Indonesia Food Processing Ingredients Sector

I. MARKET SUMMARY

The Indonesian food processing industry serving a population of 225 million offers significant market potential for U.S. suppliers of food and ingredients. In 2007, the product value of the Indonesian food processing industry was $41.7 billion, up 17 per cent from 2006.

The industry consists of businesses of all sizes. About 6,100 large and medium-size producers account for over 80 per cent of output and over 20 per cent of the 3.36 million employees. The remaining 20 per cent of processed food is produced in homes and sold on the street in roadside outdoor small restaurants, small roadside retailer kiosks called warungs, or on the street by vendors with small carts called kaki limas. Warungs, small restaurants along the road, and kaki limas are ubiquitous in Indonesia and provide a variety of meals and popular snacks for Indonesians. In Indonesia, giving food as a gift is a tradition and remains popular and snacking is very popular.

In 2007, Indonesia import $9.2 billion of agricultural, fish and forestry products with 16 per cent coming from the United States. Australia is the second-largest supplier, accounting for 12 per cent, followed by Thailand with 10 per cent. Other suppliers do not account for more than 10 per cent of imports individually. In 2007, over 40 per cent of imported products by value were major inputs for food processing, such as wheat, sugar, dairy, soybeans, wheat flour, and beef.

Several factors contributing to the growth of the food processing industry are the introduction of new flavors and products, aggressive promotional activities, growth of modern retail outlets, and growing health awareness particularly among consumers who were educated in the west. In 2007, package food retail sales showed increases ranging from two to 18 per cent in volume terms from the previous year and growth is expected to continue, ranging from 0.6 to 15 per cent each year until 2012.

Healthy eating is becoming more popular among educated consumers particularly exposed to western-style products when living abroad and is featured by newspapers, magazines, and television. Food manufacturers are continually developing new products catering to health awareness trends and snacking. In addition, more women in urban areas are entering the workforce and prefer the convenience of processed food products.

More processors are finding adding value by fortifying their products. Currently wheat flour, dairy products, noodles, cookies, and frozen processed chicken fortified with minerals and vitamins are for sale in the market. Other products that are growing in popularity include functional packaged foods, breakfast cereals, fresh and pasteurised milk, yogurt, pasta, and frozen snacks, such as Chinese snacks shiumai, chicken and shrimp puffs, spring rolls, dumplings, and croquettes. Since the large majority of Indonesians are Muslim, most foods are produced using methods and products that meet halal requirements.

Foods sold in warungs and kaki limas tend to be traditional foods with familiar flavours. US soybeans and beef offal are popular ingredients for traditional dishes such as tempe, bakso and meatballs. Soy milk in small single-serving plastic bags produced using a juicer or blender is becoming a popular option for a healthy beverage in both urban and rural areas. Fresh bakery products sold in shopping areas and malls are popular as gifts and snacks for the middle and upper classes. Indonesians will also visit high-end retail food stores to buy small packages of imported snacks.

Rice is a staple eaten at every meal. However, noodles from imported wheat are a popular substitute and use of wheat continues to grow. Dairy products continue to offer opportunities for US milk powder to be mixed with fresh milk and as an ingredient. Indonesia currently only produces about 25 per cent of milk production needs.

Though Indonesian ties to Europe remain strong and this influences taste choice and manufacturing methods, Australian, U.S., and Korean, and Japanese packaged foods are common as well. In Jakarta where about one-third of the upper and middle class live, foreigners from Asia are replacing western foreigners offering opportunities for Asian-style foods and flavours.

Smaller ready to eat packages are popular because of the lower price and the variety offered is increasing. Popular products include frozen poultry, frozen seafood, sausages, sugar confectionery, instant noodles, sweet and savory snacks, dairy drinks, and soft drinks. New brands and products with local flavors are also growing. All ages and income levels enjoy extruded snacks and other snacks of all kinds because snacking is a part of the Indonesian culture.

A troubling trend is the recent increase in trade protectionist measures by the Indonesian government. The upcoming elections, recent food safety scares, efforts to curb illegal imports, and the global financial crisis have prompted the FDA-equivalent National Agency of Drug and Food Control, or BPOM, and the Ministry of Trade to issue new requirements for packaged products and ingredients as well as resume implementing old decrees that were not being enforced.

Figure1. 2007 Package processed Food Retail Sales (IDR billion)

Further Reading

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March 2009