Overview of the Food and Beverages Industry in Indonesia
Indonesia, with the third fastest growing economy in the Group of Twenty (G20), has both substantial and interesting food and beverage markets, as well as very dynamic food and beverage demand.
During the period of January to September in 2017 alone, investment values in the food and beverages sector have reached IDR 19.7 trillion (USD 1.4 billion) for foreign investments and IDR 27.9 trillion (USD 2 billion) for domestic investments.
Observant Muslims purchase Halal foods, which have stringent requirements for processing, packing, and labelling.
Under the Halal Law of Indonesia, it is mandatory for all products (traded, distributed, and imported) within the Indonesian land to be certified halal. This requirement is set to come into effect five years after enactment of the Halal Law, which will be on October 17, 2019. Halal products which fail to meet the deadline will be considered as non-halal.
The food and beverages sector is where companies in Indonesia produce value-added products. The growth of this sector in Indonesia is powered by basic needs of people for foods and drinks, huge population (265 million people in 2018), rising incomes and increased spending on food by the surging middle class. As a result, it is considered a relatively safe investment choice for most investors to venture into this potentially large market.
Read also Halal Certification in Indonesia
Increased food and beverages consumption and higher spending go hand in hand, attributable to lifestyle urbanization and various diets. The growth of this sector is also supported by the development of retail infrastructures, particularly malls and hypermarkets. The Indonesian processed food market is dominated by several large local companies, as well as international brands such as Nestle, Kraft, and Unilever. Multinational companies market their products appealing to Indonesian middle class with an increasing health conscious in order to strengthen their market position in Indonesia.
According to the National Statistical Agency (BPS), there are approximately 6,000 large and medium-sized food and beverages companies with 765,000 employees; and 1.61 million micro and small producers with 3.75 million employees. As of 2016, a growth of 6.9% is observed in large and medium-sized firms and a growth of 11.5% in small-scale producers.
In 2016, total soft drinks sales were close 25.8 billion liters, accounting to IDR 123.59 trillion (USD 8.8 billion). Soft drinks industry growth in Indonesia is about 8-9 percent annually, with ready-to-drink coffee and bottled water at the top spots.
In the food sector, there is a strong demand for products such as packaged foods, fruits, vegetables, seafood, gourmet foods, and canned foods. The market for canned and packaged foods has grown significantly with most consumers prefer the convenience of packaged and ready-to-serve foods and beverages bring. This growth is expected to continue in 2018 and beyond.
We can also see a demand for certain new products such as individually packed snacks in flexible containers, single serve coffee or tea, breakfast cereals, etc. The ever-changing urban lifestyle will continue to shape the food and beverages in Indonesia.
Currently, Indonesia requires a wide array of raw materials for its food processing industry. Thus, this demand is opening up significant opportunities for ingredient suppliers from all over the world, especially neighboring countries. The food processing industry continues to grow and will continue to grip the great potential for foreign investors.
For a full year in 2018, Industry Ministry of Indonesia set IDR 53.18 trillion (approx. USD 3.9 billion) investment goal for the national food sector and IDR 10.07 trillion (approx. USD 735 million) investment for the beverage industry. Therefore, total direct investment in the food and beverage industry in Indonesia has a very positive outlook at IDR 63.25 trillion (USD 4.6 billion).
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