Food and Beverage in Indonesia

Exporter ply FOOD AND BEVERAGE IN INDONESIA Market write February 2012 This document is one of a series of free schooling tools for exporters produced by revolutionary Zea toss off peck and Enterprise. parvenu Zealand Trade and Enterprise provides a wide run of standard services and sophisticated solutions that assist businesses through every stage of the export process. For information or advice, phone youthful Zealand Trade and Enterprise on 0800 555 888, visit www. nzte. govt. nz, or contact your in the raw Zealand Trade and Enterprise client manager. CONTENTS 1 MARKET STRUCTURE 1. Market Overview 1. 2 1. 3 1. 4 1. 5 1. 6 2 2 Market Drivers Market Potential importation Trends Key Players in the Market regulatory Sustainability 3 3 6 7 7 8 9 11 12 12 12 12 13 13 14 MARKET ENTRY AND developing 2. 1 Market Entry St regularizegies 2. 2 2. 3 2. 4 2. 5 Points of Differentiation Long Term Strategic Issues for Exporters to Consider Distri entirelyion Channels set 3 MARKET RESO URCES AND CONTACTS 2/ Exporter get out Indonesia fare and drinkable February 2012 1 MARKET STRUCTURE Indonesia is the worlds fourth most populous rural with a population of 232. one million million million in 2010, and the largest economy in Southeast Asia. In 2011, naked as a jaybird Zealands solid food and potable exports naturalled US$468. 3 million, devising Indonesia New Zealands 11th largest export destination. i In November 2011, Indonesia provided formal notification of the completion of its internal ratification procedures to enable the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA). From 10 January 2012, AANZFTA will surface up considerable opportunities for New Zealand businesses. The agreement will allow duty / tariff free access to everyplace 90 percentage of New Zealand goods and services by 2015. i 1. 1 Market Overview In 2010 and 2011, dairy farm and meat products comprised over 76 percent of New Zealands food and beverage exports to Ind onesia (2010 US$363 million 2011 US$381 million). In 2010, Indonesias dairy and meat securities industry was worth an foreshadowd US$2 billion. The majority of the population in Indonesia, approximately 85 percent, are Muslim and all slaughtered food and meat (excluding pork) must have halal certification. iii 3/ Exporter put across Indonesia Food and Beverage February 2012 1. 1. Market by product category Packaged food In 2010, Indonesias packaged food market was encouraged at US$19. 1 billion. The sale of impulse and indulgence products (i. e. chocolates) grew due to increasing affluence. Nutrition and staples (i. e. rice) grew by 31 percent in 2010. Canned / preserved food had a high growth rate of 20 percent in 2010. Indonesia gross revenue of Packaged Food by Category Value 2005-2010 in million USD 2007 Packaged Food Total Nutrition/staples (i. e. rice) Dried refined Food (i. e. dessert mixes, instant soup) Impulse and Indulgence Products (i. e. hocolate coated biscuit s) Bakery Dairy Noodles impair Food Confectionery Meal Solutions (i. e. tomato pastes) Sweet and Savoury Snacks Oils and Fats Sauces, Dressings and Condiments Frozen Processed Food Ice Cream Canned/Preserved Food Chilled Processed Food Spreads Meal Replacement (i. e. breakfast bars) Pasta Ready Meals (i. e. instant pasta) Snack Bars Soup 13,110 7,876 4,089 4,148 2,111 1,484 1,340 1,257 1,287 1,086 779 759 477 263 245 200 63 62 13 11 4 0. 9 3 2008 14,307 8,798 4,642 4,318 2,201 1,540 1,487 1,398 1,329 1,190 812 909 499 306 269 230 68 65 15 12 4 3 3 2009 14,817 ,167 4,909 4,404 2,238 1,596 1,526 1,496 1,360 1,244 832 845 510 327 278 251 68 66 16 13 4 3 3 2010 19,100 11,959 6,515 5,506 2,781 2,026 1,999 1,967 1,704 1,634 1,054 1,039 653 439 356 346 86 82 21 17 5 4 4 stemma Euromonitor International (NB IDR/USD currency 2007 9141, 2008 9699, 2009 10389. 9, 2010 9090. 4) 4/ Exporter scat Indonesia Food and Beverage February 2012 Fresh food In 2010, the fresh food market in Indonesi a had a total volume of 48. 1 million tonnes, making Indonesia the fifth part largest fresh food market in the world. During the period 20052010, use up of fresh food increased by 13 percent. v Indonesia Fresh food market in Indonesia in million tonnes Starchy Roots Fruits Vegetables search and Seafood Meat Sugar and Sweeteners Eggs Nuts Pulses 2007 14,985 10,386 9,095 5,016 1,969 1,778 743 671 222 2008 15,148 10,786 9,356 5,153 2,024 1,825 761 700 224 2009 15,309 11,147 9,613 5,291 2,078 1,872 777 730 227 2010 15,455 11,489 9,868 5,432 2,138 1,914 794 762 230 2011f 15,582 11,787 10,119 5,592 2,188 1,952 808 798 234 Source Euromonitor International (NB 2011 forecasts) Wineiv In 2011, the Indonesian drink market was worth approximately US$32 million (RP 275. 4 billion) and sell sales totalled 3. million litres. Wine accounted for only 3 percent of total alcohol sales. Beer is considerably more popular as an alcoholic beverage. During the period 2008-2010, drink volume sales dec lined by 6 percent. While prices increased, the expect from Indonesian consumers with high disposable incomes and expatriates remained and the number of wine enthusiasts in Indonesia grew. The growth was influenced by western culture and wine events such as wine tasting, wine dinners and classes. The wine market showed an increase in sales by value of 61 percent during the period 2008-2010. Indonesia Wine Sales Off-trade Value in million USD Off-trade sight in million litres 2006 12. 0 3. 3 2007 14. 0 3. 4 2008 15. 0 3. 4 2009 16. 0 3. 3 2010 28. 0 3. 2 2011 32. 0 3. 1 Source Euromonitor International (NB IDR/USD currency 2006 9159. 3, 2007 9141, 2008 9699, 2009 10389. 9, 2010 9090. 4, 2011 8696. 1) 1. 1. 2 Market by distri furtherion channel push-d aver list grocery retail In 2011, traditional retailers, comprising small independent stores and open air markets, accounted for an estimated 77 percent of the total retail sales. vii 5/ Exporter range Indonesia Food and Beverage February 2012In the organised retail sector, Hypermarkets had the largest market share in 2010, with US$13. 6 billion in sales, followed by supermarkets (US$11 billion) and convenience stores / mini-markets (US$5 billion). During the period 2005-2010, supermarket sales increased by 112 percent, followed by hypermarkets (109 percent) and convenience stores / mini-markets (105 percent). big money Grocery Retail Sector Estimated Number of Outlets 2005 Total Convenience memory boards / Mini-Markets Supermarkets Hypermarkets Source Business Monitor International 2006 7,154 3,337 3,173 644 2007 8,530 3,953 3,830 747 2008 9,429 4,334 4,297 798 009 10,572 4,871 4,801 900 2010 11,524 5,299 5,252 973 5,912 2,758 2,652 502 1. 2 Market Drivers The following are viewed as key drivers for the food and beverage market in Indonesia ? The food and beverage market in Indonesia grew in 2010, recovering from the worldwide recession. Purchasing power of center and upper income consumers revived wit h an increase of disposable income. Political and economic conditions stabilised and the number of modern retail outlets and food service retailers grew. vi Consumers are encompass the health conscious trend seen throughout the world, as a result of exposure to health education through the media. i To meet the increasing demand of educated and health conscious consumers, the Indonesian government has taken on initiatives such as the Merauke Integrated Food and Energy Estate project. Through this US$5 billion project, the government expects to produce almost 2 million tonnes of rice, 2 million tonnes of corn, 2. 5 million tonnes of sugar, 937,000 tonnes of palm oil,167,000 tonnes of soy beans and grazing land for 64,000 cattle. vii In April 2010, measureation on wine increased significantly resulting in an increase in wine prices.Approximately 45 percent of the cost paying by consumers is tax, including sales tax (VAT), excise and import tax. v While traditional markets still acco unt for the majority of retail sales, they face greater mash on market share as modern retail becomes more popular. While the government tried to discourage the rapid spread of modern retail, it wasnt successful in enforcing its legislative regulations and modern retailers increased in numbers by using fake permits in some cases. iii ? ? ? ? 6/ Exporter Guide Indonesia Food and Beverage February 2012 1. 3 Market PotentialThe overall food consumption is forecast to grow by a compound annual growth rate (CAGR) of 9. 1 percent to 2015. vii Modern retail, such as hypermarkets are projected to increase in numbers as urban centres expand and demand increases for convenience and added-value products (i. e. rice and noodle ready-meals). However, most consumers in Indonesia remain price sensitive and private label will be a popular option as it is perceived as good value rather than cheap. vii The sale of alcoholic beverages is expected to decline with a CAGR of 2. 3 percent during 2010 -2015. However, wine is forecast to grow with a CAGR of 1. percent during 20102015 as wine is perceived to be a healthier option than other alcoholic beverages such as beer. v Indonesia has a massive youth population of around 40. 9 million, aged between 15 and 24. This age group tends to be more westernised compared to the elder population and is projected to drive demand for mass market products such as confectionary goods. vii There are opportunities for products targeted to improve the condition of specific health problems. These products include calcium fortified milk to prevent osteoporosis, dairy milk for nursing mothers, baby food and products for weight and cholesterol reduction. i 1. 4 Import Trendsvii In 2010, Indonesia imported an estimated US$8. 1 billion, a growth of 25 percent from 2009. Indonesia is relatively resilient to global trade volatility but reliant on dairy and poultry imports to meet demand. Indonesia Food and Beverage Trade in million USD 2009 Exports Im ports Balance 18,756 6,476 12,280 2010e 24,765 8,120 16,645 2011f 30,406 9,573 20,833 2012f 36,517 11,233 25,284 2013f 43,492 13,172 30,320 2014f 52,167 15,598 36,563 2015f 62,034 18,448 43,585 Source Business Monitor International (NB 2010 estimate 2011-2015 forecasts) / Exporter Guide Indonesia Food and Beverage February 2012 1. 5 Key Players in the Marketvii Food and beverages Nestle Indonesia had the highest market share with sales of US$23. 2 billion in Indonesia and Papua New Guinea. Nestle has a market leading position in the dairy sector and in its instant noodle category, operates a 50-50 joint adventure with Indofood Sukses Makmur. One of Indonesias key players in alcoholic beverages is Multi Bintang with 414 employees and US$209. 5 million in sales in 2010.Indonesia Key Players in the food and beverage market Company Nestle Indonesia Indofood Sukses akmur Terbuka Unilever Indonesia PT Charoen Pokphand Indonesia Mayora Indah Tbk Sari Husada PT Malindo Feedmill Tbk PT S iantar Top Tiga Pilar Sejahtera Food Sub-sector confectionery and dairy miscellaneous food dairy and tea meat and Fish confectionery formula and baby food miscellaneous food Snack food Snack food and instant noodles Sales (US$mn) 23,238** 4,493 2,303 1,764 845 317e 238 89 83 Yearending Dec-10 Dec-10 Dec-10 Dec-10 Dec-10 2010 Dec-10 Dec-10 Dec-09 No. f employees 1,232 64,200 3,308 7,095 4,407 902 2,144 4,292 1,925 Year Established 1971 1990 1933 1972 1977 1954 na 1970 na Source Company Investor Relations, BMI (NB e = estimate, na = not available, **Includes Papua New Guinea) Mass Grocery Retail Hero Supermarket Tbk had the largest sales within the mass grocery retail sector with US$8. 97 billion in 2010. Hero has a broad escape of store formats and offers lower value products while Carrefour, the biggest foreign retailer in Indonesia, dominates the upper end of the market. 8/Exporter Guide Indonesia Food and Beverage February 2012 Key Players in Indonesias Mass Grocery Retail Sec tor, 2011 Parent Company PT Hero Supermark et Tbk PT Sumber Alfaria Trijaya Tbk PT Matahari Putra Prima Tbk Country of ascendant Indonesia / Hong Kong Sales, US$ mn 8,971 Financial year 2010 Brand Hero Giant StarMart Indonesia 1,645 2010 Alfamart Alfa Minimart Foodmart Hypermart Cut Price PT Carrefour Indonesia PT Makro Indonesia ** PT Ramayana Lestari Sentosa Tbk PT Indomaret Prismatama PT Lion Superindo PT Alfa Retailindo Tbk France / Indonesia Netherlands IndonesiaIndonesia Belgium / Indonesia Indonesia 1,570*** 656e 639 500e 431* 187 2010 2010 2009 2010 2010 2010 Carrefour Makro Ramayana Indomaret Super Indo Alfa Alfa Grosir Gelael Format Supermarket Hypermarket Convenience Store Supermarket Convenience Store Supermarket Hypermarket Discount Store Hypermarket Supermarket Cash & Carry Supermarket Convenience Store Supermarket Supermarket Supermarket Supermarket No of outlets 120 38 125 4812 Indonesia 1,615 2009 25 52 9 63 16 20 104 5,174 74 35 8 11Source Company Investor Relatio ns, BMI (NB e = estimate,*Based on Delhaize Group Rest of World Sales,** South Koreas Lotte acquired Makro in October 2008,***Based on CarrefoursIndonesia sales. ?Includes franchised, independent stores) 1. 6 Regulatory Information provided in this section is for reference only. When negotiating supply contracts and before beginning actual export, companies are advised to consult closely with their importer or distributor. Duties and tariffs Under AANZFTA at that place will be tariff free access to more than 90 percent of New Zealand goods by 2015, and the majority of these are food and beverage products. / Exporter Guide Indonesia Food and Beverage February 2012 Alcoholic beverages in Indonesia including wine are strictly regulated due to the Muslim Law. Wines are subject to 10 percent value added tax (VAT), import tax of 150 percent and income tax of 25 percent. Category A B C Classification Alcoholic beverage with 1-5 percent ethanol content Alcoholic beverage with 5-20 perce nt ethanol content Alcoholic beverage with 20-55 percent ethanol content Import duty USD 1. 57 / litre IDR 14,000 / litre USD 6. 18 / litre IDR 55,000 / litre USD 14. 0 / litre IDR 125,000 / litre Excise Tax USD 1. 25 / litre IDR 11,000 / litre USD 4. 5 / litre IDR 40,000 / litre USD 14. 61 / litre IDR130,000 / litre For more information, visit the Directorate General of Customs & Excise at www. beacukai. go. id or the AANZFTA at www. asean. fta. govt. nz. Licensing and enrolment requirements introductory to importation of food, companies must follow a registration process which involves a fee of Rp 150,000-3,000,000 (approximately NZ$17-345). The documents needed to register include ? ? ? ? ? earn that guarantees safety, quality, nutrition and labelling an authorisation letter from the manufacturer health certificate or certificate of free sale forced by authorised deputy from country of origin an audit report of distribution facilities from NADFC (National say-so of doses an d Food tell) provincial office. copy of registration approval letter from the NZ companys importer For more information on licensing and registration, visit National Agency of Drug and Food Control at www. pom. go. id Labelling requirements All imported food and beverages need to be labelled in Indonesian language and must take over ? ? ? brand name name of product (type of food) list of ingredients net weight or net content or drained weight (if applicable) 10/ Exporter Guide Indonesia Food and Beverage February 2012 ? ? ? name and address of parties that produce or import the products into Indonesia registration number date, month and year of minimum durability For more information on labelling, visit the National Agency of Drug and Food Control at www. pom. go. id. Quotas New Zealand wine exports are subject to Indonesias import quotas. The Indonesian government increased the import quota for wine to 225,000 cases in 2009, from 80,000 cases in 2008.The number of cases of win e imported in 2008 and 2009 were 77,485 and 191,953 cases respectively. Error Bookmark not defined. Indonesia has also of late imposed beef quotas which are being reviewed regularly. Halal Halal certification in Indonesia is required for all food derived from animal products, and recommended for companies whose products are targeting the mass retail market. Exporters are advised to check this closely with their importers or distributors in Indonesia. The Federation of Islamic Associations of New Zealand (FIANZ) is recognised by the Indonesian Ulama Council (MUI) for certifying products in New Zealand.They can be contacted at emailprotected co. nz. For more information on the overseas market access requirements (including halal requirements), visit the New Zealand Food Safety consent at www. foodsafety. govt. nz For more information on halal, visit the MUI at www. halalmui. org 1. 7 Sustainabilityviii The Indonesian Government encourages companies to use sustainable packaging and r ecyclable materials through tax incentives and an awards system. The government plans to boost the environmentally friendly packaging through Industrial Regulations in Indonesia (RUU Perindustrian).Alternatives to plastic packaging such as vegetable material or bio-plastic packaging have been welcomed by the market. Bio-plastic is made from biotic materials (i. e. corn, cassava or micro-biota) and the material is easier to decompose. A national water company, PT Aqua Golden Mississippi, is currently developing a water bottle from vegetable material. The Indonesian Nanotechnology Society is researching a thinner plastic bottle which can be decomposed in 4 to 8 weeks. 11/ Exporter Guide Indonesia Food and Beverage February 2012 2 MARKET ENTRY AND DEVELOPMENT 2. Market Entry Strategies Indonesia is a price sensitive market, but with the growth of the new generation of essence and high income consumers, the quality of products is of greater importance. Branded and high quality food and beverage products are in demand. The middle high income segment is paying more attention to healthy products as the new generation becomes more health conscious. Indonesian consumers prefer internationally k straight offn brands and imported products, particularly for their children. In 2010, the government approved a number of import licences for alcoholic beverages.There were previously only 2 companies with import licences but now more than 20 companies have secured a licence. To acquire an import licence, a company needs to have at least 20 brands in its portfolio. It is recommended that New Zealand food and beverage products focus on Jakarta (with a population of 9. 6 million), Surabaya (4 million) and Bali (4 million). Jakarta and Surabaya are big markets in their own right but are also distribution hubs to the east and western parts of Indonesia. Bali is a popular tourism destination and there is a demand for quality products from hotels and eating houses. . 2 Points o f Differentiation New Zealand is known in Indonesia as a producer of fresh, clean, high quality and healthy products. However, the market holds little knowledge about the range of products New Zealand sells. New Zealand companies need to continuously promote the overall New Zealand image for the benefit of their products. 2. 3 Long Term Strategic Issues for Exporters to Consider latterly a number of new regulations were introduced, which are aimed at protecting local producers of horticultural, agricultural and dairy products.Political issues and corruption are still a major issue in doing business in Indonesia. All imported food and beverage products must be registered by Indonesias National Agency for Food and Drugs Control (BPOM). New Zealand food and beverage exporters are advised to check with their Indonesian customers or partners what the exact process is. The specified time limit for BPOM to issue registration is 45 working days, but in the past it has taken 6-12 months. 12 / Exporter Guide Indonesia Food and Beverage February 2012 2. 4 Distribution ChannelsThe best market acumen strategy is to appoint a local importer who has an established network across Indonesia. This will enable New Zealand businesses to access the retail market and also the HORECA (hotel, eatery and catering) markets. Importers will undertake the product registration on behalf of New Zealand companies. New Zealand companies must provide the necessary documentation including a letter of appointment for the Indonesian importer. 2. 5 Pricing New Zealand products face stiff competition from other imported products, particularly products from Asian countries.With the right pricing and product positioning strategies, Indonesian consumers are willing to pay for premium products. Mark-ups for imported products will include ? ? ? import agent fees custom duties value added tax (VAT) of 5-10 percent 13/ Exporter Guide Indonesia Food and Beverage February 2012 2 MARKET RESOURCES AND CONTACTS ASSOCIATIONS /ORGANISATION ASEAN New Zealand Combined Business Council Halal Indonesia The Federation of Islamic Associations of New Zealand (FIANZ) WEBLINK www. asean. org. nz www. halalindonesia. org/ www. fianz. co. nz/index. php Indonesia National Agency of Drug and Food Control www. om. go. id ASEAN Australia New Zealand Free Trade Agreement Guide Ministry of Health Republic of Indonesia Directorate General of Customs & Excise TRADE EVENTS InterFood Indonesia Fish and Seafood Indonesia Agri Indo Jakarta Fashion & Food Festival OTHER NZTE PUBLICATIONS Indonesia Country Brief Wine Market in Southeast Asia Food and beverage in the hotel, restaurant and institutions market in Southeast Asia www. asean. fta. govt. nz www. depkes. go. id/en/ www. beacukai. go. id WEBLINK www. interfood-indonesia. com www. fisheryandseafoodexpo. com www. agri-indo. com www. jfff. info WEBLINK www. nzte. ovt. nz www. nzte. govt. nz /www. nzte. govt. nz Disclaimer This publication is provided t o you as a free service and is intended to flag to you market opportunities and possibilities. workout of and reliance on the information/products/technology/concepts discussed in this publication, and the suitability of these for your business is entirely at your own risk. You are advised to carry out your own independent assessment of this opportunity. The information in this publication is general it was prepared by New Zealand Trade and Enterprise (NZTE) from publicly available and/or subscription database sources.NZTE its officers, employees and agents stick out no liability for any errors or omissions or any opinion/s expressed, and no responsibility is accepted with respect to the standing of any soused/s, company/ies or individual/s mentioned. New Zealand Trade and Enterprise is not responsible for any adverse consequences arising out of such use. You release New Zealand Trade and Enterprise from all claims arising from this publication. New Zealand Trade and Enterprise r eserves the right to reuse any general market information contained in its reports. i ii iii iv v vi vii viii Euromonitor International, 26 August 2011.Indonesia Country Profile APNZ, 15 November 2011. Indonesia to join regional FTA. The New Zealand Herald. Retrieved from www. nzherald. co. nz Euromonitor International, 9 August 2011. Consumer Food Service in Indonesia. Euromonitor International, 2011. Market sizes, Indonesia Euromonitor International, February 2011. Alcoholic Drinks Indonesia Euromonitor International, November 2010. Packaged food Indonesia Business Monitor International, August 2011. Indonesia Food & Drink explanation Q4 2011. Euromonitor International, April 2011. Packaging Indonesia 14/ Exporter Guide Indonesia Food and Beverage February 2012