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Indonesia’s Rising Consumer Scene
The food industry in Indonesia is gearing up: with almost 235 million inhabitants the island state is "blossoming out" to a dynamic market also for the food industry. Here strong momentum is generated by many young consumers. The major international food groups have discovered this nation of prospering consumers long since - and investors show a strong interest in the country.
Indonesia promises to become a market with giant growth potential: growing by 1.4% annually the big population ensures a steady growth in demand. Almost half the total population is aged between 15 and 44. A target group very open-minded towards new products that are associated with a modern lifestyle. Appealing packaging, new product versions and increased quality rank high on the list of priorities. According to a study carried out be the Central Statistical Office Indonesia’s consumers spend on average half their income on food - and figures are rising. Some 65% are considered part of the so-called middle classes - i.e. are neither rich nor poor. They can afford buying branded products for the first time and up to two third of spendings on food are accounted for by packaged food now. But some 14% of the population still live under the poverty line.
Export demand is growing in line with domestic demand. According to data by the Indonesian Food and Beverage Producers Association (GAPMMI) it achieved at a real growth of 6% in 2009. In the medium term expansion is expected to rise to 10%.
High Rationalisation Demand
This bright sales outlook make companies expand their production capacities and invest strongly in modern technology. The demand for rationalisation is high - state-of-the-art automation technology is hoped to make for more efficiency in enterprises. Rising quality requirements and a growing health awareness make modern machinery and technologies indispensable for production and packaging. According to Germany Trade & Invest (gtai) investment in new machinery and equipment is predominantly made abroad. Germany and Italy are the No. 1 suppliers.
While the major enterprises employ food machines in accordance with international standards the small and medium-sized businesses rather demand for equipment for smaller capacities and packaging units. Apart from the global players Unilever and Nestlé the food industry in Indonesia is composed of approx. 6,300 bigger oufits and SMEs employing some 750,000 staff. Output in 2008 was estimated at around EUR 37.4 billion. In addition to this, there are to the tune of one million small manufacturers that employ roughly 2.6 million people and continue playing a key role for supplying the population. Principal products include instant noodles, pastry, cereal products, dairy products, icecream, sauces, snacks, food and confectionary containing preservatives. The modernisation of retail by the opening of super and hyper-markets and altered consumers’ behaviour add to a growing output of frozen food, snacks and dietary products.
Big Growth Opportunities
Especially big growth opportunities are forecast for the biscuit market and the companies in this sector constantly invest in new equipment. According to gtai data domestic demand for cookies and similar fine pastry is expected to rise from 236,000 tons in 2009 to 343,000 tons in 2014.
The market for dairy products also offers excellent opportunities for growth: at present to the tune of 75% of the annual per-capita consumption, which is still as low as ten litres, have to be imported from Australia and New Zealand in the shape of milk powder. US$ 329 million are earmarked for boosting local production according to calculations of the Ministry for Agriculture.
Add to this the extended production of palm oil, sugar and of fast-food suppliers. The global rise in demand for organic fuels from pailm oil, which is sure to be profitable against the background of the climate discussion, is likely to trigger especially rapid growth of production sites in Indonesia. Malaysia and Indonesia currently produce and cover some 85% of global demand for palm oil, which is currently still used predominantly for food production and the cosmetics industry.
Government eases investment
Due to the abundant availability of raw materials Indenosia also boasts substantial export potential. Food multi-nationals take a growing interest in investing in this country. To ease foreign investment the Indonesian government has recently adopted a complete set of measures replacing the previous provisions dating back to 2007. They are designed to improve the investment climate in Indonesia even further and comply with the requirements of the ASEAN Economic Community. For the coming five years the Government has set itself an average annual economic growth of 7% - investment is hoped to serve as the decisive driving force. The aim is to reduce unemployment to 5% to 6% and the percentage of people living under the poverty line to below 10%.
