Page 80 - FoodFocusThailand No.162 September 2019

SURF THE AEC
SURF THE AEC
New Opportunities...Indonesia’s Food Market

As a result of a successful economic development led by • Many food products are required to be imported including
President Joko “Jokowi” Widodo, Indonesia is witnessing vegetables, fruits, milk, meat, and wheat, in total of around USD 9 billion
an unstoppable economic development at a rate of 5.2% per year.
• As alcohol is contradicted to the Muslim’s norms, the sale of the
a year, as well as increasing disposable income. The beverage is pushed down. However, drinking water and other non-
phenomenal has created great new opportunities in the alcoholic drinks are seeing tremendous opportunities.
• Indonesia’s Halal market is growing continuously, importing up to
country’s value-added food market, particularly ready- USD 169.7 billion averagely per year, and growing at a rate of 7%. It is
to-eat products/ready meals and beverages which have the world’s biggest Halal market followed by Turkey, Pakistan, Egypt,
high values. Bangladesh, Iran, and Saudi Arabia (Source: The International Market
Analysis Research and Consulting; IMARC).
• Halal market is not limited only to food, but also education, fashion,
The Strengths of Indonesia’s Food Market cosmetics, medicines, recreational activities, tourism, culture, health,
• Indonesia is a net importer of food. and financial & banking. These industries are areas where Thailand has
• Indonesia is the biggest market in ASEAN and the biggest Halal market some expertise.
in the world (Source: Thaihalal.com). This is encouraging new entrepreneurs • (Low) price remains the main factor for Indonesians to make
to enter the market, both as importers and via foreign direct investments purchases.
(FDI) in food and beverage processing (Source: FitchSolutions).
• Despite being Thailand’s 4 biggest export market following Japan, Obstacles
th
China, and Vietnam, Indonesia offers a great export potential. In 2018, the • Indonesia is aiming to be the world’s food treasury by 2045 and hope
country’s import of sugar and rice from Thailand increased 25% and 500%, to be food self-sufficiency in terms domestic production and consumption.
respectively. The country also has the biggest population in ASEAN (269 This might impact the export of Thai agricultural products in the future
million). (Source: National Food Institute).
• Brand loyalty among Indonesians remains low, especially among young • Accessing Indonesia’s soft drinks market is considerably difficult
consumers. They are price sensitive and are willing to try new things, which due to market’s competitiveness, price dumping, and low profit.
is a strength to draw in new players. • The Indonesian government has started to restrict the sale of
The Weaknesses of Indonesia’s Food Market alcoholic drinks since April 2015, and there are calls for more measures
• The food industry in Indonesia is still limited to big players, especially on alcoholic beverage production.
a handful number of multi-national companies (MNCs). The market is likely • Department stores and retail stores in Indonesia are facing many
moving towards monopoly, regardless of great potential, partly due to the challenges due to the growth of e-commerce, causing some to close
adversity to access business loans, especially for SMEs. down.
• The country’s basic infrastructures are not facilitating the food industry,
for example, inadequate roads and insufficient electricity. This is preventing Suggestions for Adaptation
the chilled and frozen food sector to reach its full potential. • Thai products exported to Indonesia are usually basic agricultural
• The Indonesian government is still putting a cap on foreign investment products, namely, sugar, rice, tapioca, and fruits. Meanwhile, consumers
in retail businesses, which draws back the sector. The problem also spills are looking for processed food such as ready-to-eat products/ready meals
over into receding logistics and warehouses. to serve their hasty lifestyle.
• Even though Indonesians are keen to drink alcohol, but the restoration • The policy for Indonesia to become food self-sufficiency by 2045
of Muslim norms through political agenda has resulted in the limitation of could affect Thai food exports in the near future, for example, new
alcohol sales, which obstructs the growth of the alcoholic beverages. measures could be applied to protect local players. At the same time,
Indonesians are not loyal to brands. Therefore, Thai food producers should
Opportunities continue to penetrate the market, and build up the awareness of Thai
• Indonesia imports USD 9 billion worth of food products due to brands before turning to food producers/food processors in Indonesia.
insufficient domestic production. Nowadays, many foreign investors are • Thai food products have strong brands awareness, quality, and
interested in investing in Indonesia such as Coca-Cola, Pepsi, Danone, outstanding packaging, which make them competitive and relevant.
and Thailand’s CPF. These companies are gaining more influences in the However, Thai Halal standard should be improved. Right now, Indonesia
market. is trusting the Halal standard from Malaysia more than Thailand, as both
• The purchasing power among Indonesians is increasing in response countries are Muslim countries. Moreover, the National Food Institute
to the economic growth. High potential consumers account for 15% of the (NFI) and the Central Islamic Council of Thailand (CICT) are working
total population, and many of them are turning towards processed food, together to make Thai Halal standard acceptable in Indonesia.
especially Chinese ethnic Indonesians in economic centers like Jakarta, • Indonesia’s Halal food market provides golden opportunities for
Surabaya, and Medan. It is predicted that in 2015-2019, average spending Thai entrepreneurs to generate more income. The country’s Halal market
on food per Indonesian increases 8.2% year-on-year following government value is roughly THB 6-8 trillion per year. Thailand’s export of Halal goods
expenditures, expanding tourism industry, and foreign investments. remains low at 0.1% of the total food exports. The Thai government should
• A report from Better Than Cash Alliance suggests that Indonesia support new players to access Muslim markets, starting from Indonesia.
became the fastest growing e-commerce market in the world. Lazada and • Halal standard does not limit to food, but also tourism, medical
Tokopedia, the two most successful e-commerce platforms, will provide a treatment, and clothing. Therefore, pushing for Thai Halal food to be
great potential for food products. accepted in Indonesia could result in the expansion of Thai brands in
• Indonesians are more concerned with health, especially rich other industries.
consumers, as they are highlighting more on the foods’ origins. Processed • As e-commerce is replacing department stores in Indonesia, there
food and beverages that have convincing packaging and accountable food are the needs for exporters to consider this channel. The same trend is
manufacturers are gaining sales vividly. This is a great opportunity for taking place in Thailand and other countries, too.
Thailand as the country is aiming to be the kitchen of the world. • The limitation on alcoholic drinks sale creates new opportunity for
• Indonesians spend more than 50% of their expenses on food, both for other beverages such as juices and non-alcoholic beer. Exporters should
personal consumption and gifts. not overlook these opportunities.
• Thai food products are exempted from additional tax due to the ASEAN • The shortage of cold storage is forcing exporters to design products
FTA. that do not require cold storages.

80 FOOD FOCUS THAILAND SEP 2019