M ARKET E NTRY S TRATEGIES

2.4.1 Opportunities in Overall Market in Indonesia

Indonesia has an active processed food industry that provides foreign companies with room for growth and areas of opportunities. Even though the country is self-sufficient in certain agricultural commodities, Indonesia is still a net importer for food products such as rice and sugar, which is required to cope with the increasing population and consumption rates. As an emerging market, Indonesia presents im-mense opportunities for companies, and room for investment in the local processed food sector. However, doing business in the country can be difficult, as consumers’ shopping habits differ across the country. Presented below are the key opportunities identified in Indone-sia.

1. Master Plan for the Acceleration and Expansion of Economic Development (2011-2025) - As part of the Plan, the government aims to transform the country into a developed one by year 2025, through attaining a 7.0% to 9.0% annual economic growth. A series of initiatives that will be undertaken will allow a large percentage of the population to have access to better employment, standard of living, and food security. In addition, Indonesia’s connectivity with countries around the world will also be strength-ened. Ample opportunities to fill the gaps for the Plan’s outcome also indicate that foreign investors would have lots of areas for growth within Indonesia.

2. World’s main food supplier - As part of the Master Plan’s platform, Indonesia aims to become one of the world’s main food sup-pliers and processing centre for agricultural, fishery, and natural resources by 2025 or earlier. This goal will be support ive in ex-panding the country’s food processing sector, and create opportunities for domestic and foreign companies. Information regard-ing the Plan can be accessed through http://www.ekon.go.id/media/filemanager/2011/05/27/p/d/pdf_mp3ei.pdf.

3. Demand for food imports – As consumers’ consumption patterns continue to evolve, the demand for diversified food imports will also increase. In addition, imports for food products and ingredients are expected to increase as local manufacturers continue to develop new products in order to attract the younger consumers.

4. Increasing food expenditure – The population’s monthly average expenditure on food products has increased from USD26.3 in 2010 to USD32.8 in 2011, reflecting an increase of approximately 2.0%⁴. The population spends more than half of their monthly expenditure on food products. This huge consumption pattern presents opportunities, as there is a constant demand for food

4http://dds.bps.go.id/eng/download_file/booklet_leaflet/Booklet_August_2011.pdf

33 Processed Food and Food Processing Machinery & Equipment Sectors in ASEAN within the country. In addition, the large population base also offers significant potential opportunities for the processed food in-dustry.

5. Opportunities for Halal products – Indonesia has one of the largest Muslim populations, and there is massive demand for Halal food products in the market. Untapped Halal markets such as the Middle East also present opportunities for food manufacturing companies and exporters with Halal-related expertise. Companies looking into entering Indonesian food industry should place a greater emphasis on Halal food products.

6. Adoption of Western culture – The adoption of the Western culture by affluent Indonesians will also be a contributing factor to-wards the higher acceptance level for Swiss products. In addition, the number of affluent Indonesians is growing in the country.

7. Opportunities for niche products – Companies looking to enter Indonesia’s food processing industry may be facing tight competi-tion from the local manufacturers, as well as imports from cheaper sources such as the PRC and Malaysia. However, compa-nies should look into providing niche food products and leveraging on Switzerland’s expertise in food products. Targeting a dif-ferent segment of the population in urban areas is also more likely to be successful.

8. Opportunities targeted at the population – Indonesia has a rapid growing middle class income group. This segment of the popu-lation is expected to purchase better quality foods products. Companies looking to enter the market can tap on this popupopu-lation segment, and offer quality products. In addition, the immense size of Indonesian population makes the sector attractive to for-eign companies and investors.

9. Growing youth population – There is a growing youth population from the ages of 15 to 24 in Indonesia. This segment of the population is generally more receptive to new products, and has a higher level of acceptance for foreign products. The culture of snacking in the population also presents opportunities for the snack foods sector.

10. Adequate facilities in urban areas – The presence of adequate facilities such as cold storage and modern retail outlets provide good prospects for companies intending to enter Indonesia. With the increasing number of modern retail outlets, consumers will be more exposed to international products, and companies can take advantage of this trend by entering the local market.

11. Food Processing Machinery and Equipment – Indonesia has recently abolished its policy of import duties for raw materials and processing equipment in 2011. With a vibrant processed food industry, demand for food processing machinery and equipment will continue to increase. In addition, the government has also identified the importance of food processing machines and tec h-nologies in the country⁵. This offers opportunities for Swiss companies that supply such machinery and equipment.

12. Food and Hotel Indonesia 2013 – The event, to be held from 10 to 13 April 2013, provides opportunities for Swiss companies to showcase their food processing machinery and equipment. The event may also potentially create business opportunities within the domestic market.

5Indonesia Investment Coordinating Board, http://www3.bkpm.go.id/contents/general/20/food-agriculture

34 13. Functional Foods – Functional food products are gaining in popularity globally, and several local food manufacturers such as PT Heavenly Nutrition Indonesia and PT Demka Sakti have been incorporating such ingredients into food products. Swiss compa-nies may look to introduce and sell other functional ingredients into the local market.

2.4.2 Opportunities for Cheese

In 2011, Indonesia imported a total of 17,717 tons of cheese products, worth approximately USD84.4 million. In the same year, the coun-try exported only 685 tons of cheese products, with an approximate value of USD2.4 million. The figures reflect that the councoun-try is a large importer of cheese products. Statistics below have reflected a drop in number of imports in 2009, following the 2008 global financial crisis.

However, values and volume of cheese products rebounded in 2010, suggesting the continued demand for cheese products.

Figure 8: Trade Statistics (2007- 2011) for Cheese Products in Indonesia

Year

The top exporting countries of cheese products for Indonesia include Germany and the Netherlands. Major brand names within the coun-try include international players like Kraft and Fonterra. Demand for cheese products are expected to increase in the councoun-try, as consum-ers continue to be influenced by the western food culture. As the Dutch colonially ruled Indonesia, Dutch food culture, such as pasta, is also predominant within the local population. Increase in affluence within the middle and high-income groups in the population will also drive the demand for cheese products. Companies looking to enter the cheese market can look into offering a range of cheaper cheese products by importing in bulk and repackaging for the local market. Companies may also seek and collaborate with local milk producers as an alternative mode of entry.

2.4.3 Opportunities for Coffee

As one of the largest coffee producers in the world, Indonesia exported 423,411 tons of coffee products in 2011. The total export value amounted to USD1.3 billion. In the same year, the country imported 29,240 tons of coffee products, worth approximately USD122.0 mil-lion. Indonesia has a strong coffee drinking culture, and the country has high levels of coffee consumption. Increasing standards of living and lifestyle changes have also driven the demand for coffee products within the country.

35 Processed Food and Food Processing Machinery & Equipment Sectors in ASEAN

Figure 9: Trade Statistics (2007- 2011) for Coffee Products in Indonesia

Year

The top exporting countries for coffee products into Indonesia include Brazil and Vietnam. Major coffee brand names within th e country also include Santos Jaya Abadi and Mayora Indah. Instant coffee and sophisticated coffee products are gaining popularity within the younger generation in the country. Companies looking to enter Indonesia’s coffee sector may face tight competition, as the country is self-sufficient in coffee production. However, opportunities for niche coffee and quality coffee products exist within the younger generation and the growing income groups.

2.4.4 Opportunities for Confectionery (Candy and Chocolate)

In 2011, Indonesia imported 19,138 tons of candy and chocolate products that were worth approximately USD69.7 million. In the same year, the country exported 62,279 tons of candy and chocolate products, worth approximately USD165.2 million. In terms of volume, imports have declined since 2008, while exports have reflected an increasing trend from the same year. This suggests that the country is a major processer of candy and chocolate products.

Figure 10: Trade Statistics (2007- 2011) for Confectionery Products in Indonesia

Year

36 Chocolate confectionery is popular in the country, and is also often used as gifts during festivals and birthdays. The top exporting coun-tries for chocolate products include Malaysia and Singapore. Brands that are popular with consumers include Ceres and Cadbury. As consumers become more health conscious, chocolate confectionery is expected to face competition from other snack foods such as healthy snack bars. Companies looking to enter the market should tap on niche opportunities, catering to the premium end of the market, riding on the health trend adopted by consumers. Dark chocolate products can be expected to grow in demand, as they are lower in fat and sugar contents.

The larger exporters for candy products into Indonesia include Thailand and the PRC. Popular brands include Mentos, Fruit -Tella, and Chupa Chups. Children are the main consumers of candy products in the country, and the rising awareness of health and wellness may encourage consumers to choose alternatives such as sugar-free products. The massive youth population in the country is also a large market for confectionery products in Indonesia.

2.4.5 Opportunities for Processed Meat Products

Rising income has led to increased demand for meat products within the population. Most of the local meat processing enterprises oper-ate on a small-scale basis, and the majority of the processed meat is consumed domestically. In 2011, Indonesia imported 1,904 tons of processed meat products, worth approximately USD7.4 million in value. In the same year, the country exported only 505 tons of pro-cessed meat products, worth approximately USD0.9 million.

Figure 11: Trade Statistics (2007- 2011) for Processed Meat Products in Indonesia

Year well-developed hotel and tourism industry has driven demand for high quality meat products. Companies looking to enter the market should look for opportunities to provide new products, and may look to collaborate with existing meat producers in the local processed food sec-tor.

37 Processed Food and Food Processing Machinery & Equipment Sectors in ASEAN

2.4.6 Opportunities for Machines for Making Confectionery

In 2011, Indonesia imported 1,860 tons of machines for making confectionery, worth an estimated USD52.0 million in value. In the same year, the country exported only 51 tons of machines for making confectionery, worth approximately USD0.4 million.

Figure 12: Trade Statistics (2007-2011) for Machines for Making Confectionery in Indonesia

Year

The larger exporters for machines for making confectionery into Indonesia include Germany, Italy, and Netherlands. The statis tics show an increasing trend in the number of machines for making confectionery in Indonesia. In 2011, Switzerland only accounted for 0.5% of the import value of such machinery and equipment into Indonesia. The largest exporter to the country is Germany. Hence, Swiss companies should explore opportunities within this sector.

2.4.7 Opportunities for Coffee Pulpers and Other Beverages Machinery

In 2011, Indonesia imported 3,226 tons of coffee pulpers and other machinery for preparation of beverages, worth approximately USD69.1 million in value. In the same year, the country exported only 253 tons of such machinery and equipment, worth approximate-lyUSD3.6 million.

Figure 13: Trade Statistics (2007-2011) for Coffee Pulpers and Other Beverages Machinery in Indonesia

Year

38 The larger exporters for machines for coffee pulpers and other machinery for preparation of beverages into Indonesia include Germany, Italy, and Denmark. The import statistics revealed that there is a large domestic demand for such machinery and equipment. Swiss com-panies can explore in increasing such exports into Indonesia.

2.4.8 Opportunities for Machines for Molding Articles

In 2011, Indonesia imported 1,533 tons of machines for molding articles in paper pulp, paper, or paperboard, worth approximately USD26.4 million. In the same year, the country exported only nine tons of such machinery and equipment, worth USD0.1 million. This indicates that much of the imports are for domestic usage.

Figure 14: Trade Statistics (2007-2011) for Machines for Molding Articles in Indonesia

Year PRC. Switzerland did not export any of these machinery and equipment into Indonesia in 2011. As indicated previously, much of the im-ports of such machinery are for domestic use, thus, indicating that there may be room for Swiss companies to explore.