wants her children to help the poor. Sido Muncul has paid for 36,000 cataract surgeries since 2011 and hires buses each year for 20,000 people in Jakarta who can’t afford to pay for trips back to their villages during the Muslim Eid-ul-fitr celebration.
Desy and her daughter, Sandra Linata Hidayat, guard the family’s jamu recipes with two employees. The company uses about 500 ingredients, including cloves, ginger, galangal and turmeric. The matriarch, who goes for medical checkups in Singapore once every three months, says her herbal concoctions have been more effective in treating her ailments than Western medicine.
Sido Muncul’s factory near Semarang can produce 80 million sachets of Tolak Angin a month. It plans to use part of the money from its share sale to more than double its factory’s monthly output to 200 million sachets by the end of next year, Irwan said.
The factory also makes more than 180 million sachets of energy drink Kuku Bima every month. Sido Muncul sells an aphrodisiac of the same name that’s made from seahorse and ginseng.
Irwan said his company applies the same standards as the pharmaceutical industry and conducts scientific tests in its laboratory before putting its products on the market. In local neighborhoods, old-fashioned jamu sellers still peddle their homemade formulas in a basket fastened to their torsos with a fabric sling.
“In 1990, I realized that people didn’t trust the jamu industry,” said Irwan. “We talked about our experience but it’s not scientifically proven. One of the ways to gain trust is through research.”
Sido Muncul, which makes about 200 products, plans to acquire a pharmaceutical company in Indonesia to complement its business, Irwan said. He also intends to expand into new markets overseas, including China, and turn Sido Muncul into a global brand. The family owns Hotel Tentrem in Yogyakarta, the cultural center of Java, and Hotel Candi Baru, a restored Dutch colonial building in Semarang.
Desy asked her children five years ago to prepare for an IPO. The plan almost unraveled when Irwan decided against it.
“It’s not easy for a family-owned company to go public,” he said. “I was content with what I had.”
The matriarch, who has 13 grandchildren and 14 great-grandchildren, called him three times that day and said she wouldn’t be able to sleep if he didn’t promise to fulfill her dream. Irwan gave her his word.
“She was thinking about the future. It’s not because an IPO would make us rich, but the company would be managed in a more transparent way,” he said. “Her wish is that the fourth generation will not fight because so many families do.”
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