Do you know why YOUR BRAND must go into Indonesia?

Indonesia is ASEAN’s most populous country with an estimated population of 261 million people in 2017, mainly on islands of Java, Sumatra, Kalimantan, Sulawesi and Papua. Very rich in natural resources like petroleum and natural gas, lumber, fisheries and iron ore.

 

Since 2007, its GDP has been growing steadily at rates above 6%. Under the new President Joko Widodo, the country and people have continued to prosper.

 

Per capita gross domestic product grew from $1,213 in 2005 to $3,366 in 2015 demonstrating a triple jump in the last 10 years!! Food and beverage expenditures reached 21.36% while restaurant & hotel expenditures reached 5.35% of GDP. What is interesting is the rising of the middle class in terms of population and income. The middle class population grew from 37% in 2004 to 56.7% in 2013. That means the middle class today makes up 130 million people of the total Indonesia’s population. They spend about $2 to $20 daily. This growing demographic is creating new demand for western food products, imported brand names and a major shift in cultural behavior that is socializing outside of home. The middle class consumers also have newly acquired access to media and Internet, which further exposes Indonesians to various international products, activities and lifestyles.

 

The Indonesian Hotel, Restaurant and Institutional (HRI) sector is extremely diverse, consisting of high end hotels and restaurants that serve local and international cuisine, fast food outlets, cafes and bars, bakeries and low end small restaurants, street side restaurants known as warungs and vendors that sell food to customers on the street.

 

There is a concentration of high-end HRI businesses in Bali, Jakarta and other urban areas. The growth of these businesses is in line with the growth of tourist and more importantly, the growth of Indonesia’s middle class because that would provide business sustainability in the long term.

 

There is a strong demand for western, Japanese and Korean products in Indonesia, particularly as more people associate them with quality, consistent availability and healthy lifestyles. Because of this trend, Japanese and Korean restaurants have been mushrooming throughout Indonesia. Also as tourists and expatriates increase in areas beyond Java, demand for imported products is expected to increase. Unfortunately, protectionist policies for retail packaged imported foods have led to irregular supplies of imported products at retail and food service outlets.

 

Therefore, the entry strategy for imported products must be through reputable local importers or distributor agents. They represent imported products, obtain import licenses and permits, understand customs clearance procedures, and distribute the products all over Indonesia. Many regulations related to distribution and marketing of imported food and beverage products are still very ambiguously enforced.

 

 

Another key success driver to note is for Foreign Brands that use a lot of imported raw materials must rethink and reengineer the way they do business in Indonesia. This is due to the fact that despite the growing middle class and increasing spending power, Indonesia’s rupiah depreciation against foreign currency makes it difficult for business’s to be profitable, or end products well priced to serve the market if products are mostly based on imports. Businesses intending to be successful in Indonesia will need to seriously consider a supply chain that is predominantly Indonesian sourced.

 

 

Facts on the restaurant industry in Indonesia:

 

  • Fast food franchises are appropriate for customers in all income groups because they offer affordable prices, creative menus, child friendly menus & facilities and delivery services for time sensitive customers.
  • Full service restaurants promote group events, such as televised sports.
  • Restaurants are found in shopping malls, apartment buildings, hospitals, schools, office buildings, freeway rest areas, airports, recreational parks and residential areas.
  • Convenience store expansion increases the probability of selling imported food and beverage products.
  • Bakery businesses are growing in popularity in Jakarta and throughout major urban areas.
  • Restaurants are increasingly partnering with credit card companies by offering discounts.
  • Gathering, entertaining and socialization in restaurants is growing. Eating out is a common activity across all socio-economic levels, especially amongst families on weekends.
  • Social media is a very popular means of publicizing foodservice information targeting young customers.
  • Control of the alcoholic beverage market is divided between local governments and the central government.

 

All said, the outlook for the next 10 years seems very bright for the Indonesia’s food & beverage industry.

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