An insider view to the F&B sector
It’s easy to get giddy when you think about the potential of Indonesia as an export market. Some 250 million people, a rising middle class and a GDP of 5.1%, which is among the highest in the region.
Having lived and worked in Indonesia for the past five years, I’ve learned to temper this excitement with a healthy dose of pragmatism. Indonesia is a complex market and it’s not suitable for every F&B exporter.
There is certainly demand for imported goods. The Food and Beverage (F&B) sector in Indonesia has transformed over the past 5 years, especially on Bali. The Island has enjoyed an ever increasing influx of visitor numbers. According to the Bali Government Tourist Office, Bali welcomed more than 4 million international visitors (double the figures seen in 2008) in 2015.
There are also a great number of weekenders jetting in from Jakarta and spending money, as evidenced by the hourly flights between Bali and Jakarta and the abundance of city slickers amassing at hip venues like Potato Head every weekend.
The transformation can be seen in the multitude of busy cafes and restaurants that are mushrooming along the Western coast of Bali. It’s also apparent in the growing number of international supermarkets like Pepito branching out across the Island – a telling sign of the growing populace of permanent and semi-permanent residents settling on Bali.
In Jakarta, the array of international goods at supermarkets like Hero (the largest retailer in the country), is noticeably more expansive than just five years before. While you might struggle to find a huge array of speciality items, the expanding array of imported ambient goods like canned pulses, pasta sauces and breakfast cereals clearly demonstrate that the trend towards foreign goods is on the rise.
However, there are some major hurdles curtailing this transformation. All F&B goods imported into Indonesia must first be registered with the Government department “BPOM” (Badan Pengawas Obat dan Makanan). A complicated and time consuming process that must be conducted in Bahasa Indonesian and can take anywhere from 3-12+ months.
Indonesia also has a long way to go in terms of infrastructure. Customs clearance can chew up precious shelf life on imported F&B goods and crippling traffic jams mean it can take hours to cover short distances.
Electricity is also problematic with regular power outages. The Joko Widodo ‘Jokowi’ Government is working hard to alleviate these barriers to progress, but it will take time.
Therefore, the most common model for market entry in the F&B game is via a distribution partner who has the necessary skills and networks required to navigate the regulatory environment and get sales moving.
Due to the nature of the market, distributors in Indonesia favour long shelf life, dry goods that are able to withstand the pressure of multi-transit loading and unloading in high temperatures and humidity.
Of course, there are some short shelf life, temperature sensitive imported brands carving out a respectable business in Indonesia. Australian dairy brands Bega (cheddar cheese) and Bulla (yogurt) are doing well and it is encouraging to Whittaker’s steadily gaining market share.
The international brands that perform well have an unwavering commitment to supporting sales. This often takes the form of heavy discounts (Indonesia is still very price sensitive) and regular marketing activations driven by the brand owner.
F&B exporters with the right product portfolio will find huge potential Indonesia. Patience and tenacity are required to convert opportunity into success in this high growth mega-market.