The Food and Beverage Market Entry Handbook: Indonesia a Practical Guide to the Market in Indonesia for European Agrifood Products Agriculture and Rural Development October 2017 Prepared by: EUROPEAN COMMISSION Consumers, Health, Agriculture and Food Executive Agency Promotion of Agricultural Products Unit E-mail: Chafea-agri-events@ec.europa.eu Tastes of Europe Indonesia – Market Entry Handbook Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet (http://europa.eu). Luxembourg: Publications Office of the European Union, 2016 © European Union, 2016 Reproduction for commercial purposes is not authorised. 3 Tastes of Europe Indonesia – Market Entry Handbook TABLE OF CONTENTS TABLE OF CONTENTS ............................................................................................. 4 TABLE OF FIGURES ............................................................................................... 7 LIST OF TABLES .................................................................................................... 8 I. THE FOOD AND BEVERAGE MARKET ENTRY HANDBOOK: INDONESIA ..................... 10 i. How to use this handbook ....................................................................... 10 1. INDONESIA FACT SHEET .................................................................................. 11 1.1 Key economic figures “at a glance” ........................................................ 16 1.2 Food and beverage trade statistics ......................................................... 17 1.3 General information on distribution and logistics infrastructure .................. 17 2. THE INDONESIAN FOOD AND BEVERAGE MARKET ............................................... 19 2.1 Market size and market share ............................................................... 19 EU-Indonesia bilateral trade ............................................................. 20 EU GIs in Indonesia ......................................................................... 21 Opportunities for Foreign-Supplied Products ....................................... 22 2.2 Growth drivers and trends .................................................................... 22 Rising incomes and growing consumer confidence ............................... 22 Young, growing Indonesian population ............................................... 23 Increased urbanization..................................................................... 23 Growing awareness of healthy lifestyle products ................................. 23 Expanding mass grocery retail sector ................................................. 23 Growth of tourism sector .................................................................. 24 General consumer tastes and preferences .......................................... 24 2.3 Market access and market entry ............................................................ 25 2.4 Transportation infrastructure ................................................................. 25 Infrastructure challenges.................................................................. 26 Distribution Channels and Intermediaries ........................................... 26 2.5 Key markets by geography ................................................................... 28 Mid-sized and large middleweight cities.............................................. 28 Small middleweight cities ................................................................. 29 Indonesia’s 2025 Vision for Major Cities ............................................. 29 2.6 Customs, SPS Requirements and Labelling .............................................. 29 Customs Procedures and Documentation ............................................ 29 Important stakeholders in export-import process in Indonesia: ............. 30 Import declaration forms.................................................................. 33 SPS Requirements in Indonesia ......................................................... 33 Standards ...................................................................................... 34 4 Tastes of Europe Indonesia – Market Entry Handbook Labelling ........................................................................................ 35 Packaging and Container Regulations................................................. 36 Halal labelling ................................................................................. 36 Organic labelling ............................................................................. 37 2.7 The Status of Geographical Indications (GIs) and Intellectual Property (IP) Protection ................................................................................................ 37 Definitions of GIs in Indonesia .......................................................... 37 Protection ...................................................................................... 38 Enforcement ................................................................................... 38 Registration as a GI ......................................................................... 38 Application Cost .............................................................................. 40 Registration of foreign GIs in Indonesia.............................................. 40 Competent authorities for GI protection ............................................. 41 3. MARKET SNAPSHOTS FOR SELECTED PRODUCTS ................................................ 42 3.1. Wine.............................................................................................. 44 Consumption .................................................................................. 44 Offer.............................................................................................. 45 Distribution .................................................................................... 50 3.2 Spirits ................................................................................................ 53 Consumption .................................................................................. 53 Offer.............................................................................................. 55 Distribution .................................................................................... 58 3.3 Beer ................................................................................................... 60 Consumption .................................................................................. 60 Offer.............................................................................................. 61 Distribution .................................................................................... 66 3.4 Fresh and Processed Meat ..................................................................... 68 Consumption .................................................................................. 68 Offer.............................................................................................. 70 Distribution .................................................................................... 76 3.5 Olive Oil ......................................................................................... 78 Consumption .................................................................................. 78 Offer.............................................................................................. 79 Distribution .................................................................................... 81 3.6 Fresh Fruits and Vegetables .................................................................. 82 Consumption .................................................................................. 82 Offer.............................................................................................. 85 5 Tastes of Europe Indonesia – Market Entry Handbook Distribution .................................................................................... 90 3.7 Processed Fruits and Vegetables ............................................................ 93 Consumption .................................................................................. 93 Offer.............................................................................................. 94 Distribution .................................................................................... 97 3.8 Dairy Products ..................................................................................... 98 Consumption .................................................................................. 98 Offer............................................................................................ 101 Distribution .................................................................................. 108 3.9 Processed Cereals .............................................................................. 110 Consumer trends........................................................................... 110 Offer............................................................................................ 113 Distribution .................................................................................. 116 3.10 Bread, Pastry, Cakes, Biscuits and other bakery products ..................... 117 Consumption ................................................................................ 117 Offer............................................................................................ 122 Distribution .................................................................................. 127 3.11 Chocolate and Derived Products and Confectionery .............................. 131 Consumption ................................................................................ 131 Offer............................................................................................ 134 Distribution .................................................................................. 140 3.12 Honey ............................................................................................ 142 Consumption ................................................................................ 142 Offer............................................................................................ 143 Distribution .................................................................................. 147 3.13 Gums Resins and Plant Extracts ......................................................... 150 Consumption ................................................................................ 150 Offer............................................................................................ 151 Distribution .................................................................................. 155 3.14 Cotton and Live Plants ...................................................................... 156 ............................................................................................................. 156 Consumption ................................................................................ 156 Offer............................................................................................ 158 Distribution .................................................................................. 165 4. COMMUNICATION .......................................................................................... 166 4.1 How does the Consumer get Influenced: By whom and how? .................. 166 4.2 Example of current communication campaigns made by main investor ..... 170 6 Tastes of Europe Indonesia – Market Entry Handbook 5. DOS AND DON’TS .......................................................................................... 172 DO ........................................................................................................ 172 DON’T .................................................................................................... 173 Key Facts and Considerations ......................................................... 173 6. SYNOPSIS .................................................................................................... 176 6.1 Strengths, Weaknesses, Opportunities and Threats Analysis ................... 176 6.2 Key Criteria for Success ...................................................................... 178 7. SUPPORT SERVICE DIRECTORY ...................................................................... 180 7.1 European Union Organizations ............................................................. 180 7.2 Directory of EU Member States’ Embassies ........................................... 182 7.3 Other organizations and service providers ............................................. 184 7.4 Calendar of trade events and exhibitions .............................................. 193 ANNEX I: GI PRODUCTS REGISTERED IN INDONESIA ............................................ 197 ANNEX II: DATABASE OF PROFESSIONAL BUYERS ................................................ 198 TABLE OF FIGURES Figure 1: Indonesia’s Individual Household Consumer Expenditure (2014). Source: Statistic Indonesia ............................................................................................... 20 Figure 2: EU Agri-Food Exports to Indonesia. Source: European Commission .............. 21 Figure 3: Masterplan for the Acceleration and Expansion of Indonesia's Economic Development ...................................................................................................... 29 Figure 4: Guidelines for Foreign Enterprises on the Import of Overseas Shipments in Indonesia ........................................................................................................... 31 Figure 5: GI Registration Procedure in Indonesia ..................................................... 40 Figure 6: EU Export of Wines and Vermouth to Indonesia (in value), 2011-2015 ......... 47 Figure 7: Indonesia's Wine Exports (in tonnes), 2011-2015 ...................................... 47 Figure 8: Indonesian Spirits Imports from the EU, 2010-2015. ................................. 55 Figure 9: Indonesia's Export of Spirits (in tonnes), 2011-2015. ................................. 56 Figure 10: Indonesia’s Beer Imports, 2011-2015..................................................... 63 Figure 11: Indonesia’s Beer exports (in tonnes), 2011-2015. .................................... 63 Figure 12: Indonesian Imports of Meat and Edible Meat Offal, 2010-2015. ................. 71 Figure 13: Indonesian Imports of Processed Meat, 2010-2015. ................................. 72 Figure 14 Indonesia's export of meat and edible meat offal in thousands of euros, 20112015. ................................................................................................................ 73 Figure 15: Indonesia's Olive Oil Imports, in tonnes (2011-2015) ............................... 80 Figure 16 Indonesia's Olive Oil Exports, in tonnes (2011-2015)................................. 80 Figure 19: Fruit consumption in Indonesia amongst the elderly (65 and above) .......... 84 Figure 20: Indonesia's Exports of Fresh Fruits (2011-2015) ...................................... 90 Figure 24: Imports of Preparations of Vegetables, Fruits and Nuts, 2011-2015 ........... 95 Figure 25: Exports of Preparations of Vegetables, Fruits and Nuts, 2011-2015. ........... 96 Figure 26 Percentage Share of Total Dairy Imports (in terms of quantity)................. 103 Figure 27 EU Exports of Dairy Products to Indonesia, 2011-2015 ............................ 104 Figure 28: Percentage Share of Total Dairy Exports (in terms of quantity), 2015 ....... 105 Figure 29 Indonesian Imports of Processed Cereal, 2011-2015 ............................... 114 7 Tastes of Europe Indonesia – Market Entry Handbook Figure 30 Indonesian Exports of Processed Cereals, 2011-2015 .............................. 114 Figure 31: ©Consumption and Expenditure on Baked Goods in Selected Markets. ..... 118 Figure 32: Sales Trends of Baked Goods by Selected Product Category in Indonesia .. 123 Figure 33 Leading Exporters to Indonesia of Bread, Pastry Cakes, Biscuits and Other Bakers' Wares ................................................................................................... 124 Figure 34 Leading European exporters to Indonesia of Bread, Pastry, Cakes, Biscuits and other Bakers’ Wares. ......................................................................................... 125 Figure 35: Indonesia's Exports of Baked Goods (2011-2015) .................................. 125 Figure 36: Composition of Indonesian Baked Goods Market by Producer Shares (percent) ....................................................................................................................... 126 Figure 37 Distribution Shares of Store-Based Retailers of Baked Goods in Indonesia. . 128 Figure 38 Comparing Import Costs in Indonesia with the East Asia & Pacific Region. .. 130 Figure 39: Indonesia's Imports of Chocolate and Confectionery by Quantity (2011- 2015) ....................................................................................................................... 135 Figure 40: Indonesia's Imports of Chocolate and Confectionery from the EU by Value, 2011-2015 ....................................................................................................... 135 Figure 41: Indonesia's Exports of Chocolate and Confectionery by Quantity (2011-2015) ....................................................................................................................... 136 Figure 42 Indonesia's Exports of Chocolate and Confectionery to the EU by Value, 20112015 ............................................................................................................... 137 Figure 43 Indonesia: Import Procedure Flow Chart ................................................ 144 Figure 44: Indonesia's Exports of Honey by Quantity (2011-2015) .......................... 145 Figure 45 Evolution of 20 Top EU Agri-Food Exports to Indonesia, 2011-2015 ........... 152 Figure 46: Indonesia's Imports of Gums Resins and Plant Extracts by Value (2011-2015) ....................................................................................................................... 153 Figure 47 Countries importing Indonesian-made Gum Resins (kg) ........................... 154 Figure 48: Indonesia's Exports of Gums Resins and Plant Extracts by Value (2011-2015) ....................................................................................................................... 154 Figure 49 Indonesian Imports of Cotton from the EU ............................................ 159 Figure 50 Imports of Live Plants from the EU to Indonesia ...................................... 161 Figure 51 Growth in Value of Indonesian Imports of Live plants from the EU (% p.a.) 161 Figure 52 Indonesian Exports of Cotton to the EU.................................................. 162 Figure 53 Indonesian Exports of Live Plants to the EU ............................................ 162 Figure 54 Growth in Value of Indonesian Exports of Live plants to the EU (% p.a.) .... 163 Figure 55 Indonesian Communication Channels..................................................... 168 LIST OF TABLES Table 1 Key Economic Figures “at a glance”. Source: compiled from publicly available statistics ............................................................................................................ 16 Table 2 Product Classification Table ....................................................................... 42 Table 3 S.W.O.T. Analysis .................................................................................. 178 Table 4 Key Criteria for Success .......................................................................... 179 Table 5 Directory of EU Member States’ Embassies ................................................ 184 Table 6 Chambers of Commerce and Other Associations......................................... 186 Table 7 Service Providers ................................................................................... 192 Table 8 Local Bodies and Associations .................................................................. 193 Table 9 Calendar of Trade Events and Exhibitions .................................................. 196 Table 10 EU GI Products Registered in Indonesia .................................................. 197 Table 11 Buyers ................................................................................................ 201 8 Tastes of Europe Indonesia – Market Entry Handbook Table Table Table Table 12 13 14 15 High End Supermarkets ........................................................................ Convenience Stores .............................................................................. Journalists ........................................................................................... Bloggers ............................................................................................. 203 205 206 207 9 Tastes of Europe Indonesia – Market Entry Handbook I. THE FOOD AND BEVERAGE MARKET ENTRY HANDBOOK: INDONESIA This Handbook is intended to act as a reference for those agri-food producers planning for, or in the process of entering, the Indonesian market. This Handbook provides step-by-step guides on the operationalisation of the market in Indonesia, including relevant information such as analysis of the Indonesian market for different product categories, market access and market entry procedures, IP protection, referrals to professional buyers and a signposting and referral system providing useful contacts and ways to penetrate the Indonesian market. i. How to use this handbook Depending on your stage of market entry, company profile, and product range, different sections within this handbook will be helpful to a different extent for your business strategies. For those wishing to learn more about the Indonesian food and beverage market in general Section 2 provides an overview of the business climate. This section contains information on: the food and beverage market, market access procedures, customs procedures, SPS and labelling requirements, and the status of Geographical Indications and Intellectual Property protection. The information contained within this section is of a general nature and so may not be relevant for those in the more advanced stages of market entry. _2._The_Indonesian If Section 2 got you interested in the market but you want to find out more information relevant for your product, then check out the Market Snapshots for Selected Products. This content illustrates the market situation, market access procedures, SPS requirements etc. specific for this product or product category. This information will provide more industry specific information to consider as part of any market entry or market expansion strategies. _3._Market_Snapshots If you already have decided that the Indonesian market is where you want to be, but you need some support, then the Support Services Directory can point you in the right direction. Contact information for a service provider, business facilitation support organisation, or from a business contact, could help put you in touch with the right parties who can help you to build your brand in the Indonesian market. 10 Tastes of Europe Indonesia – Market Entry Handbook 1. INDONESIA FACT SHEET1 Indonesia Official name Republic of Indonesia Political system Capital Flag Unitary presidential constitutional republic Jakarta Official languages Largest languages are Indonesian, Javanese, and Malay, in addition to more than 700 spoken languages and dialects USD 3.032 trillion (2016, 2.564 trillion EUR) - USD 16,143 (2016, World Bank latest, 13,649 EUR) GDP growth has remained positive in the last 10-year reference period in Indonesia, with growing GDP per capita indicative of increasing purchasing power among Indonesia consumers GDP, PPP - 1 Per capita, PPP Trend Data from World Bank and WTO 11 14 GDP, PPP 12 3 GDP PPP, euro GDP, per capita 10 2.5 8 2 6 1.5 4 1 2 2007 2008 2009 Currency - GDP per capita, euro 3.5 Thousands Trillions Tastes of Europe Indonesia – Market Entry Handbook Exchange trend 2010 2011 2012 2013 2014 2015 2016 Indonesian rupiah (IDR) rate - There are approximately 16,000 IDR in 1 EUR. Since early 2017, the IDR:EUR exchange rate has been at a relative 10-year low, down from a peak of 11,100 IDR to 1 EUR in 2010. 12 Tastes of Europe Indonesia – Market Entry Handbook Major cities - - Metropolitan population (CIA, 2015) Province Jakarta (Capital) - 8.5 million Jakarta Surabaya - 2.4 million East Java Medan - 1.8 million North Sumatra Bandung - 1.7 million West Java Bekasi - 1.5 million West Java Palembang - 1.4 million South Sumatra Tangerang - 1.4 million Banten Makassar - 1.3 million South Sulawesi South Tangerang - 1.3 million Banten Semarang - Land area Population - Median age Trend - Age by cohort: 1.3 million Central Java 1,904,569 km2 261,115,456 (2016) - 27.9 years Indonesia has one of the largest populations in the world,and maintains a positive growth rate. However this rate has decreased in recent years and registered a comparatively modest 1.1% in 2016. 13 Tastes of Europe Indonesia – Market Entry Handbook 65 & older Age cohort 55-64 25-64 Male Female 15-24 0-14 80 60 40 20 0 20 40 60 Millions Labour force (economic participation of population aged 10 and over, 2016) - Employment share by sector Unemployment rate of population aged 15 and over 125.1 million - Agriculture sector 32%; Manufacturing sector 21%; Services sector 47% 5.6% 14 Tastes of Europe Indonesia – Market Entry Handbook Provinces, Provincial Capitals and Population (2010 census) Indonesia’s large population of more than 260 million inhabitants is distributed across 34 provinces, ranging from high density urban adminstrative areas to sparesely populated islands and rural regions. Province Capital Population Aceh Banda Aceh 4.5 million Bali Denpasar 3.9 million Babel Pangkalpinang 1.2 million Banten Serang 10.6 million Bengkulu Bengkulu 1.7 million Jateng Semarang 32.4 million Kalteng Palangka Raya 2.2 million Sulteng Palu 2.6 million Jatim Surabaya 37.5 million Kaltim Samarinda 3.0 million East Nusa Tenggara (NTT) Kupang 4.7 million Gorontalo Gorontalo 1.0 million Jakarta Special Capital Region Central Jakarta 9.6 million Jambi Jambi 3.1 million Lampung Lampung 7.6 million Maluku Ambon 1.5 million Kaltara Tanjung Selor 622,350 Malut Sofifi 1.0 million Sulut Manado 2.3 million Sumut Medan 12.9 million Papua Jayapura 2.8 million Riau Pekanbaru 5.5 million Kepri Tanjung Pingang 1.7 million Sultra Kendari 2.2 million Kalsel Banjarmasin 3.6 million Sulsel Makassar 8.0 million Sumsel Palembang 7.5 million Jabar Bandung 43.0 million Kalbar Pontianak 4.4 million West Nusa Tenggara (NTB) Mataram 4.5 million Papuabarat Manokwari 760,400 Sulbar Mamuju 1.2 million Sumbar Padang 5.1 million Special Region of Yogyakarta (DIY) Yogyakarta 3.5 million Author’s compilation 15 Tastes of Europe Indonesia – Market Entry Handbook 1.1 Key economic figures “at a glance” Indonesian market economy GDP (billions of euros) 2011 2012 2013 2014 2015 2016 798.4 822 818 796.6 768.4 838.1 Real annual GDP growth 5.0% in 2014 4.8% in 2015 4.9% in 2016 Forecast GDP growth 2016-2018 Indonesia is projected to grow at a rate of 6% in 2017 and 5.1% in 2018. GDP by sector In 2014, industry including energy accounted for 32.8% of the total GDP; trade, repairs, transport and accommodation accounted for 21.3%; the agriculture, forestry and fishing sector accounted for 13.7%; the construction sector accounted for 10.1%; public administration, defence, education, health and social work accounted for 8.4%; finance and insurance accounted for 4.1%; the information and communication sector accounted for 3.6%; real estate accounted for 2.9% and professional, scientific and support services accounted for 1.6%. GDP per capita (in euros) 2011 2012 2013 2014 2015 2016 3,298.0 3,348.3 3,286.7 3,158.1 3,006.7 3,237.5 Inflation 6.4% in 2014 6.4% in 2015 4.3% in 2016 Principal exports and main destinations (2015) The top export products of Indonesia are coal briquettes, palm oil, petroleum gas, crude petroleum and rubber. The export of goods accounted for EUR 132.7 billion and the export of services accounted for EUR 19.8 billion. The main export destinations were Japan (12.0%), the United States (10.8%) and China (10.0%), followed by Singapore and India. Principal imports (2015) The top import products are refined petroleum, crude petroleum, petroleum gas, vehicle parts, broadcasting equipment and spelt, common wheat and meslin. The import of goods accounted for EUR 120.8 billion and the import of services accounted for EUR 27.3 billion. Indonesia mainly imported from China (20.6%), Singapore (12.6%) and Japan (9.3%), followed by South-Korea and Malaysia. Table 1 Key Economic Figures “at a glance”. Source: compiled from publicly available statistics 16 Tastes of Europe Indonesia – Market Entry Handbook 1.2 Food and beverage trade statistics According to statistics retrieved from the Global Cold Chain Alliance, expenditure on food amounted to USD 179 billion (approx. EUR 152,5 billion 2 ) in 2015 and represented approximately 36 percent of total consumer expenditure in Indonesia. The per capita spending on food was recorded at USD 697 (EUR 594 billion). Forecasts reveal that expenditure on food and beverages will progressively increase up to 2020. National statistics reveal that such expenditure will increase from just over IDR 2 trillion (EUR 126 million) to approximately IDR 4 trillion (EUR 252 million) in 2020.3 In 2015, the EU had a considerable trade deficit of EUR 3,411 million for its agri-food trade with Indonesia. EU exports of agri-food products to Indonesia amounted to EUR 735 million, while EU imports of agri-food products from Indonesia amounted to EUR 4,148 million. Over the period 2005-2015, the annual rate of change for EU agri-exports to Indonesia was 9.4 percent compared to 10 percent in the case of EU agri-imports from Indonesia. The top five EU agri-food export products in 2015 and their respective export shares were: milk powders and whey (27 percent), wheat (9 percent), food preparations (8 percent), pet food (6 percent), and raw tobacco (5 percent).4 It is important to note that the range of goods traded between Indonesia and the European Union is largely complementary. Hence, the economies are considered an ideal “trading” fit. 1.3 General information on distribution and logistics infrastructure As Indonesia is an archipelago with thousands of islands, freight and transportation can be both complex and expensive. Transportation times and costs vary upon the mode of transportation and goods, and it may require a combination of two or more means of transport to reach some markets in Indonesia. Indonesia’s distribution infrastructure is fragmented geographically, and mom-and-pop stores predominate in many consumer categories. 5 Channels are evolving, however, and modern retailing has made rapid inroads. Wholesale and hypermarket outlets procure from domestic suppliers or directly from manufacturers and importers.6 There are many elements to the food distribution supply chain including importers, distributors, retailers and food service operators. The appointment of a local partner or importer is essential. A reputable importer will be able to supplement knowledge of the feasibility of market entry in the first instance, but also help create a development plan for the product over time. Such partners can help register a product, advise on marketing, organise logistics and liaise with the most appropriate retail outlets. They have established networks with defined geographies and reach. Currencies in this Handbook are converted at official posted rates available at www.ec.europe.eu/budget/contracts_grants/info_contracts/inforeuro/index_en.cfm. 3 U.S. Department of Commerce, “2016 Top Markets Report Cold Chain Country Case Study: Indonesia” available at: http://trade.gov/topmarkets/pdf/Cold_Chain_Indonesia.pdf 4 European Commission, DG Agriculture and Rural Development, “European Union-Indonesia” available at: http://ec.europa.eu/agriculture/trade-analysis/statistics/outside-eu/countries/agrifood-indonesia_en.pdf 5 ©Indonesia Investments, “Infrastructure Development in Indonesia” available at: https://www.indonesiainvestments.com/business/risks/infrastructure/item381?. 6 U.S. Department of Agriculture, “Indonesia Retail Foods”, GAIN Report, December 2015, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf 2 17 Tastes of Europe Indonesia – Market Entry Handbook Distributors and agents usually sell directly to modern retailers, the food service industry and, in case of ingredients, directly to manufacturers. Goods are shipped to warehousing facilities or delivered directly to the store. 18 Tastes of Europe Indonesia – Market Entry Handbook 2. THE INDONESIAN FOOD AND BEVERAGE MARKET Boasting one of the largest populations in the world, the demand for primary goods in Indonesia, which includes food and beverage products, is very high. Importantly, whilst local production of food and beverages is robust, a large percentage of products still have to be imported to meet local demand. As a result, EU producers stand to gain immensely as consumer demand continues to rise. Indonesia has great market potential for European exporters of branded and specialty food products, as well as for suppliers of food ingredients and packaging. 7 Rising disposable incomes levels have resulted in increased consumer spending for a wide range of products and services, which is backed by the rapid growth of the middle class. European companies must be proactive to take full advantage of these promising possibilities. 2.1 Market size and market share Indonesia has a booming economy and the income levels are high. In 2016, GDP amounted to USD 932 billion (EUR 781 billion), while real GDP growth amounted to 5.1 percent. 8 Indonesia is recognised as the largest economy in ASEAN and is one of the most dynamic regions in the world. Indonesia’s GDP makes up 36 percent of total ASEAN GDP. 9 Additionally, Indonesia stands as the 16th largest economy in the world. Meanwhile, it is important to recall that with a total population of 261 million, Indonesia is the fourth most populous country in the world.10 Jakarta Skyline: large and crucial for market entry in Indonesia The food and beverages industry is one of the industrial development priorities set by the Indonesian government and it is still promising for both domestic manufacturers and importers. The sector has proven to be very resilient during economic downturns, and for many 7 © EU-Indonesia Business Network, “Food and Beverage”, EIBN Sector Reports, 2014, available at: https://www.flandersinvestmentandtrade.com/export/sites/trade/files/news/637150602213204/63715060221 3204_1.pdf 8 World Bank, Open data – Indonesia, available at https://data.worldbank.org/country/indonesia. 9 European Commission, Countries and regions – Indonesia, available at http://ec.europa.eu/trade/policy/countries-and-regions/countries/indonesia/. 10 World Bank, Open data – Indonesia, available at https://data.worldbank.org/country/indonesia. 19 Tastes of Europe Indonesia – Market Entry Handbook multinational food companies, Indonesia is among their most important markets. Indonesia has the fifth largest fresh food market in the world, at a total of 48.1 million tons in 2010.11 Nestlé Indonesia has the highest market share in the food and beverage market, leading in the dairy and instant noodle categories, operating a joint venture with Indofood Sukses Makmur.12 Other players include Unilever Indonesia, Charoen Pokphand Indonesia and Mayora Inda. 13 The consuming class is made up of 55 million urban and 15 million rural Indonesians.14 Thet are the most commercially attractive segment. It is anticipated that 5 million Indonesians will enter the urban consuming market each year. Consumer expenditure in 2015 amounted to USD 493 billion (EUR 440 billion) and is expected to increase by 7.7 percent a year resulting in a USD 1 trillion (EUR 893 billion) opportunity by 2030.15 Expenditure on food in Indonesia amounted to USD 179 billion (EUR 160 billion) and represented approximately 36 percent of total consumer expenditure in 2015. In 2014, the monthly average expenditure per capita for food was IDR 388,350 (USD 32.64). This averages approximately 50 percent of total monthly expenditure per capita. A breakdown of average expenditures in 2014 is adequately captured in the figure below.16 Figure 1: Indonesia’s Individual Household Consumer Expenditure (2014)17 EU-Indonesia bilateral trade Trade between Indonesia and the EU reached EUR 25.3 billion in 2015.18 Not only is the EU one of Indonesia's largest export markets, with a value of more than EUR 15.3 billion in 2015, © EU-Indonesia Business Network, “Food and Beverage”, EIBN Sector Reports, 2014, available at: https://www.flandersinvestmentandtrade.com/export/sites/trade/files/news/637150602213204/63715060221 3204_1.pdf. 12 Ibid. 13 Ibid. 14 World Bank Data, available at: https://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS. 15 © Source: Euromonitor International, “Indonesia Country Factfile”, 2015 16 U.S. Department of Agriculture, “Indonesia Retail Foods”, GAIN Report, December 2015, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf. 17 Ibid 18 European Commission, Countries and regions – Indonesia, available at http://ec.europa.eu/trade/policy/countries-and-regions/countries/indonesia/. 11 20 Tastes of Europe Indonesia – Market Entry Handbook but Indonesian exports to the EU increased by 6.2 percent from 2014. Furthermore, the EU is Indonesia's largest trading partner with which it enjoys a large trade surplus (EUR 5.4 billion in 2015). Total EU exports to Indonesia increased by 13 percent in 2015 compared to 2010. In 2015, the EU’s share in Indonesian imports was 7.9 percent. Overall, the EU was the 4th largest exporter to the Indonesian market in that year. The main exporters to the Indonesian market in 2015 (in terms of market share) are China (20.6 percent), Singapore (12.6 percent) and Japan (9.3 percent).19 In 2015, the EU had a considerable trade deficit of EUR 3.6 billion for its agri-food trade with Indonesia. EU exports of agri-food products to Indonesia amounted to EUR 735 million, while EU imports of agri-food products from Indonesia amounted to EUR 4.3 billion. Over the period 2005-2015, the annual rate of change for EU agri-exports to Indonesia was 9.4 percent compared to 10 percent in the case of EU agri-imports from Indonesia.20 The top five EU agrifood products exported to Indonesia in 2015 and their respective export shares were: 1. 2. 3. 4. 5. Milk powders and whey (27 percent); Wheat (9 percent); Food preparations (8 percent); Pet food (6 percent); and Raw tobacco (5 percent). Figure 2: EU Agri-Food Exports to Indonesia. Source: European Commission EU GIs in Indonesia Currently, there are only three European products that are registered as GIs in Indonesia. However, this number is expected to increase as Indonesian intellectual property laws improve 19 © Trade Map, International Trade Center, available at: http://www.trademap.org/ European Commission, Agri-Food Trade Statistical Factsheet, “European Union- Indonesia” available at: http://ec.europa.eu/agriculture/trade-analysis/statistics/outside-eu/countries/agrifood-indonesia_en.pdf 20 21 Tastes of Europe Indonesia – Market Entry Handbook and as Indonesian enforcement authorities become more aware of GI protection and enforcement. The European products that are presently registered as GIs include Champagne (wine) from France (Registration ID: ID G 000000002), Parmigiano Reggiano (cheese) from Italy (Registration ID: ID G 000000009) and Grana Padano (cheese) from Italy (Registration ID: ID G 000000045). Opportunities for Foreign-Supplied Products The following are some of the opportunitieswhich exist for the supply of foreign goods in the Indonesian market: 1. Temperate fresh fruit, processed fruits and vegetables, beef, French fries, tree nuts, and pet foods are among the most imported products. Sixty percent of fresh fruit sold in hypermarkets is imported. 2. Western cuisine is becoming more common and western products such as breakfast cereals, spreads and baked goods are often consumed in the place of traditional rice or noodle breakfasts. 3. Changing dietary habits are driving consumption growth of milk, yoghurt, cheese, pasta, meat nuggets, sausages, and red meats.21 2.2 Growth drivers and trends Prospects and trends regarding the food and beverage sector remain broadly positive for a number of reasons. Some of the main reasons include: (i) rising incomes and growing consumer confidence; (ii) a young and growing Indonesian population; (iii) increased urbanisation; (iv)a growing awareness of healthy lifestyle products; (v) the shift of consumers towards modern retail stores; and (vi) a growing Indonesian tourism industry. Rising incomes and growing consumer confidence Rising incomes and growing consumer confidence in Indonesia will support a growing demand for a wider product range and higher-value products. Indonesia's economy is largely driven by rising household consumption, and one industry that thrives on this like no other is that of food and beverages. Sales growth is fueled by rising personal incomes and increased spending on food and beverages, especially from the growing number of middle class consumers. According to Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (Gapmmi), Indonesia's purchasing power is improving amid overall rising commodity prices.22 This is reflected by a strong demand for food and beverages in August 2016. Regarding full-year 2016, turnover in Indonesia's processed food and beverages industry is expected to reach IDR 1,400 trillion (approx. EUR 100 billion), up 8 percent (y/y). The first semester of the year will contribute about 60 percent to full-year turnover as consumption of food and beverages increased in June due to Islamic celebrations. U.S. Department of Agriculture, “Indonesia Exporter Guide”, GAIN Report, December 2014, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Exporter%20Guide_Jakarta_Indonesia_12-302014.pdf 22 ©Indonesia Investments, “Food and Beverage Industry of Indonesia: Positive Outlook” available at: http://www.indonesia-investments.com/news/todays-headlines/food-beverage-industry-of-indonesia-positiveoutlook/item7135 21 22 Tastes of Europe Indonesia – Market Entry Handbook Young, growing Indonesian population Indonesia has a large youth population of 40.9 million between the ages of 15 and 24 which is expected to drive demand for more westernised products such as confectionery goods. Jakarta will be the city with the largest young and consumptive population in the world by 2030. One of the major trends is growing health consciousness among Indonesia's young population, which creates opportunities for products such as nutritional drinks or cereals enhanced with vitamins and minerals. Urbanisation and a growing office workforce make also convenience foods popular, such as ready-to-drink coffee and tea, as well as sport and energy drinks. Increased urbanization The UN forecasts that two-thirds of the Indonesian consumers will be urbanised by 2050, and 60 percent of these will be located on Java Island. Lifestyle changes in Indonesia's urban centres largely follow the trends of established markets, with office workers having less time for cooking, or less interest in doing so, yet demanding health-boosting food. Importantly, shoppers are gaining access to a wider range of products thanks to the country's developing retail infrastructure, with hypermarkets and mini-markets moving deeper into the regions Indonesia has several large- and medium- sized cities with populations of more than one million inhabitants. At the same time as overall urbanisation increased in Indonesia, the country’s cities are developing into unique markets based on income levels and economic structure. For example, Jakarta is highly internationalized city and Indonesia’s political centre, attracting a cadre of foreign and cosmopolitan consumers. Surabaya on the other hand is a major port, and key export point for commodities such as tobacco, coffee and sugar, which influence local demand. Growing awareness of healthy lifestyle products Indonesian consumers are increasingly health-conscious and aware, in-line with global trends. This provides opportunities for products targeted at alleviating certain health conditions such as calcium fortified milk to prevent osteoporosis, dairy milk for nursing mothers, baby food and products for weight problems. Moreover, consumers are looking for fast and convenient food without significantly compromising on healthy eating. One product category that fits the bill is frozen foods, which reduces cooking time, but maintains much of the 'goodness' contained in vegetable or animal products. The expansion of modern retail outlets across the archipelago is the main driver for frozen food sales in Indonesia. Equipped with freezers and modern storage facilities, hypermarkets and supermarkets help to supply frozen goods even to formerly underserved regions such as eastern Indonesia. Expanding mass grocery retail sector The availability of imported products will be accommodated by the rapid growth of the modern retail sector. Hypermarkets, supermarkets, and minimarkets are developing rapidly in Indonesia as purchasing power increases. Development is primarily occurring in urban areas, 23 Tastes of Europe Indonesia – Market Entry Handbook and the prospects for the continued retail sector expansion throughout Indonesia remain promising.23 Growth of tourism sector The growth of the tourism sector in Indonesia is expected to increase the demand for imported products especially in the horeca (hotel/restaurant/café) sector. Currently, Indonesia’s tourism sector is benefitting from its proximity to major regional markets, an expanding luxury hotel sector and greater international air connectivity. 24 Additionally, supporting growth in the tourism sector are ongoing and widespread government-led investments in transport infrastructure, which is gradually improving accessibility across Indonesia's many islands. Tourism is a significant driver for food service consumption in Indonesia and influences local culinary preferences General consumer tastes and preferences The following provides a synopsis of the tastes and preferences of Indonesian consumers: 1. Most consumers prefer fresh foodstuffs, which are readily available in their neighborhood at affordable prices. Healthy eating is becoming more popular among educated consumers and is regularly featured in print and broadcast media. Fresh foods, fruit juices, fruit concentrated-based beverages, organic foods, sugar-free confectionery, packaged food with higher fiber content, dairy products, vitamin and calcium fortified packaged food and beverages are also preferred by middle to upper-income consumers. 2. Traditional and modern snack foods, such as confectionaries, pastries, cakes, biscuits, ice cream, or sweet and savory snacks are very popular among Indonesians. 3. Local flavours are generally preferred and local food manufacturers are exploring opportunities to produce new products using a combination of local and imported flavours. Frozen foods and instant noodles, which are easy to prepare for children, are popular among working mothers. 4. Smaller package sizes are often preferred due to convenience, price considerations, and weight management concern. Consumers are showing a growing concern about food additives, high amount of MSG, fat, sugar, salt, and preservatives in packaged food.25 U.S. Department of Agriculture, “Indonesia Exporter Guide”, GAIN Report, December 2014, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Exporter%20Guide_Jakarta_Indonesia_12-302014.pdf 24 ©Indonesia Investments “Tourism Industry Indonesia”, available at https://www.indonesiainvestments.com/business/industries-sectors/tourism/item6051? 25 U.S. Department of Agriculture, “Indonesia Exporter Guide”, GAIN Report, December 2014, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Exporter%20Guide_Jakarta_Indonesia_12-302014.pdf 23 24 Tastes of Europe Indonesia – Market Entry Handbook 2.3 Market access and market entry All food and drink products must be registered at the Indonesia National Agency of Food & Drug Control (BPOM), which can be done by the local distributor or agent. It can be a lengthy process with standard product registration taking at least 50 to 60 days. All imported products must display the ingredients used, storage requirements and any applicable health warnings in Indonesian.26 A health or safety certificate from the country of origin must accompany all food imports. The certificate is to be issued by the responsible authority in the country of origin or the exporting country. It should state that the food is safe or fit for human consumption, and that its distribution is permitted in the country of origin. Indonesia’s geography and established maritime transport services lead to most agri-food trade being conducted by sea Certain products are the subject of more protectionist policy, namely those that may compete with locally produced goods, such as electronics and a range of agricultural products, including coffee and tea, as well as luxury goods. Furthermore, “Alcoholic beverages are strictly controlled and subject to high rates of excise.”27 The requirements for obtaining approval for importing alcoholic liquor are listed in several Ministerial and Departmental documents. Furthermore, the Ministry of Agriculture (MOA) and The Ministry of Trade (MO) regulations limit the sale of imported beef to the hotel and restaurant industry. Indonesian regulations also prohibit retailers from purchasing imported horticultural products directly from importers, limiting product availability and increasing prices. 28 There are also several regulations regarding the import of rice, sugar, seeds, and meat and poultry products. An Import Permission Certificate must be obtained from the Director General of Livestock Services. 2.4 Transportation infrastructure As Indonesia is an archipelago with thousands of islands, freight and transportation can be both complex and expensive. Transportation times and costs vary upon the mode of transportation and goods selected and it may require a combination of two or more means of transport to reach some markets in Indonesia. Concerning goods transport, the sea route is used the most. Almost 70 percent of imports pass through the two main ports which are Tanjung Priok (Jakarta) and Tanjung Perak (Surabaya).29 Ports are managed by the various Indonesia Port Corporations, of which there are four, Australia Trade and Investment Commission, “Food and Beverage to Indonesia” available at: https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/Indonesia/Industries/food-andbeverage. 27 “Food Safety Standards in Major Export Markets: A Readymade Guide for Agro Exporters”, Ministry of Foreign Affairs of the Republic of Indonesia, available at: http://www.kemlu.go.id/kyiv/Documents/indonesia_food_regulations.pdf. 28 U.S. Department of Agriculture, “Indonesia Exporter Guide”, GAIN Report, December 2014, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Exporter%20Guide_Jakarta_Indonesia_12-302014.pdf 29 For further information on product logistics channels in Indonesia, see: OECD, “Regulatory and Competition Issues in Ports, Rail and Shipping”, available at: https://www.oecd.org/indonesia/Chap%205%20%20Ports%20Rail%20and%20Shipping.pdf. 26 25 Tastes of Europe Indonesia – Market Entry Handbook numbered I through IV. Each has jurisdiction over various regions of the country, with I in the west and IV in the east. Shipping to Indonesia usually happens via Singapore. Some cargoes are also transshipped via regional ports. The distribution system on the island of Java is improving, providing increased access to a population of 145 million. Infrastructure challenges According to figures by the Indonesian Chamber of Commerce and Industry (Kadin Indonesia), logistics costs represent around 17 percent of a company’s total expenditure in the country.30 In peer regional economies, this number lies below ten percent. Transport costs are high both for land and sea transport. Despite Indonesia's archipelagic geography, the country's sea transport is yet to be developed substantially. Infrastructure is often inadequate, especially outside of Java and major cities. The ability to transport frozen and refrigerated products is limited. Inadequate port facilities are often cited as the single largest distribution constraint. Shallow drafts limit ports to small ships, and inadequate loading/unloading facilities and frequent congestion are frequently cited problems. Poor roads and bad traffic both inside and outside of ports are also a major constraint. Distribution firms also list unreliable shipping schedules and an inadequate number of small ships serving Eastern Indonesia, particularly during bad weather periods, among the transport challenges. This can result in shortages and obligate firms to maintain large and costly inventories.31 Distribution Channels and Intermediaries Distribution of infrastructure in Indonesia is fragmented geographically, while mom-and-pop stores lead in many consumer categories. Modern retailing has made rapid inroads, as channels are growing. Wholesale and hypermarket outlets procure from domestic suppliers or directly from manufacturers and importers.32 There are about 16 major cities that serve as distribution hubs in Indonesia. They are Bandung, Cirebon, Yogyakarta, Semarang, Surabaya, Makassar, Manado, Denpasar, Mataram, Balikpapan, Banjarmasin, Medan, Padang, Pakanbaru, Palembang, and Batam. There are many elements to the food distribution supply chain including importers, distributors, retailers and food service operators. The appointment of a local partner or importer is essential. A reputable importer will be able to supplement knowledge of the feasibility of market entry in the first instance, but also help create a development plan for the product over time. Such partners can help register a product, advise on marketing, organise logistics and liaise with the most appropriate retail outlets. They have established networks with defined geographies and reach. Distributors and agents usually sell directly to modern retail, the food service industry and, in case of ingredients, directly to manufacturers. Goods are shipped to warehousing facilities or delivered directly to the store. It is crucial that exporters consider the following steps: ©Indonesia Investments, “Infrastructure in Indonesia” available at: http://www.indonesiainvestments.com/business/risks/infrastructure/item381 31 U.S. Department of Agriculture, “Indonesia Retail Foods”, GAIN Report, December 2015, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf 32 Ibid. 30 26 Tastes of Europe Indonesia – Market Entry Handbook ✓ Appoint the right business partner who has an Import Identifier Number; ✓ Visit the market on a regular basis: face-to-face contact and the development of a relationship is critical to business success; ✓ Prepare comprehensive information packs profiling your company, product specifications, pricing and terms of payment; ✓ Participate in major trade exhibitions to showcase products to a relevant audience and buyers; and ✓ Support importers, distributors and retailers with marketing and collateral spending. Retail Channels Consumer spending represents a significant although share of GDP in Indonesia. Economic uncertainty eased after the election of proreform President Widodo in July 2014. GDP growth is expected to rebound after reaching a five-year low and should outpace other regional markets going forward. Despite a slight decline in retail sales per capita in 2014, total retail sales grew by 14.5 percent as retailers continue to be drawn to Indonesia's large population and growing middle class. Imported products from the EU can make use of several Wetmarkets and traditional retailers still account for a different retail channels, each significant share of food purchases in Indonesia with their own advantages and disadvantages. Understanding the potential of various retail channels is important for understanding the market and shaping entry strategies accordingly. While traditional markets still account for the majority of retail food sales in Indonesia, modern retail is expanding and holds a significant share. 33 Traditional retail outlets, including wet markets and independent grocery stores, are gradually being replaced by modern outlets. The key characteristics of the main retail channels in Indonesia are listed below.34 Hypermarkets and supermarkets offer a wide range of food and beverage products and are generally located as anchor stores in shopping centers. Supermarkets differentiate themselves from traditional retailers by marketing high-quality fresh produce, a substantial portion of which is imported. Indonesian middle and upper income level consumers are increasingly shopping at these stores. Additionally, hypermarket and supermarket retailers usually contain in-store bakeries, cafés and restaurants, and prepared meals, with grocery products typically making up about 65 percent of the total sales. U.S. Department of Agriculture, “Indonesia Retail Foods”, GAIN Report, December 2015, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf 34 Ibid. 33 27 Tastes of Europe Indonesia – Market Entry Handbook Minimarkets, convenience stores, and other shops carry a wide range of convenience food products such as readymade meals, bakery products, processed food, ice cream, and beverages. They sometimes carry a limited offering of fresh fruits and are open 24 hours a day. These stores can be found throughout Indonesia’s major urban centers and are also colocated with gasoline stations. While traditional small grocers (warungs) may not be able to offer the variety of products and services Warungs are prevalent food retailers in Indonesia, catering to consumers’ convenience-oriented offered by minimarkets, they do sell preferences and often in informal or semi-formal local food and beverage products formats familiar to most consumers. This differentiation, along with location, helps them remain competitive against organised retail. Traditional markets also remain an important retail channel in Indonesia. 2.5 Key markets by geography The island of Java will continue to be the main area for commercial opportunities, with more than half of the population living on the island and relatively high incomes, especially in Jakarta and Central Java. However, with the island increasingly saturated by numerous operators, leading retailers and other businesses are likely to expand to other regions. Although Jakarta is the capital city of Indonesia, it is erroneous to believe that almost all of Indonesia’s growth comes from Jakarta alone. Jakarta is indeed the major contributor to Indonesia’s economic output, accounting for between one-fifth and one-quarter of the total, if the whole of greater Jakarta - known in Indonesia as Jabodetabek - is included. However, a broad swathe of mid-sized cities is outstripping the capital’s GDP growth. Mid-sized and large middleweight cities The economies of mid-sized and large middleweight cities - with between two million and ten million inhabitants - have been growing at a faster pace than Jakarta’s economy (6.7 percent a year for large middleweights and at least 6.4 percent for mid-sized middleweights) since 2002. These cities include Bandung, Bekasi, Bogor, Medan, Surabaya, and Tangerang. Bekasi, Bogor, Depok, and Tangerang are often treated as part of the Jakarta urban agglomeration. The output of these cities is expanding mainly thanks to their high population growth. Bandung (Java) is growing at 6.7 percent a year, while Surabaya (Java) and Medan (Sumatra) are each growing at 7 percent a year, largely driven by improvements in productivity. “Urban population in West Java (including Jakarta) is expected to increase from currently 60 per cent to 80 per cent by 2025”35 35 Peter D. Ellis , “Indonesia’s Urban Development Towards Inclusive and Sustainable Economic Growth”, World Bank, available at: https://siteresources.worldbank.org/INTURBANDEVELOPMENT/Resources/3363871296405826983/Ellis.pdf. 28 Tastes of Europe Indonesia – Market Entry Handbook Small middleweight cities Small middleweight cities are defined as cities (kota) or districts (kabupatens) with urban populations of between 150,000 and two million. They are growing at an average annual rate of 5.9 percent, on par with Jakarta. Around 40 percent of the cities in this category are outside Java. Among the fastest-growing cities in this category are Pekanbaru in Sumatra, Pontianak and Balikpapan in Kalimantan, and Makassar in Sulawesi with growth of respectively 9.8, 9.5, 8.6, and 9.0 percent. The economies of Pekanbaru, Pontianak, and Balikpapan are benefiting from the commodity boom, while Makassar is a key commercial centre for Eastern Indonesia. Growth in small middleweights is, in general, being fueled by simultaneous growth in their populations and productivity.36 Indonesia’s 2025 Vision for Major Cities As a country consisting of thousands of islands and located between two continents and two oceans, the Indonesian archipelago has a unique combination of economic potential with specific major islands or regions having its own strategic future-role in achieving Indonesia’s 2025 vision [Masterplan for the Acceleration and Expansion of Indonesia's Economic Development Plan (MP3EI 2011-2025)]. By taking into consideration the potential and strategic roles of each major island, six economic corridors have been identified as depicted in the map below.37 Figure 3: Masterplan for the Acceleration and Expansion of Indonesia's Economic Development Source: ©Investment Indonesia Each of the economic corridors – Sumatra, Java, Kalimantan, Sulawesi, Bali-Nusa Tenggara, and Papua-Kepulauan Maluku – will focus on developing a number of main economic activities in accordance with their respective advantages. It is important to note that Java is expected to be the main economic corridor for the food and beverages industry. 2.6 Customs, SPS Requirements and Labelling Customs Procedures and Documentation All shipments to Indonesia must pass through bureaucratic verifications jointly administered by the Finance Ministry’s Taxes and Customs Office and the Trade Ministry. For food products, the recommendation from the Agriculture Ministry, the Environment and Forestry Ibid. ©Indonesia Investments, “Masterplan: Acceleration and Expansion of Indonesia Economic Development 2011-2025” available at: http://www.indonesia-investments.com/projects/government-developmentplans/masterplan-for-acceleration-and-expansion-of-indonesias-economic-development-mp3ei/item306 36 37 29 Tastes of Europe Indonesia – Market Entry Handbook Ministry, the Food and Drug Monitoring Agency (BPOM), or the Indonesian Ulama Council (MUI) might be considered. It is highly suggested that exporters looking to ship products to Indonesia seek advice from local partners to go through the bureaucratic hurdles, as Indonesian officials strongly prefer high-contact interaction such as phone calls or face-to-face meetings with native speakers. Meanwhile, logistics costs are relatively high in the country compared to its peers in the Southeast Asian region due to the layered bureaucratic red-tapes between ministries to process the permits, with waiting time in Indonesian seaports being painstakingly long at certain busy periods of the shipping seasons. To deal with the local bureaucratic procedures, foreign companies usually appoint one or more agents or distributors, preferably those who possess an Import Identified Number (API – Angka Pengenal Import). The local representatives can then keep track of market regulations, which tend to change at short notice. Verification should be necessary whether the local distributors or retailers have the Import Approval (PI) that would be required for the exported goods to pass the customs. Important stakeholders in export-import process in Indonesia: a) The Finance Ministry’s Taxes and Customs Office All goods coming into Indonesia must be cleared through customs and they are subject to customs duty and other taxes related to import unless specifically exempted from duty by law. There are several processes one needs to undergo prior to the clearance process, such as declaration and documentation; an instructional outline of required procedures can be accessed here. The Finance Ministry’s taxes and customs office is responsible for the goods’ clearance, but it must first receive verification from institutions such as the Trade Ministry and, when required, the Agriculture and Trade Ministry, or the Environment and Forestry Ministry. The following notes on customs declaration procedures should be considered for the import of goods into Indonesia: The import declaration should be made with Importer/Customs Broker module. • Customs supplementary documents: o Invoice o Packing List o Bill of Lading/ Airway bill o Insurance Policy o Receipt of payment of import duty and import related taxes (SSPCP) 30 Tastes of Europe Indonesia – Market Entry Handbook o Power of Attorney, if submitted by Customs Broker Figure 4: Guidelines for Foreign Enterprises on the Import of Overseas Shipments in Indonesia38 Source: ©EU-Indonesia Business Network The Finance Ministry taxes and customs office has three dedicated lines for overseas shipments coming to Indonesia: 1. Red Channel, where 30 to 100 percent of the shipped goods would undergo physical inspection and document verification prior to the issuance of the Approval Letter for Clearance of Goods (SPPB). Included in this category are high-risk commodities, shipments that come from high-risk countries, certain imported goods set by the Indonesian government, re-import goods, as well as those shipped by new importers. 2. Yellow Channel, where the goods might not have to undergo physical inspection but would have to go through the document verification process prior to the issuance of the clearance approval letter. Included in this category are low-risk goods exported by highrisk exporters, or medium-risk goods exported by medium-risk exporters. 3. Green Channel, where the shipped goods would not have to undergo physical inspection and will only go through the document verification process after the issuance of the clearance approval letter. Included in this category are priority shipments from big multinational firms who have become the Indonesian government’s strategic partners (MITA). 38 The customs clearance procedure is available at: http://www.eibn.org/en/page/bizguide_content/2 31 Tastes of Europe Indonesia – Market Entry Handbook b) The Food and Drug Monitoring Agency (BPOM) Pharmaceutical, food and cosmetic products exported to Indonesia need to be registered at the Food and Drug Monitoring Agency (BPOM) that is responsible for the health and safety standards of edible products in Indonesia, particularly food and drugs. A recommendation from the BPOM – with the addition from the Agricultural Ministry for livestock food products – is required to receive shipment approval from the Ministry of Trade. The time it takes for BPOM to issue safety certificates for food products is expected to be shortened as President Joko Widodo’s administration, in his economic package announced in 2015, has pledged to conduct reforms in the agency and to make certain business permit applications easier. “The government planned to review 89 regulations to avoid the duplication of business licensing procedures.”39 The registration process in the BPOM: 1. Make an account and register the application online through http://e-bpom.pom.go.id. 2. Upload and submit the required documents as stipulated on the website, which include health certificates, lab tests, among others. 3. Pay the required Non-Tax State Revenue (PNBP). The invoice, together with the supporting documents such as packing lists, would also be required for the export declaration documents (PEB) processed in the Trade Ministry. 4. Go to the PBOM office in Jakarta to consult with officials in charge and to get the issued (paperless) certificate of recommendation from the agency. c) The Indonesian Ulama Council (MUI) The Indonesian Ulama Council (MUI), the nation’s highest authority on Islamic affairs, is responsible for issuing the “Halal” certification, which is valid for two years. Halal certification proves that the exported foods have been produced, processed and distributed according to the Islamic sharia law, and are safe to be consumed by Muslims, with the rules comprising of: - Meat must not come from pigs and dogs and other animals with long pointed tusks that are used to kill prey such as tigers, lions, bears, elephants, cats, monkeys, among others, as well as pests such as rats or scorpions. - Meat must come from animals that are slaughtered in ways that comply to the Sharia law. - Processed food should be cooked accordingly until raw blood is completely gone from the meat tissues. - All fish and sea creatures are halal, except for amphibious animals such as alligators or frogs. - All vegetables, mushrooms and other plant products are halal, except for those that are considered poisonous or have harmful effects to the body. - Beverages should not include alcohol no matter how small its amount. - Food must be stored or transported in wares that are not in direct touch with non-Halal materials, such as those containing dog, pork, or alcoholic water. Exporters to the country can apply for the certification online, with all the documents available to be downloaded at www.halalmui.org and www.e-lppommui.org, or with the assistance of various market entry consultancy firms in Indonesia. 39 The Jackarta Post, “Economic deregulation package announced”, September 2015 available http://www.thejakartapost.com/news/2015/09/09/economic-deregulation-package-announced.html at: 32 Tastes of Europe Indonesia – Market Entry Handbook 1. Fulfil the Halal food processing requirements as stipulated by MUI in Halal Assurance System (HAS) 23000. 2. Collected all the necessary documents and Halal certification paperwork online available in the websites. 3. Pay the required processing fees. 4. Prepare to have the goods tested in the following processes: Pre-Audit assessment, Audit, and Post-Audit Lab Analysis. 5. Receive the Halal certificate. Currently, it is not mandatory for food and beverage products exported to Indonesia to obtain Halal certificates – imported pork meat or alcoholic beverages, for example, could still be sold in limited places in the country without the certificate – but it is nevertheless strongly recommended in a country where more than 80 percent of the total population is Muslim. Nevertheless, the law, drafted in 2014, [not yet in force] requires all food, pharmaceutical, and cosmetic products that are consumed in Indonesia to have halal certification (which indicates the product was prepared according to Islamic law) by October 2019.40 The draft has been in the House of Representatives’ table since 2006 but is not yet passed into law due to its highly political nature. The draft bill also proposes the establishment of an independent halal certification body, effectively curbing the MUI’s authority. At the moment, the MUI and the government – in this case the Religious Affairs Ministry – are still wrangling in a power struggle on who should be responsible for issuing the Halal certification. Import declaration forms The types of import declaration forms based on purpose of the import are as follows: Market Access Database: Procedures and Formalities Details on the required documents, including examples of these forms, and detailed information on the procedures for customs clearance are available on the Market Access Database. Both general information and specific information per product category is available via search functions using HS 4 codes. Website: http://madb.europa.eu/madb/indexPubli.htm SPS Requirements in Indonesia SPS measures may be applied in any territory or country to protect the human and animal populace as well as flora and fauna from a variety of risks such as diseases, pests, residues and toxins. SPS measures include the formation of National Standards on residues and additives, inspection procedures, and quarantine regulations. Most of the SPS measures in Indonesia are in line with international standards, however, there are some areas where deviations do exist and exporters should be aware of potential impacts this may have. The five main regulators for food safety, animal health and plant health in Indonesia are:41 the Indonesian Agricultural Quarantine Agency (IAQA), the Directorate-General of Livestock and Animal Health, and the Directorate-General of Horticulture, which fall under the responsibility Halal Focus, “Indonesia: Mandatory Halal Certification Looms for Food, Pharamceuticals and Cosmetics”, available at http://halalfocus.net/indonesia-mandatory-halal-certification-looms-for-food-pharmaceuticals-andcosmetics/. 41 © World Trade Organisation, “Sanitary and Phytosanitary Measures” available at: https://www.wto.org/english/tratop_e/tpr_e/s278_e.pdf 40 33 Tastes of Europe Indonesia – Market Entry Handbook of the Ministry of Agriculture. The Fish Quarantine and Inspection Agency (FQIA) is part of the Ministry of Marine Affairs and Fisheries and the National Agency for Drug and Food Control (BPOM) falls under the President's responsibility. The main laws concerned with food safety, and animal and plant health are: Law No. 16/1992 on Animal, Fish and Plant Quarantine; Law No. 7/1996 on Food; Law No. 31/2004 on Fisheries; Law No. 18/2009 on Animal Husbandry and Animal Health; and, Law No. 13 of 2010 on Horticulture.42 In recent times, specific concerns have been raised in the WTO SPS Committee about Indonesia’s SPS policies, including about import restrictions on pork products due to influenza A/H1N1 (raised by Mexico and supported by Australia, Brazil, Canada, the Dominican Republic, and the United States); new meat import conditions (raised by the EU); import restrictions on poultry meat (raised by Brazil); import restrictions on beef and recognition of the principle of regionalization (raised by Brazil); and Indonesia's port closure (raised by the United States and supported by Australia, Canada, Chile, EU, Japan, the Republic of Korea, New Zealand, and South Africa).43 Examples of SPS measures that have impacted specific products or product categories from the European Union include unjustified import restrictions on a number of animals and animal products related to Bovine Spongiform Encephalopathy (BSE) and other diseases; and export of plant and plant products through Tanjung Priok port (Jakarta) which since early 2012 are opened only to countries with a so-called Country Recognition Agreement (CRA). None of the EU Member States have concluded a CRA. New legislation for food (Food Law 18/2012) selfsufficiency puts a temporary ban on agriculture and fisheries’ imports.44 Standards The National Standardisation Agency of Indonesia (Badan Standardisasi Nasional, BSN) remains the governmental institution responsible for coordinating and facilitating standard setting. BSN is also the contact point for cooperation with international standard setting bodies. Indonesia National Standards (SNIs) are voluntary. However, those related to national security requirements, the prevention of deceptive practices, protection of human health or safety, animal or plant life or health, and the environment may be adopted to be mandatory. Some of the concerns raised by WTO members about the application of TBT measures to imports in Indonesia include: 1. Transparency in the development of a new regulation regarding trade in Halal products, and the absence of a notification to the TBT Committee before its entry into force (raised by the United States); 2. Labelling requirements for certain imported goods prior to their entry into the Indonesian customs area, including a requirement for importers (and domestic producers) to submit a sample label to the Ministry of Trade in order to obtain a certification of labelling in the Indonesian language. The EU, Australia, and the United States argued that these measures were more burdensome than necessary to achieve the stated objectives of surveillance and consumer information, and asked Indonesia to consider other options. Concern was also expressed that this measure had not been notified to the TBT Committee prior to its entering into effect; and Ibid. Ibid. 44 European Commission, DG Trade, Market Access Database, “Sanitary and Phytosanitary Issues” available at: http://madb.europa.eu/madb/sps_barriers_result.htm?description=&countries=ID&days 42 43 34 Tastes of Europe Indonesia – Market Entry Handbook 3. Import permit regulations for horticultural products from the ministries of Agriculture and Trade (raised by the EU, the United States and South Africa).45 Labelling The labelling requirements for products can be one of the stumbling blocks for companies exporting to Indonesia and those wishing to enter the market should ensure that they are in full compliance with all labelling requirements to avoid issues for customs clearance procedures. Basic labelling requirements Specific labelling requirements are stipulated under Government Regulation No. 69/1999 on Food Labels and Advertisement ("GR 69"). According to GR 69, anybody producing or importing packaged food into Indonesia for trade must label food as part of the food packaging. The label must contain at least the following details: a) the name of product; b) a list of ingredients; c) the net weight or net content; d) the name and address of the manufacturing party or importer; and e) the date of expiration. The labels shall be written or printed by using the Indonesian language, Arabic figures and Latin letters. These letters shall be clear and easy to read. Information regarding the ingredients used in the production process must be mentioned on labels in the form of a list, beginning with the ingredient which has the largest proportion. This does not apply to vitamins, minerals, and other nutritional supplements. Information on the nutritional content of food shall be provided on the food label. Where applicable, this is to be accompanied by a declaration of any vitamins, minerals and/or other kinds of nutritional supplement present in the food. Nutritional content information shall be contained in the following order: a) total volume of energy, with specifications based on amounts of energy derived from fat, protein and carbohydrates. b) total volume of fat, saturated fat, cholesterol, carbohydrates, fibre, sugar, protein, vitamins and minerals. Some product specific requirements for labelling include: 1. On products derived from swine: the words "MENGANDUNG BABI." (Contains pork) to be written in red 'universe medium corps 12' font and enclosed in a red rectangle together with a drawing of a pig. 2. On sweetened condensed milk: the words "PERHATIKAN! TIDAK COCOK UNTUK BAYI." (Beware! Not suitable for babies) to be written in Indonesian in red 'universe medium corps 8' font and enclosed in a red rectangle. 3. Alcoholic beverages must have “MINUMAN BERALKOHOL”, DIBAWAH UMUR 21 TAHUN ATAU WANITA HAMIL DILARANG MINUM (Prohibited for use by people under 21 years or pregnant women) on the label. 4. Irradiated packaged food must carry the words "RADURA: PANGAN IRADIASI" (Irradiated food), the reason for irradiation and this logo. Also required are the name and address of the radiation facility, the month and year of irradiation, and the country in which the process was carried out. If the food cannot be re-irradiated, then the label © World Trade Organisation, “Standards and Technical Regulations” available at: https://www.wto.org/english/tratop_e/tpr_e/s278_e.pdf 45 35 Tastes of Europe Indonesia – Market Entry Handbook should include the word: “TIDAK BOLEH DIRADIASI ULANG” (Not to be reirradiated). 5. Food derived from genetic engineering must have” PANGAN REKAYASA GENETIKA” (Genetically Engineered food) on the label.46 Processed food for infants, children below five, pregnant or breast-feeding mothers, people on special diets, elders, and sufferers of certain diseases should be informed of the portion size, method of use and other necessary instructions, including the impact of the food on human health. If the product has been approved as meeting Indonesian Islamic standards, then “Halal” should appear on the package. Labels are unacceptable unless they meet all the requirements of the Indonesian law, but stickon labels meeting Indonesian requirements may be affixed. Foreign languages in addition to the mandatory Indonesian language may be used. In general, although they can be widely found on retail products, foreign expressions are discouraged since they are seen as potentially misleading to a majority of the population. Packaging and Container Regulations Packaging is regulated under the Food Act of 1996 as follows: Any person producing food for sale is forbidden to use any material that has been banned or can release contaminants that are dangerous or harmful to human health. Food for sale is to be packaged using methods that avoid spoiling or contamination. The government identifies forbidden packaging materials and methods for packaging certain food. If the effects of a packaging material on human health are not known, it cannot be used before being checked for safety. New types of material may be used for packing food only after receiving government agreement. No person is permitted to unwrap and re-pack food, except in the case of bulk food intended to be packed into smaller packages. There are no industry regulations or practices applicable to package size. The metric system is used for weights and measures. Waste disposal is not regulated, except as covered in Section VI for time expired food. Halal labelling In September 2014, Indonesia passed a law governing halal products (33/2014). The law makes halal certification mandatory for all food, beverage, drugs, cosmetics, chemicals, and organic and agricultural biotech products sold in Indonesia, as well as machinery and equipment used in processing these products, subject to further implementing regulations.47 Companies have three years from October 2014 to comply with the new law. In the meantime, companies have been instructed to follow existing Indonesia Ulama Council (MUI) halal-certification procedures. The new law also states that the Indonesian “Food Safety Standards in Major Export Markets: A Readymade Guide for Agro Exporters”, Ministry of Foreign Affairs of the Republic of Indonesia,available at http://www.kemlu.go.id/kyiv/Documents/indonesia_food_regulations.pdf 47 U.S. Trade Department, “Indonesia: Foreign Trade Barriers” available at: https://ustr.gov/sites/default/files/files/reports/2015/NTE/2015%20NTE%20Indonesia.pdf 46 36 Tastes of Europe Indonesia – Market Entry Handbook government will establish a new institution called the Halal Product Guarantee Agency to issue halal certificates. Once formed, this agency will assume the role currently fulfilled by the MUI. As of March 2015, implementation of the halal law remained uncertain, partly due to resource restraints.48 Fresh and processed meat should be halal certified in order to be better marketed in Indonesia. Organic labelling Products that meet organic requirements may use the word organic on their product as well as use the Indonesia’s organic logo on their labels. Foreign organic logos can be placed next to the Indonesian organic label logo. Indonesian consumers trust local brands more than foreign brands, but the Indonesian organic label could increase the trust towards foreign products. As a result, the label could attract health-conscious consumers. The Organik Indonesia label is administered by the Office for National Standardisation BSNI & Otoritas Kompeten Pangan Organik. 2.7 The Status of Geographical Indications (GIs) and Intellectual Property (IP) Protection Indonesia became a member of the World Trade Organization (WTO) on January 1, 1995. Through Law No. 7 of 1994 the country has fully adopted the Agreements Establishing the WTO, including the agreement on Trade-Related Intellectual Property Rights (TRIPS). Therefore, the country recognises Geographical Indications (GI) as a part of Intellectual Property Rights (IPR). It is also important to note that Indonesia has ratified the Paris Convention since December 24, 1950, as well as it joined the World Intellectual Property Organization in 1979. Definitions of GIs in Indonesia In Indonesia, GI protection is regulated under the Law No. 15 of 2001 about Trademark, Chapter VII, which provides the Protection of GI and Source of Origin. The definition of GI based on Article 56 (1) of Law No. 15 of 2001 is “GI shall be protected as a sign which indicates the place of origin of goods, which due to its geographical environment factors, including the factor of the nature, the people or the combination of the two factors, gives a specific characteristics and quality on the goods produced therein”. In implementing GI protection system, the law has been followed up by Government Regulation No. 51 of 2007 about GI. The goods may be agricultural products, foodstuffs, handicrafts or any other goods complying with the provision. The Indonesian Trade Mark Law also accepts registrations for geographical indications (GIs). A geographical indication is a name or a sign used on goods that have a specific geographical origin and possess qualities, a reputation or characteristics that are essentially attributable to that place of origin. The following signs from the EU have been accepted for registration as GIs in Indonesia: Champagne, Parmigiano Reggiano, and Grana Padano. Other recognised GIs in Indonesia include Pisco, Kopi Arabika Kintamani, Lada Putih Muntok, and Kopi Arabika Gayo. The party entitled to register will have to be an institution representing the community in the area that produces the goods. 48 Ibid. 37 Tastes of Europe Indonesia – Market Entry Handbook Protection Registered GIs shall be protected against any: - - - Direct or indirect commercial use of a registered GI in respect of goods not complying with the book of requirements; Direct or indirect commercial use of a registered GI in respect of goods covered as well as not covered by the registration to the extent that those goods are comparable to those covered under this registered GI or to the extent that this use benefits or could benefit from the reputation of the Geographical Indication; Commercial use of a registered GI which misleads the public as to the true origin of the good; GI use in respect of accompanied by an expression such as “style”, “type”, “method”, “manner”, “imitation”, or translations of such expressions, or a similar expression; Other false or misleading indications as to the provenance, origin, nature or essential qualities of the good appearing on packaging or wrapping, in advertising materials or on documents concerning the good, as well as the packing of the product in a container liable to convey a false impression as to its origin; and Other practices likely to mislead the public as to the true origin of good. Enforcement The Indonesian trade mark system is generally understood to adopt the 'first-to-file' system. It is especially important to register your trade mark in Indonesia because trademark piracy due to ‘bad-faith’ registration is a serious problem. Bad-faith registrations exist where a third party (not the legitimate owner of the mark) registers the mark first in Indonesia, thereby preventing the legitimate owner from registering it. This is very common in the case of ‘well-known’ trademarks. In such a case however, you may be able to apply to the Indonesia courts to cancel the unauthorised registration. The Indonesian legal system presents many challenges to conducting IP enforcement. While the IP laws in Indonesia are compliant with the Agreement on Trade-related Aspects of Intellectual Property (TRIPs), these laws are not yet matched by an efficient criminal enforcement or customs border protection system. Registration as a GI49 The registration of GI products is executed by the Directorate General of Intellectual Property Rights (DGIPR) of the Ministry of Law and Human Rights. The DGIPR is supported by a Geographical Indications Expert Team (GIAT) consisting of 7 members from the Ministry of Agriculture, the Ministry of Law and Human Rights, the Ministry of Industry as well as the Ministry of Sea and Fisheries. These are also responsible for the supervision and administration. A GI application cannot be enlisted if it contains indications as follows: - Contradicting with the morality of religion, and public order; - Misleading the public as to the specific characteristic, quality, place of origin, production process, and/or uses; and the name of a plant variety, which is protected by “Establishment of Geographical Indication Protection System in Indonesia, Case in Coffee” available at: http://www.wipo.int/edocs/mdocs/geoind/en/wipo_geo_sof_09/wipo_geo_sof_09_www_124275.pdf 49 38 Tastes of Europe Indonesia – Market Entry Handbook - plant variety law, except that the name of the plant variety originated from the name of a place or region; and/or Has become generic name. An applicant for GI protection may include any of the following: - an institution that represents the people in the area, which produces the goods concerned (consisting of parties that undertake business on goods of natural products or natural resources, producers of agricultural products and people who make handicrafts or industrial products); - an institution that is given the authority to do so; and/or - a group of consumers of the mentioned origin products. An applicant can apply for GI protection by filling out a form or through his proxy at the DGIPR. An application shall be filed in writing in the Bahasa Indonesia (Indonesian language) then to be submitted to the DGIPR. The application shall contain the following information: - The name and address of the applicant; - The complete name and address of the proxy (if the application is filed through his proxy); - A special power of attorney (in case an application is filed through a proxy); - The filing date of the application; - A recommendation from the relevant government institution; - The Book of Requirement (BoR); and - Receipt of the application costs. The BoR is an essential administrative document in obtaining GI protection. It should contain the following information: - The name of the GI that is filed for registration; - The type of goods covered by the GI; - The description of the specific characteristic and the quality which allows the objective differentiation of the product from other products of the same category through characteristics conferred to the product by its origin, with the description of the geographical environment and with the inherent natural and/or human factor which have an effect on quality or characteristic of the products; - The boundaries and/or map of the area that is protected by the GI; - A description of the history and tradition in relation to the using of GI to designate the goods in that area including a description of the recognition by the relevant public of the GI; - A description of the production process explained in such a way so as to allow any producer within the region to produce the given product on the basis of the information given in the specification; - A description of the method used to control the goods as well as measures taken to ensure the traceability of a good; and - The specific labeling details to be used relating to the GI. 39 Tastes of Europe Indonesia – Market Entry Handbook Figure 5: GI Registration Procedure in Indonesia50 It is important to note that both administrative and substantive examinations are undertaken. Thereafter, there is a publication stage to allow third parties to oppose and applicants to rebut the application, which may lead to a substantive re-examination. The flow diagram above (Figure 9) outlines the main formalities in registering GI protection under Indonesian Government Rule No. 51/2007. Application Cost The application costs for trademarks, which include GIs, as of August 2014, are as follows:51 a. Official fee: EUR 63 (converted from IDR 1,000,000). From 3 July, the official fee for the specification of goods/services in each class will be calculated in sets of 10 items, with each set costing EUR 63. This will be regardless of the number (1-10) of items in each set of 10 items. b. Agent fee: EUR 150 – 600. c. During the examination of a trade mark application, the authorities may reject the application if the mark does not satisfy all criteria (i.e. it is too similar to an existing trade mark etc.). Applicants may argue against such objections for a fee of between EUR 200 to EUR 650. Registration of foreign GIs in Indonesia A foreign GI product can be registered in Indonesia when an application is made by producers or operators holding legitimate interest or by the representative administrations or authorities of the foreign country in Indonesia. To be admissible for registration a foreign GI product must “Establishment of Geographical Indication Protection System in Indonesia, Case in Coffee” available at: http://www.wipo.int/edocs/mdocs/geoind/en/wipo_geo_sof_09/wipo_geo_sof_09_www_124275.pdf 51 For additional resources to register trademarks and GIs in Indonesia, see: Southeast Asia IPR Helpdesk, “Indonesia” available at: http://www.southeastasia-iprhelpdesk.eu/es/content/indonesia-factsheet. 50 40 Tastes of Europe Indonesia – Market Entry Handbook have been recognised and/or registered in accordance with the provisions of the country of origin. Competent authorities for GI protection The Directorate General of Intellectual Property Rights Ministry of Law and Human Rights Administrative of the Directorate of Marks and Geographical Indications Jalan H. R. Rasuna Said, Kav 8-9, Jakarta Selatan 12190, INDONESIA Phone: +62 21 579 05619 http://www.dgip.go.id/ 41 Tastes of Europe Indonesia – Market Entry Handbook 3. MARKET SNAPSHOTS FOR SELECTED PRODUCTS This section provides specific information for various food and beverage categories and products. This information includes a market snapshot containing analysis of the market size, trends, distribution, and consumer profiles and sensitivities. Additional information regarding market entry, import procedures, and considerations for intellectual property are also included. Within the following category specific market snapshots products have been aggregated and analysed according to the Harmonised System (HS) codes. For some product categories a single HS 4 entry will be covered whilst for others there will be multiple HS 4 categories across different HS 2 chapters. See Figure below for specific HS 4 codes covered in the following product category sections. Table 2 Product Classification Table Product Category Wine and Vermouth Spirits Beer Fresh and Processed Meat HS 2 Chapters/ HS 4 Codes 2204 and 2205 2208 2203 0201,0202,0203,0204,0206,0207,0210,1601 and 1602 Olive Oil 1509 and 1510 Fresh Fruits and Vegetables Processed Fruits and Vegetables Dairy Products 07 and 08 20 0401,0402,0403,0404,0405 and 0406 Description Wine and aromatized wines Spirits of an alcoholic strength of less than 80per cent Beer made from malt Fresh meat covers the meat and edible offal of beef, pork, lamb and poultry; processed meat covers edible meat or offal that has been salted, is in brine or is dried or smoked, sausages and similar products of offal and meat and other prepared or preserved meat or offal. Olive Oil and its fractions and other oils produced from olives. All products under these chapter headings All products under these chapter headings Includes milk and cream not concentrated or sweetened, milk and cream concentrated or sweetened, buttermilk 42 Tastes of Europe Indonesia – Market Entry Handbook and yoghurt, whey and natural milk products, butter, cheese and curd. Processed Cereals 1902 and 1904 Bread, Pastry, Cakes, Biscuits and other bakery products Chocolate and Derived Products, and Confectionery 1905 Honey 1409 Gum Resins and Plant Extracts 1301 and 1302 Cotton and Live Plants 52, 06 1806, 1704 Pasta and couscous, and breakfast cereals and cereal bars Products include bread, biscuits, wafers, cakes and pastries Chocolate and other food preparations containing cocoa, Sugar confectionary (including white chocolate, not containing cocoa Includes natural honey Includes gum resins, vegetable saps and extracts; pectic substances, pectinates and pectates, agar-agar and other mucilages and thickeners, whether or not modified, derived from vegetable products. Includes all forms of cotton, bulbs, live plants, cut flowers and ornamental foliage 43 Tastes of Europe Indonesia – Market Entry Handbook 3.1. Wine Strengths Opportunities •Low domestic competition •General awareness and recognition of EU wines as leaders in terms of product quality •High growth potential driven by growing tourism and expatriate communities •Growing demand in Indonesia's increasingly cosmopolitan key markets Wine Outlook Weaknesses Threats •Relatively smaller market share compared with other alcoholic beverages •Rates of wine consumption lower among Indonesia's Muslim majority •Burdensome labeling and domestic marketing requirements •High tariffs of more than 90% on EU imported wines Consumption The alcohol market in Indonesia is heavily regulated, partly due to several legal and cultural associations related to drinking alcohol. However, whilst there is no significant domestic wine supply in Indonesia, there seems to be a growing interest for wine, as local consumers begin to integrate it into their lifestyle. The consumption of red and white wines is of equal amount in general. Red wines are favored more among consumers in Jakarta and other Indonesian major cities, while white wines are the preferred choice of consumers in the popular tourist resort of Bali, which tend be mostly tourists. 52 Between 2005 and 2011, the consumption of wine in Indonesia increased by an annual average of 25 percent. The year-to-year consumption is estimated to increase by 20 percent.53 U.S. Department of Agriculture Foreign Agricultural Service, “Indonesia: Market Brief- Wine” GAIN Report, November 2011, available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20BriefWine_Jakarta_Indonesia_5-10-2011.pdf 53 Ibid 52 44 Tastes of Europe Indonesia – Market Entry Handbook Wine and spirits importers and their distributors expect that the tourism industry will continue to expand over the next five years, leading to an increased demand for quality wines in Indonesa’s market.54 Consumer Profiles Even though, Indonesia has the world’s largest Muslim population where the consumption of alcohol is generally forbidden, alcoholic beverages are consumed not only by upper-income bracket local people but are also in high demand by expatriates and tourists. In Indonesia, red and white wines are generally consumed in equal amounts.55 Red wines tend to be favoured more among consumers in Jakarta and other Indonesian cities, while white wines are the preferred choice of consumers in Bali, which tend be mostly tourists. Consumer Trends • • • • Rising disposable income has resulted in a preference for premium wine products in Indonesian wine market. Indonesian consumers have started to prefer wine over other alcoholic beverages for its health-related benefits. The growing interest in wines in Indonesia is influenced by globalisation and an increasing foreign presence in the country, leading to the integration of some Western elements into Indonesians’ urban lifestyles. As a result of the expansion of tourism, hotels, restaurants and institutional sectors will continue to increase their demand for wine. Challenges for EU Producers “Two Islamic parties have also proposed legislation to ban consumption of alcohol in the country with the world’s largest Muslim population.”56 Offenders could get up to two years in prison, should the proposals become law. If this legislation passes, this will extinguish the alcoholic drink industry in Indonesia and, as such, EU exporters stand to lose tremendously. Offer Domestic Offer The Indonesian wine market is expected to grow significantly in the coming years. Still wine will sustain the largest market share, while sparkling wine will be the fastest growing category, registering a compound annual growth rate (CAGR) of 10.4 percent between 2014 and 2019. The use of stopper closure for wine is forecast to grow at a high CAGR of 5.4 percent till 2019, led by its high usage in the sparkling wine category. There are around five wineries which include Sababay Winery and Hatten Wines. Imports Indonesia imported approximately EUR 1 million of wines in 2010. By 2015, wine imports amounted to approximately EUR 2 million. The main exporters of wine to Indonesia and their respective market shares in 2015 were: Australia (25.9 percent), France (25.6 percent), Singapore (18.1 percent), Italy (9.3 percent) and the United States of America (4.3 percent). Ibid U.S. Department of Agriculture, “Indonesia Market Brief - Wine”, GAIN Report, October 2011, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf. 56 Reuters, “Indonesian alcohol market faces price headache after tariff hike” available at: http://www.reuters.com/article/indonesia-alcohol-idUSL3N10I24V20150810 54 55 45 Tastes of Europe Indonesia – Market Entry Handbook According to the table below, the EU has the largest market share for imported wines in the Indonesian market. In 2015, wine exports from the EU accounted for 40 percent of the total value of wine imports into Indonesia. Importantly, all of Indonesia’s imports of Vermouth in 2015 came from the EU. Over the period 2011-2015, EU exports of wine and vermouth to Indonesia have increased steadily. In 2011, EU exports of wine were recorded at EUR 492,000, but increased to EUR 695,000 in 2015. This represents a 29 percent increase in exports over the period. In 2012, the EU recorded its highest level of exports to Indonesia – EUR 876, 000. It is important to note that in 2011, the EU had a market share of 36 percent in the imported wine industry in Indonesia. This increased to 40 percent by 2015. In the case of vermouth, EU exports moved from EUR 8,000 in 2011 to EUR 34,000 in 2015. The table below displays the EU countries from which wines and vermouth originated between 2011 and 2015. France was the dominant supplier for all the years under review, followed by Italy and Portugal, respectively. 46 Tastes of Europe Indonesia – Market Entry Handbook Figure 6: EU Export of Wines and Vermouth to Indonesia (in value), 2011-201557 Exports Exports of wine from Indonesia increased from approximately EUR 3 million in 2010 to approximately EUR 7 million in 2015. The main export destinations in 2015 and their respective market shares were Singapore (32.7 percent), China (11.5 percent), Japan (11.1 percent), and Hong Kong (11.1 percent).58 900 800 700 600 500 Exports 400 300 200 100 0 2011 2012 2013 2014 2015 Figure 7: Indonesia's Wine Exports (in tonnes), 2011-201559 57 58 59 © Trade Map, International Trade Center, available at: http://www.trademap.org/ Ibid. Ibid. 47 Tastes of Europe Indonesia – Market Entry Handbook Local Competitors One of the main local providers is Ultra Prima Abadi PT, also known as Orang Tua Group, which produces a non-grape herbal fruit wine. This wine is more traditional and mostly consumed during important festivities, for example at Christmas or Easter. They carry a range of traditional wines such as: - Orang Tua Premium Herbal Wine; - Orang Tua Beras & Kencur Traditional; - Orang Tua Malaga Wine; and - Orang Tua Kolesom Herbal Wine. One of the main producers of wine in Indonesia is Hatten Wines. Bali based producer Hatten Wines planted the first vines in 1994. After years of testing, the tough Alphonse LaVallee grape proved able to survive the tropical conditions and was successfully grown and harvested. Production is still in its infancy on a global scale of production, but the seeds of a potential new latitude market are clear. The Hatten Wines owns the biggest domestic market share in Indonesia. Specific Customs and SPS Requirements Importer Registration The Ministry of Trade regulations (MOT 20/2014) requires duty-paid alcoholic beverage importers to be “registered importers of alcoholic beverages” (IT-MB). IT-MBs are issued by MOT’s Directorate General of Foreign Trade. Some major requirements necessary to obtain an IT-MB include:60 • The importer must have three years’ experience as an alcoholic beverages distributor; • The importer must provide letters from at least 20 manufacturing companies, originating from at least five countries, which attest that the importer is an official distributor of their brand and that the importer is able to purchase a minimum of 3000 cartons per brand per year; • The importer must provide a letter from the manufacturing company granting permission to the importer to assign a distributor in Indonesia. The letter must be U.S. Department of Agriculture, “New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 60 48 Tastes of Europe Indonesia – Market Entry Handbook “legalised” by the Indonesian commercial/economic attaché in the country of origin; and The importer must have distribution agreements with alcoholic beverage distributors in at least six of Indonesia’s provinces. The IT-MB is valid for three years and can be extended. Indonesia’s state-owned company is appointed by the Minister to import duty-free alcoholic beverages. Quota Indonesia applies quantitative import limits to imported wines and distilled spirits. The Ministry of Trade determines the national demand for the type and the number of alcoholic beverages to be consumed annually in Indonesia and allocates a quantity for import based on this estimate. The determination is made annually on April 1. Importers (IT-MB holders) must also apply to MOT for an import permit. The application should be made fifteen days prior April 1 every year. Importers are required to import at least 80 percent of the import allocation listed in their import permit. As of 2010, each importer is able to import most brands, although some brands remain exclusive to certain importers.61 In 2010, the breakdown of the total import quota was about 70 percent wine, 10 percent spirits, and 20 percent beer. Product Registration As per BPOM regulations, all imported, duty-paid wine, spirits, and beer must receive a product registration (ML) number. In order to obtain the ML registration number for each SKU (Stock Keeping Unit), the importer must submit complete documentations to BPOM prior to importation of alcoholic beverages, requiring the following documentation.62 1. Letter of Appointment from the plant of origin (the original letter must be shown with the copy attached); 2. Health Certificate or Certificate of Free Sale from the competent authority in the country of origin (the original letter must be shown with the copy attached); 3. The results of laboratory analysis (original) associated with products such as nutrients (nutrition claims), a substance that is claimed in accordance with the label, chemical tests, microbiological contamination and metal contamination. The analysis is valid 6 months from the date of testing; 4. The design of the label that will be distributed in accordance with and sample products; and 5. A completed application form. Labelling Alcoholic beverages must have [“MINUMAN BERALKOHOL”, DIBAWAH UMUR 21 TAHUN ATAU WANITA HAMIL DILARANG MINUM] (Prohibited for use by people under 21 years or pregnant women) on the label. Challenges for EU Producers The tariffs applied by the Indonesian government on alcoholic beverages are very high. Tariffs applied on wine are 90 percent of the market price. “Retail prices for imported wine and spirits will now rise further, in a range from 15 percent to more than 100 percent, the association’s Borman [a board member at the International Spirit and Wine Association interviewed by U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 62 Ibid. 61 49 Tastes of Europe Indonesia – Market Entry Handbook Reuters] said. “Such high prices for imported brands might give incentive for some actors to fill in the gap by producing fake liquor at very cheap prices,” he said”.63 Distribution In order to successfully enter the Indonesian market, it is highly recommended, and in some cases mandatory for alcoholic beverages, to find a local partner either as importer or as distributor. They will help with the local procedures and the registration and certification with the Agency for Drug and Food Control (BPOM). Before 2007, only state-owned enterprises could import wine and alcoholic beverages.64 But since April 2010, strict government controls have relaxed, giving way to private official distributors to import directly any duty-paid wine and alcoholic beverage, within a mandated quota. Alcoholic beverage distribution is only allowed for designated distributors, subdistributors, and retailers. This applies for both imported and domestic products. Alcoholic beverage sales are only allowed for consumers that are 21 years of age or older in the following locations:65 • on-site consumption: hotels, restaurants, bars and other places designated by local government • retail: duty-free shops, and other places designated by local government Estimates show that the Horeca sector accounts for 90 percent of total sales of alcoholic drinks, with retail outlets accounting for the remaining 10 percent.66 Starting mid-April 2015, regulations passed by the Ministry of Trade (MOT 6/2015) prevent category A alcoholic beverages with an alcohol content of less than five percent from sale in minimarkets. Category A beverages are still allowed to be sold in supermarkets and hypermarkets. These beverages include beer, low-alcohol wine, and shandy. Previously, such restrictions were applied mostly to alcoholic beverages with over five percent of alcohol. Distribution and sale of category B and C alcoholic beverages are limited to companies that have an alcoholic beverages trade business license (SIUP-MB). This license is also valid for distributing and selling category A alcoholic beverages. Businesses selling category A products must have an SKP-A permit letter (for supermarkets, and hypermarkets) or an SKPL-A (for hotels, restaurants, and bars). SIUP-MB, SKP-A, and SKPL-A are valid for three years and can be extended.67 Importers (IT-MB holders) are required to report their import and distribution realisation every three months. Eveline Danubrata and Klara Virencia, “Indonesian alcohol market faces price headache after tariff hike”, Reuters, August 2015, available at: http://www.reuters.com/article/indonesia-alcoholidUSL3N10I24V20150810 64 U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf. 65 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 66 U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 67 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 63 50 Tastes of Europe Indonesia – Market Entry Handbook Geography and Major Markets Wine consumption is only permitted in licensed four and five-star hotels, upscale restaurants, bars, pubs, and night clubs. Duty free alcoholic beverages can only be sold through the appointed shops located in some Jakarta neighborhoods and international airports.68 Approximately 80 percent of imported alcoholic beverages are distributed to Jakarta and Bali. The remaining 20 percent goes to other major urban centres like Medan, Surabaya, and Bandung. Currently, there are three areas where selling alcoholic beverages is restricted: Bandung, Banten and Depok.69 The ports of entry for imported duty-paid alcoholic beverages include Belawan sea port, Medan; Tanjung Priok sea port, Jakarta; Tanjung Emas sea port, Semarang; Tanjung Perak sea port, Surabaya; Bitung sea port, Manado; and Soekarno Hatta sea port, Makassar. Duty-paid alcoholic beverage can also enter the country via all Indonesian international airports.70 U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 69 U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf. 70 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 68 51 Tastes of Europe Indonesia – Market Entry Handbook Challenges to EU Producers Alcoholic beverage advertisement is prohibited in all media in Indonesia. As a result of this, EU producers may find it difficult to promote their products in the Indonesian market. 52 Tastes of Europe Indonesia – Market Entry Handbook 3.2 Spirits Strengths Opportunities •Low existing levels of domestic competition •General awareness and recognition of EU spirits as leaders in terms of product quality, as well as status symbol •Well-suited to meet high growth potential driven by growing tourism and expatriate communities, as well as young consumer segments •Growing demand in Indonesia's increasingly cosmopolitan key markets Spirits Outlook Weaknesses Threats •Relatively smaller market share compared with other alcoholic beverages, with higher niche dynamic •Rates of spirits consumption lower among Indonesia's Muslim majority •Burdensome labeling and domestic marketing requirements, in addition to political risks from islamic parties •High tariffs of more than 90% on EU imported wines Consumption Despite the challenging business environment which exists in Indonesia in the spirits industry, international players posted a strong performance in 2015. The demand for premium brands, including those from the EU, is increasing, especially in ontrade channels. In recent times, Indonesians consumers have gradually been making a shift from domestic to international spirits brands. For spirits, the import tariff is now set at 150 percent of the market price.71 Since 2004, Indonesia’s public statistical agency has ceased to collect data on household expenditure on and consumption of alcoholic beverages. The trend is widely believed to be growing, however. The World Health Organisation collects detailed information on alcohol consumption in Indonesia, available here. 71 © Source: Euromonitor International, “Alcoholic Drinks in Indonesia”, 2015 53 Tastes of Europe Indonesia – Market Entry Handbook Consumer Profiles Even though, Indonesia has the world’s largest Muslim population where the consumption of alcohol is generally forbidden, alcoholic beverages are consumed not only by upper-income bracket local people but are also in high demand by expatriates and tourists. Men are more likely to consume alcoholic beverages in Indonesia than women and consume in greater volume per capita. Emerging cosmopolitan markets in Jakarta and Surabaya increasingly drive the import and consumption of alcoholic beverages in Indonesia. Consumer Trends In recent times, due to shifts in consumer preferences towards more premium brands, international brands benefited from sales restrictions in off-trade channels, which led many consumers to switch to on-trade channels. Other major growth drivers include the growing population of millennials, increasing acceptance of social drinking and the increasing number of on-trade establishments that offer alcoholic drinks as part of their menu. Challenges for EU Producers The alcohol market in Indonesia is heavily regulated, partly due to several legal and cultural associations related to drinking alcohol. “Two Islamic parties have also proposed legislation to ban consumption of alcohol in the country with the world’s largest Muslim population “.72 If this legislation passes, this will extinguish the alcoholic drink industry in Indonesia and, as such, EU exporters stand to lose tremendously. The business environment for spirits in Indonesia remains challenging. While the Indonesian Government is eager to curb the black market and the consumption of bootleg drinks (known as oplosan), it is also keen to earn higher revenue from alcoholic drinks. 73 As a result, it is likely that the government will increase import tariffs and/or excise duty in the future, while tightening customs enforcement and monitoring of alcoholic drinks distribution at the same time. Both measures, however, are likely to negatively impact legal spirits. For spirits, the import tariff is now set at 150 percent of the market price. Meanwhile, under the previous regulation, the amount of import tariffs payable was based on volume and was set at IDR 125,000 (EUR 8.6) per litre. Not only did the new taxation scheme cause a steep increase in prices of spirits in 2015, it also encouraged more illicit trade of spirits in the country.74 The increase in import tariffs and/or excise duties is likely to encourage black market sales, as the potential profit margin for illicit trade is higher. At the same time, tighter customs enforcement and monitoring of alcoholic drinks distribution are unlikely to help with the situation. As observed in 2015, more restricted distribution damaged the sales of domestic spirits, while tighter customs enforcement tends to impede the spirits supply chain in the country. As of late 2015, there was an ongoing discussion between the Directorate General of Customs and Excise and trade associations on a plan to restore the import tariff scheme to volumetric base. However, as of April 2016, regulatory changes had yet to be observed. Reuters, “Indonesian alcohol market faces price headache after tariff hike” available at: http://www.reuters.com/article/indonesia-alcohol-idUSL3N10I24V20150810 73 © Source: Euromonitor International, “Spirits in Indonesia”,2015 74 © Ibid 72 54 Tastes of Europe Indonesia – Market Entry Handbook Offer Domestic Offer Foreign companies which sell alcohol in Indonesia are Diageo, Pernod Ricard, Remy Cointreau and Bacardi. PT Multi Bintang is the largest domestic brewery of Indonesia. Market experts have predicted that because of various regulations that are put in place to deter consumption of alcohol, overall sales volumes are likely to decline in the near-term future. Imports International brands in spirits enjoyed stellar growth in 2015 because of their strong brand presence in restaurants, bars, and clubs in 2015.75 According to statistics retrieved from the International Trade Centre, imports of spirits into the Indonesian market moved from approximately EUR 4 million in 2010 to approximately EUR 7 million in 2015. Indonesian imports of spirits in 2015 were recorded at 767 tonnes. The main countries from which Indonesia imported spirits in 2015 and their respective market shares were: The United Kingdom (38 percent), Singapore (21 percent), France (17 percent), and the United States of America (8 percent). Overall, the EU’s market share in 2015 was approximately 63 percent of Indonesia’s overall inward trade in spirits.76 3500 3000 2010 2500 €'000 2011 2000 2012 1500 2013 1000 2014 500 2015 0 United France Kingdom Ireland Sweden Figure 8: Indonesian Spirits Imports from the EU, 2010-2015.77 Exports According to statistics retrieved from the International Trade Centre, Indonesian exports of spirits rose from approximately EUR 172,000 in 2010 to EUR 632, 000 in 2015. Importantly, in 2013, exports were the highest and amounted to approximately EUR 1 million. The major export destinations for Indonesian exports of spirits in 2015 and their respective market shares were: The Netherlands (63.8 percent), Singapore (24.1 percent), Vietnam (6.6 percent), and Cambodia (4.6 percent).78 75 76 77 78 Ibid. © Trade Map, International Trade Center, available at: http://www.trademap.org/ © Trade Map, International Trade Center, available at: http://www.trademap.org/ Ibid. 55 Tastes of Europe Indonesia – Market Entry Handbook 300 250 200 150 100 50 0 2011 2012 2013 2014 2015 Export Figure 9: Indonesia's Export of Spirits (in tonnes), 2011-2015.79 Local Competitors Sumber Sari Mekar Perkasa PT continued to lead the spirits market with an 18 percent total volume share in 2015, due to the popularity of its flagship brands, Topi Miring and Asoka, among local consumers.80 The low-price positioning of its brands also attracts a large consumer base in Indonesia, especially those from the lower-to-middle income demographics. However, as with other domestic spirits manufacturers, such as Perindustrian Bapak Djenggot PT and Semak Industri PT, the company’s total volume shares steadily declined over the review period. This was mainly due to increased restrictions on retail distribution of alcoholic drinks, as well as consumers’ shift towards international spirits brands. Specific Customs and SPS Requirements Importer Registration The Ministry of Trade regulations (MOT 20/2014) requires duty-paid alcoholic beverage importers to be “registered importers of alcoholic beverages” (IT-MB). IT-MBs are issued by MOT’s Directorate General of Foreign Trade. Some major requirements necessary to obtain an IT-MB, outlined in MOT 20/2014, include:81 • • • • The importer must have three years’ experience as an alcoholic beverages distributor; The importer must provide letters from at least 20 manufacturing companies, originating from at least five countries, which attest that the importer is an official distributor of their brand and that the importer is able to purchase a minimum of 3,000 cartons per brand per year; The importer must provide a letter from the manufacturing company granting permission to the importer to assign a distributor in Indonesia. The letter must be “legalised” by the Indonesian commercial/economic attaché in the country of origin; and The importer must have distribution agreements with alcoholic beverage distributors in at least six of Indonesia’s provinces. The IT-MB is valid for three years and can be Ibid. © Source: Euromonitor International, “Spirits in Indonesia”, 2015 81 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 79 80 56 Tastes of Europe Indonesia – Market Entry Handbook extended. Indonesia’s state-owned company is appointed by the Minister to import duty-free alcoholic beverages. Quota Indonesia applies quantitative import limits to imported wines and distilled spirits. The Ministry of Trade determines the national demand for the type and number of alcoholic beverages to be consumed annually in Indonesia and allocates a quantity for import based on this estimate. The determination is made annually on April 1. Importers (IT-MB holders) must also apply to MOT for an import permit. The application should be made fifteen days prior April 1 every year. Importers are required to import at least 80 percent of the import allocation listed in their import permit. As of 2010, each importer can import most brands, although some brands remain exclusive to certain importers. In 2010, the breakdown of the total import quota was about 70 percent wine, 10 percent spirits, and 20 percent beer.82 Product Registration As per BPOM regulations, all imported, duty-paid wine, spirits, and beer must receive a product registration (ML) number. To obtain the ML registration number for each SKU (Stock Keeping Unit), the importer must submit complete documentations to BPOM prior to importation of alcoholic beverages.83 The minimum requirements for product registration (ML) include: 1. Letter of Appointment from plant of origin (the original letter must be shown with the copy attached); 2. Health Certificate or Certificate of Free Sale from the competent authority in the country of origin (the original letter must be shown with the copy attached); 3. The results of laboratory analysis (original) associated with products such as nutrients (nutrition claims), a substance that is claimed in accordance with the label, chemical test, microbiological contamination and metal contamination. The analysis is valid 6 months from the date of testing; 4. The design of the label that will be distributed in accordance with and sample products; and 5. A completed application form. Product-Specific Labelling Alcoholic beverages must have “MINUMAN BERALKOHOL”, DIBAWAH UMUR 21 TAHUN ATAU WANITA HAMIL DILARANG MINUM (Prohibited for use by people under 21 years or pregnant women) on the label. Challenges for EU Producers The tariffs applied by the Indonesian Government on alcoholic beverages are very high. Tariffs applied on spirits are 150 percent of the market price. “Retail prices for imported wine and spirits will now rise further, in a range from 15 percent to more than 100 percent, the association’s Borman [a board member at the International Spirit and Wine Association U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 83 Ibid. 82 57 Tastes of Europe Indonesia – Market Entry Handbook interviewed by Reuters] said. “Such high prices for imported brands might give incentive for some actors to fill in the gap by producing fake liquor at very cheap prices,” he said”84 Distribution To successfully enter the Indonesian market, it is highly recommended, and in some cases mandatory for alcoholic beverages, to find a local partner either as importer or as distributor. They will help with the local procedures and the registration and certification with the Agency for Drug and Food Control (BPOM). Before 2007, only state-owned enterprises were allowed to import wine and alcoholic beverages. 85 But since April 2010, strict government controls have relaxed, giving way to private official distributors to import directly any duty-paid wine and alcoholic beverages, within a mandated quota. Alcoholic beverage distribution is only allowed for designated distributors, sub-distributors, and retailers. This applies for both imported and domestic products. Alcoholic beverage sales are only allowed for consumers that are 21 years of age or older in the following locations:86 • on-site consumption: hotels, restaurants, bars and other places designated by local government • retail: duty-free shops, and other places designated by local government Estimates show that the Horeca sector accounts for 90 percent of total sales of alcoholic drinks, with retail outlets accounting for the remaining 10 percent.87 Distribution and sale of spirits are limited to companies that have an alcoholic beverages trade business license (SIUP-MB). This license is also valid for distributing and selling category A alcoholic beverages. Businesses selling category A products must have an SKP-A permit letter (for supermarkets, and hypermarkets) or an SKPL-A (for hotels, restaurants, and bars). SIUPMB, SKP-A, and SKPL-A are valid for three years and can be extended.88 Importers (IT-MB holders) are required to report their import and distribution realisation every three months. Eveline Danubrata and Klara Virencia, “Indonesian alcohol market faces price headache after tariff hike”, Reuters, August 2015, available at: http://www.reuters.com/article/indonesia-alcoholidUSL3N10I24V20150810 85 U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 86 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 87 U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 88 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 84 58 Tastes of Europe Indonesia – Market Entry Handbook Geography and Major Markets Spirits consumption is only permitted in licensed four and five-star hotels, upscale restaurants, bars, pubs, and night clubs. Duty free alcoholic beverages can only be sold through the appointed shops located in some Jakarta neighborhoods and international airports.89 Approximately 80 percent of imported alcoholic beverages are distributed to Jakarta and Bali. The remaining 20 percent goes to other major urban centres like Medan, Surabaya, and Bandung. Currently, there are three areas where selling alcoholic beverages is restricted: Bandung, Banten and Depok. The ports of entry for imported duty-paid alcoholic beverages include Belawan sea port, Medan; Tanjung Priok sea port, Jakarta; Tanjung Emas sea port, Semarang; Tanjung Perak sea port, Surabaya; Bitung sea port, Manado; and Soekarno Hatta sea port, Makassar. Duty-paid alcoholic beverage can also enter the country via all Indonesian international airports.90 Challenges to EU Producers Alcoholic beverage advertisement is prohibited in all media in Indonesia. Because of this, EU producers may find it difficult to promote their products in the Indonesian market. U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 90 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 89 59 Tastes of Europe Indonesia – Market Entry Handbook 3.3 Beer Strengths Opportunities •Indonesia is the largest existing market for beer consumption in Southeast Asia •General awareness and recognition of EU beers as leaders in terms of product quality, as well as status symbol •Well-suited to meet high growth potential driven by growing tourism and expatriate communities, as well as through alcohol-free products •Growing demand in Indonesia's increasingly cosmopolitan key markets Beer Outlook Weaknesses Threats •Relatively smaller market share compared with other alcoholic beverages, with higher niche dynamic •Rates of spirits consumption lower among Indonesia's Muslim majority •Burdensome labeling and domestic marketing requirements, in addition to political risks from islamic parties •High tariffs of more than 90% on EU imported wines Consumption Asia in general and Vietnam in particular are excellent markets for European beer producers. According to Investvine “Asia overtook Europe and the Americas in beer consumption already in 2007. In 2011, the continent drank 67 billion liters of beer, against 57 billion in the Americas and 51 billion in Europe. The top beer-drinking nation in ASEAN is Vietnam. Vietnamese drinkers downed 2.6 billion liters of beer in 2011, followed by Thailand with 1.8 billion liters and the Philippines with 1.6 billion liters, nearly double the total amount of beer consumed in Indonesia (236.4 million liters), Malaysia (171.4 million), Cambodia (136.3 million), Laos (134.3 million), Singapore (108.2 million) and Myanmar (30.4 million).”91 Arno Maierbrugger, “Beer in Southeast Asia: A Matter of Taste”, Investvine, March 2016 available at: http://investvine.com/beer-in-southeast-asia-a-matter-of-taste/ 91 60 Tastes of Europe Indonesia – Market Entry Handbook Indonesia is one of the largest markets in Asia for consumption of alcoholic beverages, with the overall trend expected to increase in-line with levels of disposable income and Indonesia’s increasing integration with international markets. Beer is the most widely consumed alcoholic beverage in Indonesia, with a prevalence of both domestic and foreign products. Consumer Trends “The main reason why Southeast Asia’s citizen are gulping more booze is the growth in the number of young people with higher disposable income in recent years”.92 A correlation can be established between the consumption of beer and economic dynamics, let alone Western influence as expressed through the growing number of tourists, Western-style restaurants and international beer brands. This results in Southeast Asian consumers turn away from their traditional distillates, either rice whiskey in Thailand, or arrack in Indonesia. Other major growth drivers include the growing population of millennials, increasing acceptance of social drinking and the increasing number of on-trade establishments that offer alcoholic drinks as part of their menu. “Public drinking is technically forbidden in Indonesia, the world’s most populous Muslim-majority country, but in practice enforcement is often spotty”.93 Consumer Profiles There is a negative attitude towards alcohol in Indonesia as consumption of intoxicants (including alcohol) is generally forbidden (haram) in Islam. However, as millions of nominal Muslims (who do not follow Islamic principles strictly) live in Indonesia, beer consumption has recently risen, especially in the urban regions where it has become part of the lifestyle.94 Challenges for EU Producers The alcohol market in Indonesia is heavily regulated, partly due to several legal and cultural associations related to drinking alcohol. “Two Islamic parties have also proposed legislation to ban consumption of alcohol in the country with the world’s largest Muslim population.” 95 Offenders could get up to two years in prison, should the proposals become law. Offer Domestic Offer Total volume sales of beer witnessed a drastic decline of 13 percent in 2015, after the Ministry of Trade’s regulation Permendag No. 06/M-DAG/PER/1/2015 was passed into law in January 2015.96 This regulation essentially banned category A alcoholic drinks, including beer, from sale in convenience stores, independent small grocers and other grocery retailers. The government implemented the ban to “protect the morals and culture of Indonesian society”, as Ibid. Prashanth Parameswaran, “Indonesia wages war on alcohol”, The Diplomat, February 2015 available at: http://thediplomat.com/2015/02/indonesia-wages-war-on-alcohol/ 94 © Indonesia, Investments, “Alcohol-free beer in Indonesia: Strategy to comply with rules” available at: http://www.indonesia-investments.com/news/todays-headlines/alcohol-free-beer-in-indonesia-strategy-tocomply-with-rules/item6342) 95 Reuters, “Indonesian alcohol market faces price headache after tariff hike”, August 2015 available at: https://www.reuters.com/article/indonesia-alcohol/indonesian-alcohol-market-faces-price-headache-aftertariff-hike-idUSL3N10I24V20150810 96 © Source: Euromonitor International, “Spirits in Indonesia”, 2015 92 93 61 Tastes of Europe Indonesia – Market Entry Handbook the high number of minimarkets and kiosks in the country made it easy for schoolchildren or students to buy lightalcoholic beverages (such as beer and breezers).97 After a tumultuous start to 2015, beer began to stabilise in the last quarter of 2015 and total volume sales are expected to grow by a CAGR of 6 percent in the coming years. Many key players are now concentrating on establishing a strong foothold in on-trade establishments.98 Owing to the new government regulations, key players have moved to introduce non/low alcohol beer in the Indonesia market. By launching new products, it is anticipated that they will attract more consumers and help offset the impact of the restricted distribution. Multi Bintang introduced Bintang Radler Grapefruit in 2015 and Bintang Radler Lemon 0.0% in February 2016, becoming the pioneer of flavoured non/low alcohol beer in Indonesia.99 As a result, consumers remain engaged and tend to stay loyal to the company’s product portfolio. Introduction of Alcohol-Free Beer 100 : The British multinational alcoholic beverages firm Diageo plc has introduced alcohol-free Guinness to the country. The company is also considering building a factory on the island of Bali. The new beverage is the main strategy of the company to boost its sales in Indonesia after the ban on mini-markets has been imposed. Despite this, the company – that claims to control around 15 percent of Indonesia’s beer market - has made it clear that it was planning to introduce Guinness Zero to the Indonesian market already before. As after implementation of the ban, the company’s sales in Indonesia fell by 40 percent, Diageo now hopes to see its alcohol-free products back in the minimarkets and kiosks of Indonesia. Imports Beer imports into the Indonesian market moved from approximately EUR 258,000 in 2010 to approximately EUR 277,000 in 2015. Importantly, imports reached an all-time high in 2014 at EUR 509,000. Indonesian beer imports in 2015 were recorded at 120 tonnes. The main © Indonesia Investments, “Alcohol-Free Beer in Indonesia: Strategy to comply with Rules” available at: http://www.indonesia-investments.com/news/todays-headlines/alcohol-free-beer-in-indonesia-strategy-tocomply-with-rules/item6342 98 © Source: Euromonitor International, “Spirits in Indonesia”, 2015 99 Ibid. 100 ©Indonesia Investments, “Alcohol-Free Beer in Indonesia: Strategy to comply with Rules” available at: http://www.indonesia-investments.com/news/todays-headlines/alcohol-free-beer-in-indonesia-strategy-tocomply-with-rules/item6342 97 62 Tastes of Europe Indonesia – Market Entry Handbook countries from which Indonesia imported beer in 2015 and their respective market shares were: Singapore (41.4 percent), Australia (29.3 percent), Italy (17.6 percent), Hong Kong (6.5 percent), and Belgium (2.9 percent). Overall, the EU’s market share in 2015 was approximately 21.5 percent. Italy exported beer worth EUR 49,000 to Indonesia, while Belgium and the United Kingdom exported EUR 8,000 and EUR 2,000, respectively.101 600 EUR '000s 500 400 300 Imports 200 100 0 2010 2011 2012 2013 2014 2015 Figure 10: Indonesia’s Beer Imports, 2011-2015.102 Exports Indonesian exports of beer rose from approximately EUR 2 million in 2010 to an all-time high of EUR 12 million in 2015. The major export destinations for Indonesian exports of beer in 2015 and their respective market shares were: Timor Leste (51.7 percent), Thailand (27.8 percent), Malaysia (8.8 percent) and Australia (4.8 percent).103 14000 12000 10000 8000 6000 4000 2000 0 2011 2012 2013 Export 2014 2015 Figure 11: Indonesia’s Beer exports (in tonnes), 2011-2015.104 101 102 103 104 © Trade Map, International Trade Center, available at: http://www.trademap.org/. Ibid. Ibid. © Trade Map, International Trade Center, available at: http://www.trademap.org/ 63 Tastes of Europe Indonesia – Market Entry Handbook Local Competitors The two main players on the beer market are Multi Bintang Indonesia and Delta Djakarta Tbk. Multi Bintang continued to lead the beer market with a total volume share of 64 percent in 2015.105 Despite receiving a severe blow from the latest Ministry of Trade’s regulation, the company’s performance was buoyed by its wide product portfolio. Due to the established presence of Bintang Zero in non/low alcohol beer prior to 2015, the company could quickly shift its focus to the brand when there were unfavourable regulatory changes affecting its lager and stout portfolio. In addition, the company greatly benefits from it top-of-the-mind positioning and huge loyal consumer base of Bir Bintang in Indonesia, as well as its excellent distribution network throughout the country. Multi Bintang also remains committed to product innovation amidst a challenging volume environment. Specific Customs and SPS Requirements Importer Registration The Ministry of Trade regulations (MOT 20/2014) requires duty-paid alcoholic beverage importers to be “registered importers of alcoholic beverages” (IT-MB). IT-MBs are issued by MOT’s Directorate General of Foreign Trade. Some major requirements necessary to obtain an IT-MB, outlined in MOT 20/2014, include:106 • • The importer must have three years’ experience as an alcoholic beverages distributor; The importer must provide letters from at least 20 manufacturing companies, originating from at least five countries, which attest that the importer is an official © Source: Euromonitor International, “Spirits in Indonesia”, 2015 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 105 106 64 Tastes of Europe Indonesia – Market Entry Handbook • • distributor of their brand and that the importer is able to purchase a minimum of 3,000 cartons per brand per year; The importer must provide a letter from the manufacturing company granting permission to the importer to assign a distributor in Indonesia. The letter must be “legalised” by the Indonesian commercial/economic attaché in the country of origin; and The importer must have distribution agreements with alcoholic beverage distributors in at least six of Indonesia’s provinces. The IT-MB is valid for three years and can be extended. Indonesia’s state-owned company is appointed by the Minister to import duty-free alcoholic beverages. Quota Indonesia applies quantitative import limits to imported wines and distilled spirits. The Ministry of Trade determines the national demand for the type and number of alcoholic beverages to be consumed annually in Indonesia and allocates a quantity for import based on this estimate. The determination is made annually on April 1. Importers (IT-MB holders) must also apply to MOT for an import permit. The application should be made fifteen days prior April 1 every year. Importers are required to import at least 80 percent of the import allocation listed in their import permit. As of 2010, each importer can import most brands, although some brands remain exclusive to certain importers. 107 In 2010, the breakdown of the total import quota was about 70 percent wine, 10 percent spirits, and 20 percent beer. Product Registration As per BPOM regulations, all imported, duty-paid wine, spirits, and beer must receive a product registration (ML) number. To obtain the ML registration number for each SKU (Stock Keeping Unit), the importer must submit complete documentations to BPOM prior to importation of alcoholic beverages.108 The minimum requirements for product registration (ML) include: 1. Letter of Appointment from plant of origin (the original letter must be shown with the copy attached); 2. Health Certificate or Certificate of Free Sale from the competent authority in the country of origin (the original letter must be shown with the copy attached); 3. The results of laboratory analysis (original) associated with products such as nutrients (nutrition claims), a substance that is claimed in accordance with the label, chemical test, microbiological contamination and metal contamination. The analysis is valid 6 months from the date of testing; 4. The design of the label that will be distributed in accordance with and sample products; and 5. A completed application form. U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 108 Ibid 107 65 Tastes of Europe Indonesia – Market Entry Handbook Labelling Alcoholic beverages must have “MINUMAN BERALKOHOL”, DIBAWAH UMUR 21 TAHUN ATAU WANITA HAMIL DILARANG MINUM (Prohibited for use by people under 21 years or pregnant women) on the label. Distribution To successfully enter the Indonesian market, it is highly recommended, and in some cases mandatory for alcoholic beverages, to find a local partner either as importer or as distributor. They will help with the local procedures and the registration and certification with the Agency for Drug and Food Control (BPOM). Before 2007, only state-owned enterprises could import wine and alcoholic beverages. 109 But since April 2010, strict government controls have relaxed, giving way to private official distributors to import directly any duty-paid wine and alcoholic beverages, within a mandated quota. Alcoholic beverage distribution is only allowed for designated distributors, sub-distributors, and retailers. This applies for both imported and domestic products. Alcoholic beverage sales are only allowed for consumers that are 21 years of age or older in the following locations:110 • on-site consumption: hotels, restaurants, bars and other places designated by local government • retail: duty-free shops, and other places designated by local government Estimates show that the Horeca sector accounts for 90 percent of total sales of alcoholic drinks, with retail outlets accounting for the remaining 10 percent.111 Starting mid-April 2015, regulations passed by the Ministry of Trade (MOT 6/2015) prevent category A alcoholic beverages with an alcohol content of less than five percent from sale in minimarkets. Category A beverages are still allowed to be sold in supermarkets and hypermarkets. These beverages include beer, low-alcohol wine, and shandy. Previously, such restrictions were applied mostly to alcoholic beverages with over five percent of alcohol. Distribution and sale of category B and C alcoholic beverages are limited to companies that have an alcoholic beverages trade business license (SIUP-MB). This license is also valid for distributing and selling category A alcoholic beverages. Businesses selling category A products U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 110 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 111 U.S. Department of Agriculture, “Indonesia: Market Brief - Wine”, GAIN Report, October 2011 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Market%20Brief-Wine_Jakarta_Indonesia_5-102011.pdf 109 66 Tastes of Europe Indonesia – Market Entry Handbook must have an SKP-A permit letter (for supermarkets, and hypermarkets) or an SKPL-A (for hotels, restaurants, and bars). SIUP-MB, SKP-A, and SKPL-A are valid for three years and can be extended.112 Importers (IT-MB holders) are required to report their import and distribution realisation every three months. Although it is still allowed to sell alcoholic drinks in the larger supermarkets, restaurants, cafes and hotels, sales of beer have plunged as the beverage was banned in the (estimated) 70,000 minimarkets that are the favourite shopping spot for urbanized Indonesia.113 Geography and Major Markets Approximately 80 percent of imported alcoholic beverages are distributed to Jakarta and Bali. The remaining 20 percent goes to other major urban centres like Medan, Surabaya, and Bandung. Currently, there are three areas where selling alcoholic beverages is restricted: Bandung, Banten and Depok.114 The ports of entry for imported duty-paid alcoholic beverages include Belawan sea port, Medan; Tanjung Priok sea port, Jakarta; Tanjung Emas sea port, Semarang; Tanjung Perak sea port, Surabaya; Bitung sea port, Manado; and Soekarno Hatta sea port, Makassar. Duty-paid alcoholic beverage can also enter the country via all Indonesian international airports.115 While regional governments were given the discretion to regulate alcoholic drinks distribution in their own provinces or districts as they saw appropriate, most offices chose to abide by the January 2015 Permendag. Only a few regions, such as Bali and Lombok, opted to implement less stringent restrictions in a bid to cater to beer demand from tourists.116 Additionally, about a year later, it was announced by Governor of Jakarta that category A alcoholic beverages with alcohol content up to 5 percent, including beer, will again be available in capital city’s minimarkets.117 However, the ban remains in place in all other parts of the country. Challenges for EU Producers Alcoholic beverage advertisement is prohibited in all media in Indonesia. Because of this, EU producers may find it difficult to promote their products in the Indonesian market. U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 113 ©Indonesia Investments, “Alcohol-Free Beer in Indonesia: Strategy to comply with Rules” available at: http://www.indonesia-investments.com/news/todays-headlines/alcohol-free-beer-in-indonesia-strategy-tocomply-with-rules/item6342 114 © EIBN, EU-Indonesia Business Network, “Participating in the Wine and Cheese Expo” available at: https://www.hrvatskiizvoznici.hr/Cms_Data/Contents/hiz/Folders/dokumenti/~contents/JMU2WKD4TK45LJHL/wine---cheese-expo2014.pdf 115 U.S. Department of Agriculture, “Indonesia: New Regulations on Alcoholic Beverage Distribution”, GAIN Report, June 2014 available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/New%20Regulation%20on%20Alcoholic%20Bevera ge%20Distribution%20%20_Jakarta_Indonesia_5-6-2014.pdf 116 © Source: Euromonitor International, “Spirits in Indonesia”, 2015 117 ©Indonesia Investments, “Alcohol in Indonesia: Beer Available Again in Jakarta’s Minimarts?” available at: http://www.indonesia-investments.com/news/todays-headlines/alcohol-in-indonesia-beer-available-again-injakarta-s-minimarts/item685 112 67 Tastes of Europe Indonesia – Market Entry Handbook 3.4 Fresh and Processed Meat Strengths Opportunities •Important cultural base with a number of familiar meat dishes •EU meat products are recognised for quality, responsibilty, and ethical production •Increasing consumer income expected to coincide with greater demand for meat products •Improving cold-chain distribution and retail options, centered around core markets Meat Outlook Weaknesses Threats •Competitive domestic market with important share of output held by domestic producers •Lower rates of consumption for certain meat products, such as porkbased products which contravene Islamic dietary guidelines •Excessive interpretation of SPS requirements restrict EU market access •Domestic legislation limits opportunities for EU producers Consumption According to FAO-OECD estimates, protein was consumed in the following percentages in Indonesia in 2015: fish (74 percent); poultry (15 percent); pork (6 percent); beef and veal (4 percent); and sheep (1 percent). 118 Additionally, Indonesia has a relatively lower meat consumption per capita compared to other Southeast Asian countries. Animal product consumption is at the same level as in India, but at a lower level than in the rest of Southeast Asia or in Brazil, Russia, and China. 119 However, as Indonesia’s food system continues to evolve, a larger modern food retail sector and changing consumer tastes and preferences are likely to increase the market for the higher value foods120, including chilled and frozen meat. EU producers stand to benefit greatly from the increased demand for imported meat, particularly beef. Organisation for Economic Co-operation and Development, “Meat consumption” available at: https://data.oecd.org/agroutput/meat-consumption.htm. 119 U.S. Department of Agriculture, “Indonesia’s Modern Retail Sector: Interaction with Changing Food Consumption and Trade Patterns” available at: https://www.ers.usda.gov/webdocs/publications/44684/28836_eib97_1_.pdf?v=41304 120 Ibid. 118 68 Tastes of Europe Indonesia – Market Entry Handbook Consumer Trends In recent times, Indonesians have been consuming more meat. Importantly, food grain consumption has been declining on a per-person basis over the last few decades.121 It has been observed that as starch-based calories have declined, meat, dairy, and egg consumption has grown strongly instead. As Indonesia’s food system continues to evolve, a larger modern food retail sector and changing consumer tastes and preferences are likely to increase the market for the higher value foods, beverages, and food processing inputs. Some of this market increase will be supplied by imports. Namely, improvements to the cold chain store system, often implemented by the modern food retail companies, would enable wider sales of chilled and frozen meat and dairy products. While much of dairy product consumption needs will continue to be met by imports, chilled/frozen meat demand is supplied both by imports and by domestic production.122 Evidences revealed that Indonesia has relatively lower meat consumption per capita compared to other Southeast Asian countries, though its demand is rapidly increasing. Beef consumption is rising sharply in Indonesia. According to the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES), the real value of Indonesian domestic beef production is set to increase more than 200 percent by 2050 compared to 2009; beef consumption will rise more than 14 times during the same period. The growth will largely come from urban consumers, whose value of beef consumption is projected to be higher than China’s average, by 2050 (ABARES, per person basis) Prospects for growth in broiler meat are strong if incomes continue to rise in Indonesia. These foods benefit from refrigeration, and large-scale supply chains may be able to offer such products at lower prices. Thus, further consumer shifts to animal products are likely to present an opportunity that modern food retail chains will pursue. 123 Increasingly, the busy lifestyles of Indonesian consumers have prompted them to purchase and prepare convenient food at home, such as chicken nuggets, sausages and meatballs 124 Additionally, as a result of the rapid outlet expansion of modern grocery retailers, particularly hypermarkets, supermarkets and convenience stores, the distribution coverage of many processed meat and seafood products has been extended in 2015. Consumer Profiles “At lower incomes, typical diets [of Indonesians]include rice with some modest garnishing and vegetables. Moderately higher incomes permit a more varied diet with a significantly higher share of spending on fish, meat, eggs, dairy and fruit”.125 Spending on prepared foods also rises rapidly with income. Urban Indonesians have traditionally eaten out a lot. Their spending on convenience foods is also rising strongly. As “almost 90 percent of all Indonesians are U.S. Department of Agriculture, “Indonesia’s Modern Retail Sector: Interaction with Changing Food Consumption and Trade Patterns” available at: https://www.ers.usda.gov/webdocs/publications/44684/28836_eib97_1_.pdf?v=41304 122 Ibid. 123 U.S. Department of Agriculture, “Indonesia’s Modern Retail Sector: Interaction with Changing Food Consumption and Trade Patterns” available at: https://www.ers.usda.gov/webdocs/publications/44684/28836_eib97_1_.pdf?v=41304 124 © Source: Euromonitor International, “Processed Meat and Seafood in Indonesia”, 2015 125 Halal Meat Exporters, “Frequently Asked Questions: Marketing Halal meat products to Indonesian Consumers” available at: http://group31globalmarketing.weebly.com/faqs.html 121 69 Tastes of Europe Indonesia – Market Entry Handbook Muslims, most of them observe Islamic dietary laws”, which includes the non-consumption of pork126. Offer The local industry dominates the markets for frozen poultry and meat products. 127 Beef is instead mostly imported. Imports According to statistics retrieved from the International Trade Centre, Indonesia imported EUR 303 million worth of meat and edible meat offal (HS Chapter 02) in 2010. This amount decreased to EUR 235 million by 2015. Importantly, imports of meat and edible meat offal in Indonesia reached an all-time high of EUR 337 million in 2014. The main countries from which Indonesia imported meat and edible meat offal in 2015 and their respective market shares were: Australia (75.7 percent), New Zealand (17.7 percent), the United States of America (4.8 percent), and Malaysia (1.4 percent). The EU’s market share for this product category was only 0.3 percent in 2015.128 The main exporters of red meats (fresh, chilled and frozen) are Australia, New Zealand and the United States. The figure below shows trends in imports for several categories of meat and edible meat offal over the period 20102015. Ibid. U.S. Department of Agriculture, “Indonesia: Retail Foods: Retail Foods Update” available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf 128 © Trade Map, International Trade Centre, available at www.trademap.org. 126 127 70 Tastes of Europe Indonesia – Market Entry Handbook 250000 200000 € '000 150000 100000 50000 2010 0 2011 2012 2013 2014 2015 Figure 12: Indonesian Imports of Meat and Edible Meat Offal, 2010-2015.129 Imports of products that fall under the HS 1601 category came mainly from Malaysia (69.9 percent), Singapore (26 percent) and France (2.5 percent) in 2015. France was the only market player from the EU. Imports of products that fall under the HS 1602 category came mainly from Australia (87.8 percent), Malaysia (6.1 percent), and the United States (4.7 percent) in 2015. The EU’s market share in this category was 0.3 percent, with Italy accounting for 0.2 percent and Belgium accounting for 0.1 percent.130 The figure below shows the trends in Indonesian imports of processed meat over the period 2010-2015. 129 130 © Trade Map, International Trade Center, available at: http://www.trademap.org/ Ibid 71 Tastes of Europe Indonesia – Market Entry Handbook Indonesian Imports of Processed Meat (2010-2015) 12000 10000 € '000 8000 6000 4000 2000 0 1602- Prepared or preserved meat, offal or blood (excluding sausages and similar products, and meat ... 1601- Sausages and similar products, of meat, offal or blood; food preparations based on these products 2010 3033 334 2011 4394 256 2012 7686 238 2013 9509 3404 2014 10716 4182 2015 10961 10746 Figure 13: Indonesian Imports of Processed Meat, 2010-2015.131 Exports In 2010, Indonesian exports of products that fall under the HS category 02 (Meat and Edible Meat Offal) amounted to EUR 18 million. By 2015, exports increased to EUR 21 million. The main export destinations for such products and their respective market shares in 2015 were: Belgium (61.1 percent), France (26.2 percent), the Netherlands (4.2 percent), and China (3.6 percent).132 Exports of products that fall under the HS 1601 category amounted to EUR 54,000 and went mainly to Timor Leste, Australia and the Christmas Islands. Exports of products that fall under the HS 1602 category amounted to EUR 236,000 and mainly went to Brunei Darussalam, Singapore, the Republic of Korea and Hong Kong, China.133 The figure 19 below shows trends in Indonesia’s exports for meat and edible meat offal over the period 2010-2015. 131 132 133 © Trade Map, International Trade Center, available at: http://www.trademap.org/ © Trade Map, International Trade Center, available at: http://www.trademap.org/ Ibid 72 Tastes of Europe Indonesia – Market Entry Handbook 25000 20000 15000 10000 5000 0 2011 2012 2013 2014 2015 Export Figure 14 Indonesia's export of meat and edible meat offal in thousands of euros, 2011-2015.134 Local Competitors So Good Food retained its leadership in the processed meat industry in 2015. The company particularly excels in frozen processed poultry, targeting middle to high-income consumers. So Good Food always looks to ensure that its product endorsers are the current popular actress/singers/ celebrities. Meanwhile, within shelf stable meat, the company is primarily popular for its ready-to-eat So Good Sozzis and So Nice sausages, particularly renowned among children and teenagers, due to their practicality. In 2015, So Good Sozzis delivered higher retail value sales to So Good Food, due to having a larger profit margin, as a result of being positioned to middle-to-highincome groups. So Nice, on the other hand, brought larger retail volume sales but a lower contribution in terms of retail value sales, due to more affordable pricing, aligned with the brand targeting the lowerincome segment. Both brands enjoyed rising awareness thanks to the active above-theline promotional campaign using popular celebrity endorsers.135 The Indonesian Meat market is highly 134 135 ©Trade Map, International Trade Center, available at: http://www.trademap.org/ © Source: Euromonitor International, “Processed Meat and Seafood in Indonesia”, 2015 73 Tastes of Europe Indonesia – Market Entry Handbook competitive and fragmented with the top players Bernandi and Pronas, which together accounted for roughly 21.1 percent share of the market.136 Specific Customs and SPS Requirements Import Permit and Certification All meat imports require an import permit (SPI) from Indonesia’s Ministry of Trade, which first necessitates an import recommendation approval (RTK- Rekomendasi Teknis Kesehatan) from Directorate General for Livestock Animal Health Service (DGLAHS) in the Ministry of Agriculture.137 Before applying for the RTK, the importer must get a recommendation from the Head of the National Food and Drug Agency (BPOM). Importantly, only an RTK from the Ministry of Agriculture and an SPI from the Ministry of Trade is required in the case of imported raw meat. Importers must indicate the product being imported and the market destination (restaurant, hotel, catering, industry, etc.) in their RTK application. Applications can be made in December, April, and August for January-April, May-August, September-December permits, respectively. The Ministry of Agriculture no longer issues volume allocations. However, the Ministry of Trade will determine import volumes through the SPI process and the importer must import minimum 80 percent of import permit allocation per year. Certificates of health from exporting countries must indicate the SPI Number. The Indonesian Ministry of Agriculture released regulation 58/2015 which lists prime cuts, manufacturing meat, and variety meat (including tail and tongue) permitted for import by general and producer importer. However, state or regional/district-owned enterprises can import secondary cuts at any time in the event of insufficient supply due to epidemic disease, natural disaster or anticipated price fluctuations. MOA 58/2015, along with MOT Regulation No. 47/2013, set reference prices for meat, which are intended to trigger meat imports when local retail prices rise above a set level. The Ministry of Agriculture Regulation No 65/2014 requires that the importation of processed consumable product of animal origin material (HBAH), including processed meat, must be accompanied with a sanitation certificate and Halal certificate. Foreign meat manufacturing plants must be certified both by the DGLAHS and Islamic authorities. For meat and poultry products, halal precertification is required. Additionally, the Ministry of Trade Regulation 87/2015 states that the importation of food products for 215 HS Codes (HS codes 1601-2202) requires pre-shipment inspection. A certificate stating that the product is not contaminated by radiation greater than the level stated is required to accompany imports of meat and meat products: Cs137 100 Bq/kg. The radiation compliance certificate is to be issued by the responsible authority in the country of origin or exporting country. Ibid. U.S. Department of Agriculture, “Indonesia: Food and Agricultural Import Regulations and StandardsNarrative” available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural%20Import%20Regula tions%20and%20Standards%20-%20Narrative_Jakarta_Indonesia_12-24-2015.pdf 136 137 74 Tastes of Europe Indonesia – Market Entry Handbook SPS Measures In recent times, specific concerns about Indonesia’s SPS policies have been raised in the Sanitary and Phytosanitary (SPS) Committee of the World Trade Organization.138 They include import restrictions on pork products due to influenza A/H1N1 (raised by Mexico and supported by Australia, Brazil, Canada, the Dominican Republic, and the United States); new meat import conditions (raised by the EU); and import restrictions on poultry meat (raised by Brazil); import restrictions on beef and recognition of the principle of regionalization (raised by Brazil); and Indonesia's port closure (raised by the United States and supported by Australia, Canada, Chile, EU, Japan, the Republic of Korea, New Zealand, and South Africa). Examples of SPS measures that have impacted specific products or product categories from the EU include unjustified import restrictions on a number of animals and animal products related to Bovine Spongiform Encephalopathy (BSE) and other diseases. New legislation for food (Food Law 18/2012) self-sufficiency puts temporary ban on agriculture and fisheries’ imports.139 Labelling Specific requirements for labelling on fresh and processed meat include: • • • • • For products derived from swine: the words "MENGANDUNG BABI." (contains pork) to be written in red 'universe medium corps 12' font and enclosed in a red rectangle together with a drawing of a pig. Irradiated packaged food must carry the words "RADURA: PANGAN IRADIASI" (Irradiated food), the reason for irradiation and this logo. Also required are the name and address of the radiation facility, the month and year of irradiation, and the country in which the process was carried out. If the food cannot be reirradiated, then the label should include the word: “TIDAK BOLEH DIRADIASI ULANG” (Not to be re-irradiated). Food derived from genetic engineering must have” PANGAN REKAYASA GENETIKA” (Genetically Engineered food) on the label. Processed food for infants, children below five, pregnant or breast-feeding mothers, people on special diets, elders, and sufferers of certain diseases should be informed of the portion size, method of use and other necessary instructions, including the impact of the food on human health. If the product has been approved as meeting Indonesian Islamic standards, then “Halal” should appear on the package.140 Challenges for EU Producers Indonesia introduced a new Food Law in 2012 seeking to strengthen the principles of food sovereignty and food self-reliance in ensuring food security by giving priority to the domestic production of staples. 141 Self-sufficiency targets exist for five staples, including beef. The Indonesian government revised the timeframe for achieving self-sufficiency to 2019 for beef. © World Trade Organization, “Trade Policy Review”, available at: https://www.wto.org/english/tratop_e/tpr_e/s278_e.pdf 139 EU Commission, DG Trade, Market Access Database, “Sanitary and Phytosanitary Issues” available at: http://madb.europa.eu/madb/sps_barriers_details.htm?barrier_id=10600. 140 U.S. Department of Agriculture, “Food and Agricultural Import Regulations and Standards” available at: https://www.scribd.com/doc/76535113/Indonesia-Food-and-Agricultural-Import-Regulations-and-Standards 141 OECD, “Indonesia Policy Brief: Agriculture” available at: https://www.oecd.org/policy-briefs/indonesiaagriculture-improving-food-security.pdf 138 75 Tastes of Europe Indonesia – Market Entry Handbook To foster self-sufficiency, Indonesia provides significant market price support to agricultural producers. Because of this legislation, EU exports of beef may be low and/or face disadvantages in the Indonesian market place. The Ministry of Agriculture (MOA) and The Ministry of Trade (MOT) regulations also limit the sale of imported beef to the hotel and restaurant industry.142 Distribution Consumers in Indonesia purchase 70 percent of fresh meat in traditional markets.143 While most Indonesians purchase their food from traditional markets, modern food retail stores sell an increasing share of food products, particularly packaged goods, to urban consumers. 144 It has since been found that hypermarkets and supermarkets are the leading distribution channels in the Indonesian meat market.145 Big supermarkets and hypermarkets are important outlets for European products. The most popular hypermarkets in oIndonesia include Carrefour, Hypermart and Giant. 146 Popular supermarkets also include Superindo, Food Mart and Hero. Modern stores offer refrigeration, air conditioning, and quality assurance that are usually not found in traditional shops. Refrigeration, especially for meats, helps expand consumption and address consumers’ food safety concerns. Refrigeration is available in all modern formats in Indonesia, but it can be unavailable or unreliable in traditional formats. Modern retail markets are generally more consistent than traditional markets in keeping raw meats and vegetables separate to avoid bacterial contamination. In traditional markets, slaughtering may occur onsite close to retail offerings. U.S. Department of Agriculture, “Indonesia Retail Foods” available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf 143 U.S. Department of Agriculture, “Indonesia Retail Foods” available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf 144 U.S. Department of Agriculture, Economic Research Service, “Indonesia’s Modern Retail Sector: Interaction with Changing Food Consumption and Trade Patterns” available at: https://www.ers.usda.gov/webdocs/publications/44684/28836_eib97_1_.pdf?v=41304. 145 U.S. Department of Agriculture, “Indonesia Retail Food” available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-182015.pdf. 146 U.S. Department of Agriculture, Economic Research Service, “Indonesia’s Modern Retail Sector: Interaction with Changing Food Consumption and Trade Patterns” available at: https://www.ers.usda.gov/webdocs/publications/44684/28836_eib97_1_.pdf?v=41304. 142 76 Tastes of Europe Indonesia – Market Entry Handbook Challenges for EU Producers Indonesia’s food retail market has so far proved slower to embrace frozen broiler meat and modern stores than some of the countries with which it is usually compared. 147 Border measures, infrastructure deficiencies, and domestic political concern for the traditional food system make dietary and retailing changes difficult. 147 Ibid. 77 Tastes of Europe Indonesia – Market Entry Handbook 3.5 Olive Oil Opportunities Strengths •Important cultural base where people use a lot of oil for cooking •EU is recognized as the main importer of Olive oil •Increasing consumer income expected to coincide with greater demand for oive oil •Consumers are becoming more health-concious and see olive oil as healthier option Meat Outlook Weaknesses Threats •Competitive domestic market •Olive oil is seen as a niche products, as many people still prefer cheap palm oil for cooking •Neigbouring countries like Thailand are expected to increase palm oil production, meaning that more cheaper palm oil can become available in Indonesia's market Consumption A market for imported olive oil is emerging in Indonesia. EU producers stand to benefit tremendously as the major global suppliers of the product. Additionally, as Indonesians become more health conscious, this trend is also likely to benefit olive oil. However, this product is only expected to attract a niche consumer base among middle-to-upper income class Indonesians and premium hotels/ restaurants due to its high price. Consumer Trends The demand for imported olive oil is expected to increase in Indonesia in the coming years. Importantly, the Indonesian government has taken measures to prohibit the use of unbranded cooking oils, which are usually cheap but unhealthy alternatives to other cooking oils. Government regulation 80/M-DAG/PER/10/2014 supports the sale of packaged and branded 78 Tastes of Europe Indonesia – Market Entry Handbook cooking oil and discourages the use of bulk unbranded and unpackaged cooking oils (locally known as “minyak curah”), which is typically sold in traditional markets.148 Indonesian consumers, especially middle—toupper-income urban dwellers, are expected to follow the global trend of increasing health awareness. Given this, producers of healthier products expect to see rapid growth in their sales performance over the forecast period. These product types will grow at the expense of palm oil, although this will continue to dominate retail value sales of vegetable and seed oil up to the end of the forecast period. The health trend is also likely to benefit olive oil, although the product will still attract a niche consumer base due to its high price. Because of the expansion of tourism, hotels, restaurants and institutional sectors will continue and increase their demand for specific food products, and to meet demand, some may need to be imported. Olive oil, which is used mainly as a salad oil in the hospitality industry, stands to benefit from this increased demand. Consumer Profiles As consumers’ purchasing power declined in 2015, many consumers, especially those from the low-income groups, traded down to cheap unbranded and unpackaged cooking oils. As is to be expected, olive oil, a more expensive alternative to other cooking oils, is mostly consumed by middle-to-upper income Indonesians and premium hotels/restaurants. Offer Imports Imports rose by 241 percent in value and 177 percent in volume between 2010 and 2014. The market is expected to grow by 20.6 percent by volume and 15.1 percent by price between 2015 and 2020.149 148 149 © Source: Euromonitor International, “Oils and Fats in Indonesia”, 2015 . © Trade Map, International Trade Center, available at: http://www.trademap.org/. 79 Tastes of Europe Indonesia – Market Entry Handbook Indonesia's Imports of Olive Oil by Quantity (2011-2015) Unit: Tonnes 2500 2000 1500 1000 500 0 2011 2012 2013 2014 2015 Imports Figure 15: Indonesia's Olive Oil Imports, in tonnes (2011-2015)150 Exports Indonesia is not a major olive oil producer; thus, its olive oil exports are relatively low. In 2015 Indonesia only exported 7 tons of olive oil. 120 100 80 60 40 20 0 2011 2012 2013 2014 2015 Export Figure 16 Indonesia's Olive Oil Exports, in tonnes (2011-2015)151 150 151 Ibid. Ibid. 80 Tastes of Europe Indonesia – Market Entry Handbook Competition In 2015, cooking oil (mostly composed of vegetable and seed oil) was the dominant contributor to sales of oils and fats category in Indonesia. Palm oil dominates the retail value sales of vegetable and seed oil. In 2015, the value share of branded oils and fats continued to be divided between the five principal manufacturers, namely Salim Ivomas Pratama, Unilever Indonesia, SMART, Bina Karya Prima and Sari Agrotama Persada. In 2015 they accounted for a combined retail value share of 90 percent in oils and fats. Their brands, namely Bimoli, Blue Band, Filma, Tropical and Sania respectively, are well-known in the country. Thanks to continuous promotions and extensive distribution networks, these brands managed to gain trust from loyal consumers and thus retained their leading positions.152 Distribution Imported olive oil attracts a niche consumer base among middle-to-upper income class Indonesians. Hypermarkets and supermarkets are the most suitable retail outlets as they offer a wide range of imported food and beverage products that cater to the target market. 152 © Source: Euromonitor Intrnational, “Oils and Fats in Indonesia”, 2015 81 Tastes of Europe Indonesia – Market Entry Handbook 3.6 Fresh Fruits and Vegetables Strengths Opportunities •Important cultural base with a number of familiar meat dishes •EU meat products are recognised for quality, responsibilty, and ethical production •Increasing consumer income expected to coincide with greater demand for meat products •Improving cold-chain distribution and retail options, centered around core markets Meat Outlook Weaknesses Threats •Competitive domestic market with important share of output held by domestic producers •Lower rates of consumption for certain meat products, such as porkbased products which contravene Islamic dietary guidelines •Excessive interpretation of SPS requirements restrict EU market access •Domestic legislation limits opportunities for EU producers Consumption Indonesia’s consumption of fruits and vegetables is still below the standard set by Food and Agriculture Organization (FAO). According to the Indonesian Ministry of Agriculture, per-capita fruit and vegetables consumption among the nation’s citizens is estimated to average less than 40 kg per year, which is well below the FAO standard of 65.75 kg per capita a year.153 Fresh fruits and vegetables have always made up a significant portion of the Indonesian diet, which in the past consisted of locally grown produce purchased from traditional retail outlets and markets. Indonesian consumer spending on fresh horticultural products compared to that on rice was 50 percent in ©Food and Agriculture Organization of the United Nations, 2006, A. Dimyati and S. Kuntarsih, “Fruit and Vegetable Development Program for Human Health in Indonesia” available at http://www.fao.org/fileadmin/templates/agphome/documents/horticulture/WHO/seoul/Indonesia_Paper_Dirjen -Korea.pdf . Reproduced with permission 153 82 Tastes of Europe Indonesia – Market Entry Handbook 1994, this has since risen to 75 percent in 2004 and 100 percent for urban dwelling Indonesians in 2007.154 Indonesia’s upper middle class is expected to grow to 30 million people by 2015 according to World Bank estimates. The growth of the middle class is expected to drive this new trend of an increased awareness about health and the nutritional benefits of fresh fruit and vegetables. Additionally, it is also expected that this new trend will become entrenched in everyday eating habits and will be accelerated by improved supply chains and the ease of access to modern retail facilities such as supermarkets in urban areas. The latter will allow for the correct storage of fresh produce, thus making previously unavailable varieties of fruit and vegetables available to consumers. Hence, the market is highly promising for both local and foreign producers. The country’s reliance on imports, however, shows the declining competitiveness of domestic horticulture, as well as the government’s moves towards more protectionist and restrictive trade policies. Consumer Profile: Fruit Preference and Health Concerns The growing economy has changed consumer lifestyles in Indonesia. Indonesian consumers are busier and work longer hours and are therefore more likely to consume unhealthy food. This has caused an increasing trend of non-communicable diseases, such as heart disorders, kidney failure, liver malfunction, high cholesterols and diabetes. On the other hand, many consumers have low incomes and it is difficult for them to fulfill their nutritional needs. Therefore, malnutrition is very common in the Indonesian society. To alleviate this problem, the Indonesian government through the Ministry of Health proclaimed the Healthy Indonesia 2010 Programme. The Ministry of Agriculture through the Directorate General of Horticulture supports the programme by formulating various national programs for developing the fruit and vegetable industries to fulfill the consumer’s need.155 World Bank, “Horticultural Producers and Supermarket Development in Indonesia” available at http://documents.worldbank.org/curated/en/863941468752426320/Horticultural-producers-and-supermarketdevelopment-in-Indonesia 155 © Food and Agriculture Organization of the United Nations, 2006, A. Dimyati and S. Kuntarsih, “Fruit and Vegetable Development Program for Human Health in Indonesia” available at http://www.fao.org/fileadmin/templates/agphome/documents/horticulture/WHO/seoul/Indonesia_Paper_Dirjen -Korea.pdf . Reproduced with permission 154 83 Tastes of Europe Indonesia – Market Entry Handbook Because of the expanding middle-class, the consumption of fruits in Indonesia has been increasing. This is driven by increasing consumption from one demographic segment: Indonesian elders, who have been consuming more fruits and vegetables and provide lucrative business opportunity for foreign fruit exporters. Studies showed that the five most frequently consumed fruits among elderly Indonesians were bananas, oranges (citrus), papayas, apples and watermelons. The results of the study are presented in figure below where n shows the number of respondents out of a sample of 7078 people. Figure 17: Fruit consumption in Indonesia amongst the elderly (65 and above)156 Research on consumer preferences in 2011 revealed that most Indonesians look at other consumers’ preferences before buying. They preferred apples, oranges and mangoes (particularly shredded) and peanuts. In many cases, imported fruits are preferred over local fruits, particularly those with cheap prices and attractive physical appearance. The other factors Nurhayati Nurhayati, “Recommended Alternative Daily Intake of Fruits and Vegetables for Indonesian Elderly” 2014 Vol5, No1, p. 32, Health Science Journal of Indonesia, available at: http://ejournal.litbang.depkes.go.id/index.php/HSJI/article/view/3528 , reproduction permissible under a Creative Commons License found here: https://creativecommons.org/licenses/by-sa/4.0/ 156 84 Tastes of Europe Indonesia – Market Entry Handbook that play a significant role in the Indonesian consumers’ purchase of fruits are price, colour and freshness.157 Consumer Trends: How to Market Fruits and Vegetables in Indonesia Indonesia is an agro-based country with tropical climate suitable for growing various horticultural crops including tropical fruits and vegetables. They are cultivated in different business scales and cultivation systems. There are various tropical fruits and vegetables available throughout the year or seasonally. Banana, pineapple, papaya, citrus, star fruit, snake fruit, melon, and watermelon, are among tropical fruits available all year round; whereas, durian, mango, mangosteen, and lansium are among tropical fruits seasonally available. A lot of fruits in Indonesia are still sold in wet markets or street stalls. In some small cities throughout Indonesia, tourists can easily find local farmers offering their fruits on the streets. Popular fruits that are being sold include durians, mangoes, oranges and rambutans. Offer Domestic Market and Main Competitors Indonesia’s horticulture sector is a key opportunity for international players to work with local farmers to introduce improved production methods and coordinate economies of scale which would result in improved harvests and efficiencies. Seed research, modern planting and greenhouse methodology in addition to cold chain storage and transportation networks offer interesting business opportunities. However, exporters should position themselves strategically rather than competing directly with local producers. They should offer products which cannot be grown locally such as temperate fruit varieties. For example, those stone fruits (such as cherries, peaches and plums) as well as various berry fruit that cannot be cultivated in Indonesia’s tropical climate make a good choice for exporters. Indonesia’s fresh fruit and vegetables sector is at a key stage in its development. It can offer interesting opportunities to international importers. However, a more hands-on approach will have to be taken by the government to have any real impact on the horticulture sector. The middle-upper income section of Indonesia’s consumers will continue to provide demand to fruit exporters to Indonesia. More competition might however riase from local producers if market conditions are favourable. The Agriculture Ministry is aiming at increasing the value of Indonesian flower and fruit farming by IRD 120 trillion (USD 9 billion) by pushing promotion, revitalising plantations and boosting local fruit consumption. Agriculture Minister Amran Sulaiman said that the decision was based on the increasing opportunity for fruit exports from Indonesia, on top of surging 157 © Agriculture and Agri-food Canada, “The Indonesian Consumer Behaviour, Attitudes and Perceptions Toward Food Products”, January 2011, available at: http://publications.gc.ca/collections/collection_2013/aacaafc/A74-2-2011-19-eng.pdf 85 Tastes of Europe Indonesia – Market Entry Handbook domestic local demand stating that “Our fruit exports continue to increase on top of meeting our local demand”.158 Fruit includes five commodities that are seen as having strong potential demand locally and internationally: banana, mango, citrus, mangosteen and durian. Banana: As a tropical country, Indonesia is a perfect spot for growing this yellow, carbohydrate-rich fruit. It is one of the most important banana export hubs in Asian region as it has been shipping the fruit overseas for more than a century, since the Dutch occupation of the country. Major production hubs are located in Sumatera, Java and Bali. The most popular type is the Ambon Banana originating from Maluku Islands but has been cultivated elsewhere in Indonesia. Mango: Indonesian mangoes are known for their sweet taste, bright yellow color, strong aroma and soft texture. Mangga Harum Manis (literally translates as sweet and fragrant mango), produced in Java, has been the major fruit commodity exported to the US, Canada, Europe, China, Middle East, Japan and Singapore. Other popular mangoes are Indramayu, which is big in shape, and Gedong Gincu, which has orange skin and extremely sweet taste. Orange (Citrus): Indonesia is among the world’s top 10 orange producers, with most of the fruit exported to ASEAN countries such as Malaysia and Singapore. Orange production could easily be found in all areas throughout Indonesia from Java, Sumatera, Kalimantan and Bali. Among many types of citrus in Indonesia, the Pontianak orange, which originates from West Kalimantan, is the most popular choice among Indonesian households due to its sweet, honeyed-like taste. Mangosteen: Indonesia’s mangosteen is famous for becoming the best value-for-money choice in the regional market, as it comes in high quality but with a cheaper price compared to its regional counterparts, such as Thai mangosteen. Major productions hubs are in Java, Sumatera, Lombok and Bali. Durian: The Indonesian capital Jakarta is nicknamed the “Big Durian” for a reason: you either love it or hate it – nothing’s in between. This spiky fruit is known to have big share of lovers in Indonesia and is normally enjoyed together with relatives in big family gathering. Medan durian is smaller in size and plainer in color, or less attention-grabbing than the famous Thai Monthong durians, but this local Indonesian fruit comes with stronger smell and richer, more flavorsome taste of its flesh. The Jakarta Post, “Indonesia eyes USD 9 billion in fruit flower business”, May 2016 available at: http://www.thejakartapost.com/news/2016/05/10/indonesia-eyes-us9-billion-in-fruit-flower-business.html 158 86 Tastes of Europe Indonesia – Market Entry Handbook “Vegetable productions in Indonesia are concentrated in upland areas. Main products such as cabbage, potato, carrot, and chilli, have important roles as source of farmer's income, job opportunity, poverty alleviation and improvement of food security. The big potential of vegetable production is based on the current consumption rate, increasing domestic population especially in urban areas and exporting to abroad markets as well” 159 . Overall, these factors have contributed to the growth and development of vegetable production in Indonesia. Horticulture plays an important role in the Indonesian economy. Its share of GDP, which is dominated by vegetables and fruits, has trended upwards since 2003. However, per capita consumption of vegetables is low in comparison to similar consumption in other Asian nations. The study of price integration among regions is important in order to increase the marketing efficiency of vegetables in Indonesia. Government intervention is needed both at the producer and consumer level, especially in determining the efficient prices. The success of this intervention depends heavily on government’s understanding of price transmission in the fruits market. This research measured the integration level of regional vegetables markets in Indonesia. Engle-Granger test showed that all vegetable prices at PIKJ integrated with producer’s prices, except red chili price. Ravallion model showed that integration did not exist for all commodities. However, there was no significant difference of the market integration performance between the highest and the lowest production area. The government’s intervention, especially in the form of pricing policies at the producer level, is much needed in ensuring the stability of vegetables prices. In Indonesia, some vegetables such as large red chili and shallots are classified by the Bank of Indonesia (2010) as major contributors to inflation. The government’s ability to determine the most suitable pricing policy is strongly influenced by how profound the decision makers’ understanding of the market structure, behavior and effectiveness is. One of the methods to understand the structure, behavior, and effectiveness of the market is by understanding the relative strength of a market and the price diffusion from one market to another through a market integration study among regions in a country. 159 Arsanti, Idha; Bohme, Michael; Jahnke, Hans E., “Evaluation of Vegetable Farming Systems for Competitiveness in Upland Areas of Java and Sumatra, Indonesia”, retrieved from: http://www.tropentag.de/2006/abstracts/full/272.pdf 87 Tastes of Europe Indonesia – Market Entry Handbook There are well established retailers specifically selling fruits in big cities in Jakarta. Leading fruit retailers are All Fresh Fruit Store in Indonesia, which boasts 10 branches in Jakarta and West Java. Another noted retailer is PT Total Buah Segar that has operated various branches in Indonesia since 2013. Both the fruit retailers sell high-quality imported and domestic fruits and have grown in popularity among the capital’s middle-class citizens. Import The growing number of middle-class consumers with increased purchasing power in Indonesia has translated into a growing demand for imported fruits. This shows potential business opportunities for European fruit exporters. The Indonesian Government in 2014 unveiled plans to more than double the import quota for fruits and vegetables to try and meet a surge in domestic demand. The Indonesian Trade Ministry said the Government would allow up to 600,000 tons of 17 horticultural products including apples, mangoes, citrus and potatoes to be imported in the first half of the year, up from 260,000 tons in the same period of 2013. Aside from the eight aforementioned fruits, Indonesia also imports some other fruits, particularly those which are not grown suitably in the country. These include apple, grape, kiwifruit, pear, and palm fruit which can be categorised as prominent imported fruits. Apple, grape, kiwifruit, and pear are commonly consumed in urban areas. Meanwhile, palm fruit is favorably consumed by Muslims especially during the fasting month (Ramadan). “Total volume and value of these five fruit in 2013 were respectively recorded at 328,426,720 kg and USD “[432 million (EUR 386 million)].160. In other words, the proportion of volume and value of these imported fruit was about 67 percent of the total volume and value of imported fruit of the country. 160 Arsanti, Idha; Bohme, Michael; Jahnke, Hans E., “Evaluation of Vegetable Farming Systems for Competitiveness in Upland Areas of Java and Sumatra, Indonesia”, Tropentag, retrieved from: http://www.tropentag.de/2006/abstracts/full/272.pdf 88 Tastes of Europe Indonesia – Market Entry Handbook Indonesia’s lucrative fruit market, though boasting enormous potential for overseas exporters, has not been without controversy. In 2013, the Indonesian Government banned the import of thirteen horticultural and agricultural products to protect its local market, affecting the regional fruit trade and inciting complaints from its trading partners. This move was followed by a similar stance from the central government that in January 2017 called for importers of horticulture to purchase domestically grown fruits and vegetables to support local farmers. In late 2016, in fact, “Indonesia launched the “Orange Revolution” late last year to push up local fruit production, aiming to become the biggest tropical fruit exporter in ASEAN by 2025, and in the world by 2045”.161 Export With the launch of the ASEAN Economic Community (AEC) in 2016, Indonesia began to face tougher competition for its fruits exports. The AEC promotes a high degree of free trade among its member nations. Therefore, competition for tropical fruit exports has increased, not only in export markets in other parts of the ASEAN region but also in Indonesia's domestic market.162 Stefani Ribka, “Importers urged to buy local fruit, vegetables”, The Jakarta Post, January 2017 available at: http://www.thejakartapost.com/news/2017/01/12/importers-urged-to-buy-local-fruits-vegetables.html 162 ©Indonesia Investments, “Indonesia is rich in tropical fruits but export remains low” available at: http://www.indonesia-investments.com/news/todays-headlines/indonesia-is-rich-in-tropical-fruits-but-exportremains-low.-why/item6653 161 89 Tastes of Europe Indonesia – Market Entry Handbook Indonesia's Exports of Fresh Fruits (2011-2015) Unit: EUR thousand 800000 600000 400000 200000 0 2011 2012 2013 2014 2015 Export Figure 18: Indonesia's Exports of Fresh Fruits (2011-2015)163 Based on a report from Indonesia's Ministry of Agriculture, there is a solid demand for Indonesia's tropical fruits in the United States, the Netherlands, Spain, Japan and the Middle East. In 2015, pineapples were Indonesia's most valuable products in terms of fruit exports. In that year, Indonesia exported a total of 193,940 tons of pineapples, generating USD 232.3 million (EUR 207 million) in exports. This was followed by mangosteen and then banana. Other fruits that are valuable due to high global demand are mangos, oranges and durians.164 However, there are several interrelated factors that block higher export volumes and earnings. Firstly, the quality of Indonesia's fruit is generally low because nearly all of Indonesian fruit farmers are smallholders who lack the financial resources to invest in higher-quality machinery, pesticides and fertilizer, and who also lack mastery of higher-quality farming techniques. This low quality fruit is not suitable for export purposes. Secondly, Indonesia does not have big fruit plantations or estates. Thirdly, despite being rich in tropical fruit, Indonesia lacks a welldeveloped cold storage & transport industry. Adequate handling of freshly picked fruit is crucial for long storage and shelf lives of fruit and vegetables.165 Distribution The distribution of fruit and vegetables from farmers to end-consumers in Indonesia typically involves at least five intermediaries, namely collectors, village/local wholesalers, agents at central markets, traditional markets and retailers such as fruit-vegetable vendors, small restaurants and small markets. “A multi-layer distribution system might be helpful for small farmers to market their products.”166 Additionally, it could also, to a certain extent, provide employment opportunities for individuals to act as agents. However, in comparison to those advantages, the disadvantages of such a system are greater. “Multi-layer distribution system has several disadvantages related © Trade Map, International Trade Center, available at: http://www.trademap.org/ ©Indonesia Investments, “Indonesia is rich in tropical fruits but export remains low. Why?” available at: http://www.indonesia-investments.com/news/todays-headlines/indonesia-is-rich-in-tropical-fruits-but-exportremains-low.-why/item6653 165 Ibid. 166 Soviana Soviana and Jofi Puspa, “Multi-Layer Distribution System of Indonesian Fruit-Vegetable Sector: Current Challenges and Future Perspectives”, Tropentag, September 2012 available at: http://www.tropentag.de/2012/abstracts/full/116.pdf 163 164 90 Tastes of Europe Indonesia – Market Entry Handbook to the risk of products’ quality reduction, higher transaction cost, more advanced technical requirements, more limited information flow, and information asymmetry.”167 Such a long distribution channel is particularly problematic since fruits and vegetables are perishable and thus very vulnerable. “The longer the chain is, the higher the risk that products’ quality is reduced. Aside from that risk, it is more costly to maintain the freshness (or quality) of the products through a long distribution channel than through a short one. This transaction cost will further influence the competitiveness of products and farmers well-being. If the distributors are to maintain their profit margin, then to cover up the high transaction cost they will need to either increase the selling price (lowering the competitiveness of products at the market) or press down the purchasing price (at the end putting more pressure to farmers).” 168 To maintain products’ quality, good storage and transportation facilities are essential. Though getting better at some aspects in some regions, the existing storage and transportation facilities are still relatively poor.”Cool-storage and trucks are still not widely implemented yet. Such facilities are not affordable by small farmers and thus, only large enterprises (wholesalers and supermarkets) are increasingly using such facilities to maintain their products’ quality. However, as the demand shifting, it is certainly necessary for farmers as well as other relevant supply-chain players (such as collectors, agents, etc.) to response to the market demand and to adjust their technology and management system accordingly” .169 Challenges for the European Products Transportation and distribution of goods are major challenges for all consumer goods related industries in Indonesia. As fresh fruit and vegetables need to be delivered fresh, this problem is even more acute for their producers. Indonesia’s poor infrastructure and high logistical costs are not new issues for those in the distribution sector. Some Indonesian seaports have been closed to horticulture products, following the introduction of new quality standards for imported fruit (Ministry of Agriculture Regulation No. 15/2012 and No. 16/2012). To import horticultural products into Indonesia, Ministry of Agriculture (MOA) and MOT regulations require Indonesian importers to obtain: (1) an Import Recommendation of Horticultural Products (RIPH) from MOA; and (2) an Import Approval (SPI) from MOT. Import approvals are issued on a biannual basis and are valid for one six-month period. RIPHs specify, inter alia, the product name, HS code, country of origin, manufacturing location (for industrial materials), and entry point for all horticultural products the applicant wishes to import. After securing an RIPH, an importer must obtain an SPI from MOT before importing horticultural products. An SPI specifies the total quantity of a horticultural product (by tariff classification) that an importer may import during the period for which the SPI is valid. Importers cannot amend existing SPIs or apply for additional ones outside the application window.170 Soviana Soviana and Jofi Puspa, “Multi-Layer Distribution System of Indonesian Fruit-Vegetable Sector: Current Challenges and Future Perspectives”, Tropentag, September 2012 available at: http://www.tropentag.de/2012/abstracts/full/116.pdf 168 Ibid. 169 Ibid. 170 U.S. International Trade Administration, “Indonesia Prohibited and Restricted Imports”, available at: https://www.export.gov/article?id=Indonesia-Prohibited-Restricted-Imports. 167 91 Tastes of Europe Indonesia – Market Entry Handbook Indonesia has updated its import rules on horticultural products through MOT’s Regulation 71/2015 (superseding MOT Regulations 16/2013, 47/2013, and 40/2015), but the new regulation makes few substantial changes. Import licenses still are required and quantities will be allocated subject to the importer’s cold storage capacity. MOT eliminated the 80-percent rule for horticultural products, which imposed punitive measures on importers that used less than 80 percent of the quota allotted under their import permits. However, importers state that they must file import-realization reports and that the 80 percent rule is still being implemented informally. This regulation also specifies that the total import allocation will be set annually and that importers are no longer required to register as horticultural product importers. MOA also maintains seasonal import restrictions on certain horticultural products. For example, oranges can only be imported in months outside of Indonesia harvest periods171. Indonesia’s fresh fruit and vegetables sector is at a key stage in its development with the scope to offer lucrative opportunities to both local players and international importers. However, the government’s plans to tighten their grip over horticultural imports are making life more difficult for importers and local distributors that have already to face inadequate infrastructure. 171 Ibid. 92 Tastes of Europe Indonesia – Market Entry Handbook 3.7 Processed Fruits and Vegetables Strengths Opportunities •Complementarity between EU and Indonesian growing seasons •EU fruit and vegetable products are recognised for quality, responsibilty, and ethical production •Increasing consumer income and health-awareness expected to coincide with greater demand for fruit and vegetable products •Improving cold-chain distribution and retail options, centered around core markets Fruit & Vegetable Outlook Weaknesses Threats •Competitive domestic market with important share of output held by domestic producers •Long distance to market for fresh produce and potential for spoilage due to uncertainty at market entry •Excessive interpretation of SPS requirements restrict EU market access •Competition from regional suppliers Processed fruits and vegetables is a separate category of food and beverage products, made up primarily of canned or dried fruit and vegetables, and sauces. Most fall under HS 20: Preparations of vegetables, fruit, nuts or other parts of plants. Consumption Consumer trends Processed fruits and vegetables have posted positive growth in recent years, despite being less popular then fresh fruits and vegetables. Its lack of popularity stems from Indonesian consumer’s preference for fresh variants, as they are cheaper, healthier and have high availability. Expected rising health consciousness among consumers may even prompt a further shift away from processed products to fresh ones.172 The current level of consumption is driven by busy urban consumers seeking convenient healthy snacks. Driven by the wide availability of fresh fruits and vegetables, not only in wet markets but also in hypermarkets, supermarkets and some convenience stores, processed fruits and vegetables posted slower growth in 2015 than in 2014 in terms of both retail volume and value sales.173 The government of Indonesia decided to increase the price of fuel several times during 2015, a move which further diminished consumer purchasing power and boosted the already high 172 173 © Source: Euromonitor International, “Processed Fruit and Vegetables in Indonesia”, 2015 Ibid. 93 Tastes of Europe Indonesia – Market Entry Handbook rate of inflation. As a result, many Indonesian consumers became more cautious with regards to their spending, with packaged food no exception. Almost all packaged food categories recorded marginally slower volume growth in 2015 than in 2014.174 Nonetheless, volume growth remained positive and respectable value of the main packaged food categories during 2015, with growth supported by a flurry of new product launches, aggressive promotional activities by key players and the rapid expansion of modern grocery retailers. These factors all contributed to improvements in consumer knowledge and understanding of the many products available and consequent increases in spending on various product types.175 Indonesia's demand for agricultural commodities is expected to remain strong, as the processing industry for agricultural commodities continues to grow. Urbanisation, an expanding middle class, and strong domestic demand will fuel sustained demand for agricultural imports. The increasing receptiveness to Western foods and lifestyle factors has also led to a change in the diet of Indonesians. This is expected to continue to drive consumption of processed vegetables and fruit among other commodities.176 Offer Domestic offer Indonesia has abundant natural resources and a range of biodiversity including horticulture in which they must be maintained, utilised, and preserve sustainably. The biodiversity is shown in the form of fruit crops, vegetable crops, medicinal plants, ormanental plants, aquatic plants, etc. which have food and aesthetic value. Fruit, in particular, is a group of horticultural plant species that can be consumed in both of fresh or processed forms. The majority of fruit producers are small holder farmers, operating on land less than one hectare, and home-yard. According to the National Statistical Agency (BPS), there were approximately 6,100 large and medium sized processed food producers and 1.24 million microand small-scale producers with 2.9 million employees in 2014. Micro and small-scale producers include home industries and products sold in small roadside restaurants, retailer kiosks called warungs, and pushcarts called kaki limas. “The product value of Indonesia’s large and medium food and beverage processing industry was estimated at IDR 1,238 trillion ($92.3 billion) [75 billion EUR]. The value of raw materials used by large and medium processors was IDR 791.8 trillion ($59.0 billion)[48.2 billion EUR].”177 “The Government of Indonesia is encouraging the growth of the food processing industry.”178 Fruit processing data in Indonesia are not available in detail, except for the number of fruit and vegetable industries (see the table below). This number was classified based on KLBI (Klasifikasi Baku Lapangan Usaha Indonesia/Indonesian Standard Industrial Classification) Codes. It refers to the International Standard Industrial Classification of All Economic Ibid. © Source: Euromonitor International, “Packaged Food in Indonesia”, 2015 176 Australian Trade and Investment Commission, “Agribusiness to Indonesia” available at: http://www.austrade.gov.au/Australian/Export/Export-markets/Countries/Indonesia/Industries/agribusiness 177 Food Export, “Indonesia Country Profile” available at: https://www.foodexport.org/get-started/countrymarket-profiles/southeast-asia/indonesia-country-profile#foodprocessing 178 Ibid. 174 175 94 Tastes of Europe Indonesia – Market Entry Handbook Activities (ISIC), ASEAN Common Industrial Classification (ACIC), and East Asia Manufacturing Statistics (EAMS). Import Food processors commonly import primary inputs, such as skim milk, whey powder, and frozen meat rather than processed goods. Food processors generally purchase essential complementary inputs/food additive like flavourings, preservatives, emulsifiers, and vitamins from a local agent or distributor because they are used in smaller quantities and often have limited shelf life. Some processors may choose to act as an importer if they find a better-priced alternative. “Post advises that primary ingredients such as wheat, refined sugar, soybeans, dairy, fresh fruit, and processed fruit have high demand and are frequently imported.” 179 140000 EUR '000s 120000 100000 80000 60000 40000 20000 0 Imported value in Imported value in Imported value in Imported value in Imported value in 2011 2012 2013 2014 2015 China United States of America Brazil World European Union (EU 28) Aggregation Figure 19: Imports of Preparations of Vegetables, Fruits and Nuts, 2011-2015180 Reports suggest that primary ingredients such as refined sugar, soybeans, dairy and processed fruit have high demand and are frequently imported. Blending products used for enriching products such as corn starch, potato starch, dehydrated potato, garlic powder, onion powder, and chili powder are also in demand. Concentrates of fresh fruits and vegetables are also in demand. 181 Food Export, “Indonesia Country Profile” available at: https://www.foodexport.org/get-started/countrymarket-profiles/southeast-asia/indonesia-country-profile#foodprocessing 180 © Trade Map, International Trade Centre, available at www.trademap.org. 181 Ibid. 179 95 Tastes of Europe Indonesia – Market Entry Handbook Export In 2015, Indonesia exported EUR 126.4 million of processed fruit more than it imported. Top export markets were the EU, particularly Spain, and the USA. Exports of processed fruit and vegetables declined in 2013 but have since recovered. 300000 EUR '000s 250000 200000 150000 100000 50000 0 Exported value in Exported value in Exported value in Exported value in Exported value in 2011 2012 2013 2014 2015 United States of America Netherlands Spain World European Union (EU 28) Aggregation Figure 20: Exports of Preparations of Vegetables, Fruits and Nuts, 2011-2015.182 182 © Trade Map, International Trade Centre, available at www.trademap.org. 96 Tastes of Europe Indonesia – Market Entry Handbook Main competitors on the market Kikkoman Corp lead the market in processed fruit and vegetables in Indonesia, accounting for a retail value sales share of 21 percent in 2015. Owning the notable Del Monte brand, the company is present in almost all categories in shelf stable fruit and vegetables. In the dominant shelf stable fruit category, Del Monte led with a retail value sales share of 24 percent in 2015. The Del Monte brand is available in most modern grocery retail outlets in the country and the brand name is well-recognised for its quality. It is also available in anumber of product variants, making it favourable amongst consumers. Distribution As noted in the chapter on fresh fruit and vegetables, distribution channels in Indonesia are not always efficient. This will less effect on the market for processed fruit and vegetables as they are less perishable. Convenience stores are expanding rapidly in Indonesia. Following the introduction of 7-Eleven in 2009, the stores have grown in popularity among young consumers and students. “Minimarkets, convenience stores, and other shops carry a wide range of convenience food items such as readymade meals, bakery products, processed foods, ice cream, and beverages. They sometimes carry a limited offering of fresh fruits and are open 24 hours. These stores are found throughout Indonesia’s major urban centers and are also co-located with gasoline stations, such as Bright, Circle K, Bonjour, Indomaret and Alfamart; and railway station.” 183 Franchising is driving the rapid growth of minimarkets and convenient stores. Food Export, “Indonesia Country Profile” available at: https://www.foodexport.org/get-started/countrymarket-profiles/southeast-asia/indonesia-country-profile#foodprocessing 183 97 Tastes of Europe Indonesia – Market Entry Handbook 3.8 Dairy Products Strengths Opportunities •EU dairy products are recognised for quality, responsibilty, and ethical production •Certain dairy products are aligned with increasing trends in consumer lifestyles •Increasing consumer income expected to coincide with greater demand for imported dairy products •Improving cold-chain distribution and retail options, centered around core markets Dairy Outlook Weaknesses Threats •Relatively low existing levels of dairy consumption in Indonesia, even against regional comparators •Dairy products are considered pricesensitive and consumption drops during slowed economic performance •Greater consumer trust, awareness, or familiarity with domestic dairy products •High regional competition from markets in Australia, New Zealand, and elsewhere Consumption Indonesian dairy production continues to grow, driven by new demand in Indonesia for dairy products, led by an expanding middle class that is seeking new sources of high quality proteins.184 The per capita milk consumption in the country is however significantly lower than the consumption in other countries in the region. In 2015, the consumption of milk was 14.3 litres per capita compared to 22.1 litres in the Philippines, 33.7 litres in Thailand and 50.9 litres in Malaysia. 185 However, milk consumption in Indonesia has been growing more rapidly than in its neighbouring countries, with some dairy processors reporting as much as 15 percent increases in some product categories. This is supported by Indonesia’s growing middle class, which has expanded significantly over the last decade186. U.S. Department of Agriculture, “Indonesia 2016 Dairy and Products Annual Report”, available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Dairy%20and%20Products%20Annual_Jakarta_In donesia_10-17-2016.pdf. 185 Ibid. 186 Ibid. 184 98 Tastes of Europe Indonesia – Market Entry Handbook Consumer Profile Dairy products, notably drinking milk products, are especially popular among consumers from the middle class in Indonesia. The expanding middle class is therefore one of the key drivers behind the increased dairy and milk consumption. In the past decade, the middle class grew significantly to include 56.5 percent of the total population in 2010. It is expected to expand further at 7 percent per year to include approximately 68.2 percent by 2020, according to World Bank estimates.187 The main consumers of dairy products such as milk, flavoured milk and milk powder are babies and young children. Milk has a longstanding reputation as the best substitute for breast milk. These products are to a lesser extent popular amongst adults, who prefer milk derivatives such as cheese, desserts and coffee whitener. Consumer trends: Health conscious consumers and westernised diets Dairy products are not a traditional part of the Asian diet; more than 90 percent of the Southeast Asians are thought to be lactose intolerant. However, dairy products are gaining popularity and have become regular products in the Indonesian households. There are several trends that have contributed to this development. The consumption of dairy and milk is influenced by the economic performance of a country and the consumer purchasing power. In 2015, when Indonesia’s economic performance weakened, and the purchasing power declined, consumers prioritised staple foods, such as cereals, flour and rice. Especially the consumption of milk derivatives, such as desserts, chilled snacks and coffee whiteners was affected by these developments. Similarly, consumption patterns will change to include more animal products such as dairy when the economic situation improves, and incomes rise. With a positive economic outlook for the coming years and growing incomes, the Indonesian dairy consumption is expected to further increase.188 The increased health awareness among Indonesian consumers as a result of growing media coverage has contributed to the increased consumption of drinking milk products, yoghurt and sour milk products. Consumers, especially with a middle or higher income, are increasingly becoming aware of the health benefits associated with these products. These products are an important source of protein and calcium and can aid digestion. Furthermore, they are believed to contribute to weight loss, improved skills and a slower ageing process, making these products especially popular among female consumers.189 Another trend that positively impacts the dairy consumption in Indonesia is the introduction of western-style food and dishes, such as pizza, pasta and cakes, which commonly use dairy products. Products such as cheese and cream are increasingly being used in restaurants and urban households to cook western-style dishes, but are also being used in street food, such as toast, fried breaded banana, chips and pastries. This trend is most visible among middle and Ibid. U.S. Department of Agriculture “Indonesia Dairy and Products Annual 2016” available at: http://www.fas.usda.gov/data/indonesia-dairy-and-products-annual-1 189 © Source: Euromonitor International, “Dairy in Indonesia”, 2015 187 188 99 Tastes of Europe Indonesia – Market Entry Handbook higher-income consumers in urban areas, who tend to be more receptive to western food than consumers in rural areas.190 There are also some trends that could negatively impact the dairy consumption in Indonesia. First of all, drinking milk products are expected to face increased competition from products offering the same benefits as milk. In addition to this, several products, such as fortified powder milk and flavoured powder milk increasingly have to compete with more convenient calcium supplements in the form of tablets.191 Lastly, dairy-free, sugar-free and gluten-free products are becoming more popular as a way to lower cholesterol and prevent chronic diseases. While this trend is relatively new, the popularity of these products is expected to increase soon as a result of increased health awareness.192 Challenges and opportunities for EU companies The increased demand for dairy products, which is expected to further increase as a result of more health-conscious consumers, westernised diets, a growing middle class and rising incomes, provides important opportunities for EU companies that wish to expand their business to Indonesia. While the current level of dairy consumption is relatively low, especially compared to other countries in the region, there is enormous growth potential and the milk consumption is expected to double over the next ten years. However, there are some challenges for EU dairy producers that wish to export their products to Indonesia. Indonesians, in fact, tend to prefer and trust local brands over foreign brands. As it comes to the flavour, there is a preference for sweet tasting dairy beverages, for example flavoured milk drinks, especially amongst children who dislike the taste of milk. Besides this, © Source: Euromonitor International, “Dairy in Indonesia”, 2015 Ibid. 192 © EU-Indonesia Business Network, “Food and Beverage” available at: http://www.flandersinvestmentandtrade.com/export/sites/trade/files/news/637150602213204/637150602213 204_1.pdf 190 191 100 Tastes of Europe Indonesia – Market Entry Handbook Indonesian consumers prefer small packaging due to its convenience. Companies that are already established on the market have for example introduced smaller packaging of flavoured milk to target children. Lastly, a trend towards dairy-free, sugar-free and gluten-free products is developing in Indonesia. While this trend is relatively new, it could have an impact on the consumption of dairy products in the future. Offer The domestic production of milk and dairy in Indonesia is relatively limited and as a result, the country relies heavily on the import of dairy products. As the demand for dairy products is further increasing, the Indonesian government acknowledges the growing gap between production and demand. “The Indonesian Agriculture Ministry said that the country is for 60 percent dependent on milk imports (particularly from Australia and New Zealand) to meet domestic demand. Currently, domestic milk demand in Indonesia stands at 3 million tons per year. However, only 1.2 million tons can be produced domestically. In the future the situation can worsen as domestic milk consumption grows 7 percent per year, whereas domestic milk production grows by 3.3 percent per year only”.193 Domestic production The domestic production of dairy and milk in Indonesia is limited. The dairy cow herd is relatively small, estimated at 405,000 cows in 2015. While this constitutes an increase compared to 2014, the number of dairy cows significantly decreased in recent years. Between 2011 and 2013, the dairy cow herd decreased by 16.7 percent from 420,000 to 350,000 cows. The key drivers for this decrease were high beef prices, which led many farmers to sell their dairy cows to slaughterhouses. However, the recent increase in the number of dairy cows is expected to persist and the production of milk is expected to grow again.194 ©Indonesia Investments, “Milk Industry of Indonesia Dependent on Imports to Meet Domestic Demand”, June 2014: https://www.indonesia-investments.com/news/todays-headlines/milk-industry-of-indonesiadependent-on-imports-to-meet-domestic-demand/item2071? 194 U.S. Department of Agriculture, “Indonesia Dairy and Products Annual 2015” available at: http://www.fas.usda.gov/data/indonesia-dairy-and-products-annual-1 193 101 Tastes of Europe Indonesia – Market Entry Handbook In 2014, 1.64 million litres of milk were produced in Indonesia.195 Despite the growth of largescale dairies, milk producers in Indonesia are mainly smallholders with usually no more than five cows. Indonesia’s Ministry of Agriculture (MOA) reports there are 122,750 dairy farmers managing about three or four cows each on average. These small-scale companies often join dairy cooperatives that collect the milk to sell to processing companies. Because of their suboptimal production methods and the lack of scaling technologies, their yields remain limited at 10 to 12 litres per cow per day and are of inferior quality.196 In addition to these smallholders, there are several large companies on the market that continue to drive production growth. These companies are expected to build new production facilities and further expand milk production in the coming years.197 These large-scale Indonesian dairies are mostly concentrated on Java. Especially East Java has seen significant growth of the milk and dairy industry in recent years. At higher elevations, Java proves to be the most suitable place for dairy farming as dairy cows prefer a cool and dry climate.198 Import As a result of its limited quantity and quality of domestically produced milk and dairy and the increased demand among Indonesian consumers, Indonesia heavily depends on the import of milk and dairy products. However, the devaluation of the Indonesian Rupiah in recent years has increased the costs of imports. In terms of quantity, the main imports concern powdered and condensed milk. 195 196 197 198 Ibid. Ibid. Ibid. World Bank Group, International Finance Corporation, “Dairy Industry Development in Indonesia”, available at: https://www.ifc.org/wps/wcm/connect/93f48d00470e3bf883ffd7b2572104ea/Dairy+Industry+Development2011.pdf?MOD=AJPERES 102 Tastes of Europe Indonesia – Market Entry Handbook 1% Concentrated milk and cream 31% Non-concentrated milk and cream Cheese and curd 55% Butter Whey Buttermilk, etc. 6% 6% 1% Figure 21 Percentage Share of Total Dairy Imports (in terms of quantity)199 Indonesia mainly imports its dairy products from New Zealand and Australia due to these market’s geographic proximity and longstanding trade relations, including the ASEANAustralia-New Zealand Free Trade Agreement. Another important trade partner is the USA, which have increased their share in the total imports in recent years, especially for whey and cheese. For certain dairy products, including concentrated milk and cream, buttermilk and whey, the EU Member States are significant trading partners. Milk powder and whey are the EU’s main agri-food export products: In 2015, these products held a share of 27.1 percent of the total agrifood exports to Indonesia. In the past five years, the export of EU dairy products has slightly increased in value from EUR 210 million in 2011 to EUR 233 million in 2015. However, in 2015 the overall EU dairy exports to Indonesia have declined in value compared to 2014, as displayed in the figure below.200 199 200 © Trade Map, International Trade Centre, available at: www.trademap.org. Ibid. 103 Tastes of Europe Indonesia – Market Entry Handbook 250 200 150 100 50 0 2011 Milk powder and whey 2012 Butter 2013 Cheese 2014 2015 Fresh milk and cream, buttermilk and yoghurt Figure 22 EU Exports of Dairy Products to Indonesia, 2011-2015201 Indonesia imports large quantities of concentrated milk and cream. In 2015, the value of the import of these products was EUR 461 million. This demonstrates a decrease of 31.6 percent compared to 2014, but only a decrease of 17.5 percent compared to 2011. An explanation for this could be the recent devaluation of the Indonesian Rupiah and the resulting as-needed approach of Indonesian importers. The main exporters of concentrated milk and cream to Indonesia are New Zealand (with a 28.7 percent share in 2015), Australia (24.5 percent) and the USA (18.4 percent). The main EU exporters are Belgium (8.2 percent), France (7.4 percent), Germany (3 percent) and Denmark (2 percent).202 In the past five years, the whey imports have increased significantly. In 2011 Indonesia’s import of whey was valued at EUR 115 million which increased to EUR 168 million in 2015. Indonesia mainly imports whey from France (28.4 percent of the total import in 2015), the USA (19 percent) and Germany (12.4 percent). Other EU Member States that hold a significant share in Indonesia’s whey import include Poland (11.6 percent), the Netherlands (7.2 percent) and Ireland (4.4 percent).203 The import of cheese and curd has increased by 29.5 percent between 2011 and 2015 to reach EUR 78 million in 2015. With a share of 58.4 percent in 2015, New Zealand dominates the cheese and curds exports to Indonesia. Other main exporters to Indonesia are the USA (17.4 percent) and Australia (15.8 percent). The EU Member States hold relatively small shares: The Netherlands exported for EUR 1.2 million (1.5 percent), Denmark for EUR 1 million (1.3 percent) and France for EUR 869 000 (1.1 percent). Italy is the only EU Member State which has registered two GIs for cheese, but its exports were only worth EUR 796 000 (1 percent).204 Butter imports have also increased over the past five years: In 2015 the imports were valued at EUR 73 million compared to EUR 62 million in 2011. Indonesia mainly imports butter from New Zealand, which held a 71.9 percent share in 2015, Belgium (13.6 percent) and France (5.7 percent). The other EU Member States hold a significantly smaller share: The Netherlands (3.3 percent), Denmark (0.6 percent) and Germany (0.2 percent).205 European Commission, Agri-food Trade Statistical Factsheet: EU – Indonesia” available at: http://ec.europa.eu/agriculture/trade-analysis/statistics/outside-eu/countries/agrifood-indonesia_en.pdf 202 © Trade Map, International Trade Centre, available at www.trademap.org. 203 Ibid. 204 Ibid. 205 © Trade Map, International Trade Centre, available at www.trademap.org. 201 104 Tastes of Europe Indonesia – Market Entry Handbook The Indonesian market for butter milk is significantly smaller and has faced a strong decline in imports. Between 2011 and 2015, the import value of buttermilk decreased by 59.2 percent to EUR 6.5 million. The main exporters are the Netherlands (42.2 percent share in 2015), New Zealand (16.3 percent) and Australia (15.6 percent). Other EU exporters are France (8.9 percent), Sweden (4.9 percent), Germany (3.3 percent) and Denmark (2.7 percent).206 Export The Indonesian export of dairy products is rather limited and is mainly focused on other Asian countries, such as the Philippines, Singapore and Timor-Leste. Indonesia also increasingly exports to African countries, including Nigeria and Algeria. The export of Indonesian dairy products to the EU is very limited. 28% 33% Concentrated milk and cream Non-concentrated milk and cream Cheese and curd Butter Whey 1% 1% Buttermilk, etc. 35% 2% Figure 23: Percentage Share of Total Dairy Exports (in terms of quantity), 2015207 In 2015, the main export product in terms of quantity was non-concentrated milk and cream, which made up 35 percent of the total dairy export. The exports were valued at EUR 10.6 million 2015 and have remained relatively stable since 2011. The main importers of Indonesian non-concentrated milk and cream are Singapore, Timor-Leste and Hong Kong. The second most exported product in 2015 was buttermilk, which accounted for 33 percent. The export of buttermilk nearly doubled between 2011 and 2015, from EUR 7.8 million to EUR 12.7 million as shown in the chart above. Indonesia mainly exports to Papua New Guinea, Timor-Leste and Viet Nam.208 The export of concentrated milk and cream constituted 28 percent of the total exports in terms of quantity, but its value is the highest at EUR 20.3 million. The export of concentrated milk and cream has nearly halved in the past five years. The main importers of these Indonesian products are Nigeria, Algeria and Malaysia. The Netherlands and Denmark held a small share 206 207 208 Ibid. Ibid. © Trade Map, International Trade Centre, available at www.trademap.org. 105 Tastes of Europe Indonesia – Market Entry Handbook in the Indonesian export of concentrated milk and cream of respectively EUR 5,000 and EUR 4,000 in 2015. Cheese and curd is exported in limited quantities and only made up 1 percent of the total dairy exports in 2015. The exports were valued at EUR 2.1 million and increased with 20.9 percent since 2011. Indonesia mainly exports its cheese and curd to the Philippines, Singapore, Thailand and Malaysia. The export of whey in terms of quantity only accounts for 1 percent of the dairy exports but has increased significantly in the past five years. The value of whey exports increased by 1620.8 percent, moving from EUR 53,000 in 2011 to EUR 912,000 in 2015. The main importers of Indonesian whey are Malaysia, Thailand, Singapore and Viet Nam. In 2015, the Netherlands imported EUR 23,000 worth of whey from Indonesia, while Denmark imported for EUR 10,000.209 Lastly, the export of Indonesian butter has dramatically decreased in recent years. In 2011, Indonesia’s export was valued at EUR 3 million and decreased by 87.5 percent to EUR 381,000 in 2015. Indonesia mainly exports to the Philippines, Singapore, Nigeria and Hong Kong. Main competitors on the market The main players on the Indonesian market can be divided by the following product categories: drinking milk products; yoghurt and sour milk products; cheese; and other dairy products, including for example cream and coffee whitener. The main competitors on the market for drinking milk products are Ultrajaya Milk Industry & Trading Co., Frisian Flag Indonesia, Nestlé Indonesia, Indolakto and Fonterra Brands Indonesia. Notably, three of these companies have a foreign origin: Frisian Flag originated in the Netherlands, Nestlé originated in Switzerland and Fonterra Brands originated in New Zealand. By investing in their distribution network, new products, marketing and promotions, these five companies managed to hold a 82 percent retail value share in the market in 2015.210 In the market for yoghurt and sour milk products, the main player is Yakult Indonesia Persada, which has its origin in Japan. In 2015, Yakult held a 39 percent value share in the market, which Euromonitor attributes to its marketing and strong distribution network. Another development that positively contributed to its strong market presence is the rapid development of convenience stores in Indonesia. Another major player in the market is the French company Danone.211 209 210 211 © Trade Map, International Trade Centre, available at www.trademap.org. © Source: Euromonitor International, “Dairy in Indonesia”, 2015 Ibid. 106 Tastes of Europe Indonesia – Market Entry Handbook Kraft Ultrajaya Indonesia, from the American company Kraft Foods, is the leading company in the market for cheese. In 2015, the company held a value share of 61 percent. The brand’s popularity can be attributed to an early entry in the Indonesian market and a focus on both above-the-line television advertisements and below-the-line, personal marketing. Another important player is the Indonesian company Prochiz. In 2016, Prochiz introduced fruit flavoured cheese slices to target children. In the market for other dairy products, including for example condensed milk, cream and coffee whitener, the main market players are Frisian Flag (holding a 36 percent value share), Indomilk and Indolakto. An explanation for Frisian’s Flag popularity is its longstanding presence in Indonesia (Frisian Flag products were first imported in 1922) and its marketing efforts, both through television and other media. Specific customs and SPS requirements According to Food Law No. 18 of 2012, the import of food is only allowed if Indonesia’s domestic production is insufficient or if the goods cannot be produced domestically. The importer must therefore register with the Indonesian Ministry of Trade as an APIU for the importation of goods for sale or APIP for the importation of goods for their own production. Furthermore, importers are required to obtain an import approval (SKI) and provide a health certificate for each shipment of goods. In addition to this, a halal certificate is also required. The shipment and relevant documentation is then checked upon arrival by the Indonesian Ministry of Agriculture. The following documents may be required when exporting dairy products to Indonesia: ▪ Appointment as IT Animal and Animal Products; ▪ Import Permit for Drugs and Food; ▪ Import Approval for Animals and Animal Products; ▪ Registration of Foodstuffs; ▪ Free Sale Certificate; ▪ Certificate of Analysis; ▪ Certificate of Good Manufacturing Practice; ▪ Irradiation Certificate for Foodstuffs; ▪ Veterinary Health Certificate for Animal Products; and ▪ Halal Certificate. For more information, please check the European Commission Market Access Database: here 107 Tastes of Europe Indonesia – Market Entry Handbook Challenges and opportunities for EU businesses The widening gap between domestic production and the demand for dairy provides opportunities for EU companies seeking to export their products to Indonesia. There is an especially large market for the import of concentrated milk and cream and whey products, and the import of cheese and curds has steadily increased in the past five years. However, there are some challenges that should be considered by EU companies wishing to export to Indonesia. First, there are several large companies that have firmly established themselves on the Indonesian market. These companies, including Frisian Flag, Kraft, Ultra Jaya and Yakult, have entered the market early on and now have a large market share.They have invested heavily in marketing and advertisement to establish a good reputation and brand. Additionally, they have made investments to set up a well-functioning distribution system for their products. These companies hold a significant share in the market and EU companies thinking about entering the market should keep in mind that they need a large marketing budget to create brand awareness.212 Secondly, exporting dairy products to Indonesia is associated with a heavy bureaucratic burden. As Indonesia only, imports products it cannot or insufficiently produces domestically, an importer needs to register at the Ministry of Trade and obtain an import permit. Furthermore, there are a number of certificates that are required in order to export to Indonesia, including a Free Sales Certificate, Certificate of Good Manufacturing Practice, a Veterinary Health Certificate for Animal products and a Halal Certificate. Most EU companies will not currently have a halal certification and obtaining one in Indonesia could be especially burdensome and resource consuming for smaller companies.213 Due to the large number of required approvals, certificates and permits, it could be beneficial for EU companies to work closely with an Indonesian importer. Distribution The lagging infrastructure development, along with Indonesia’s complicated geography, complicates a quick and efficient distribution of dairy products to major urban centres. A cold chain distribution system, essential for dairy products, is constrained by an underdeveloped distribution system and the lack of refrigeration and electrical power in remote areas of the country. As a result, most dairy producers work with a range of distributors and large companies, such as Frisian Flag, Indolakto and Tigaraksa, set up their own distribution company. Some Indonesian companies, including PT Sukanda Djaya, PT Indoguna Utama, PT Tigaraksa and PT Wicaksana, provide national distribution services to local and imported dairy suppliers. However, it is expected that as the demand for temperature-sensitive products increases because of rising incomes, improvement to the distribution system will be made accordingly.214 World Bank Group, International Finance Corporation, “Dairy Industry Development in Indonesia”, available at: https://www.ifc.org/wps/wcm/connect/93f48d00470e3bf883ffd7b2572104ea/Dairy+Industry+Development2011.pdf?MOD=AJPERES. 213 Office of the US Trade Representative, “Indonesia”, available at: https://ustr.gov/sites/default/files/files/reports/2015/NTE/2015%20NTE%20Indonesia.pdf. 214 US Department of Commerce, “2016 Top Markets Report. Cold Chain Country Case Study: Indonesia” available at: http://trade.gov/topmarkets/pdf/Cold_Chain_Indonesia.pdf; World Bank Group, International Finance Corporation “Dairy Industry Development in Indonesia” available at: https://www.ifc.org/wps/wcm/connect/93f48d00470e3bf883ffd7b2572104ea/Dairy+Industry+Development2011.pdf?MOD=AJPERES 212 108 Tastes of Europe Indonesia – Market Entry Handbook Challenges for EU products In remote areas, there is limited or no availability of electricity and refrigeration. This is especially true for small traditional retail shops. However, the expansion of modern retail channels, such as supermarkets, hypermarkets and mini-markets, with refrigeration provides the possibility for EU companies to sell their products in Indonesia. 109 Tastes of Europe Indonesia – Market Entry Handbook 3.9 Processed Cereals Strengths Opportunities •Well-attuned to growing consumer health consciousness •Good match with increasing convenience-orientation of Indonesian consumers •Government policy increasingly supports move towards healthy meal options away from traditional, highfat foods •Long shelf-life and ease of transport to market Cereals Outlook Weaknesses Threats •Consumption opportunities mainly restricted to middle- and upperclasses in Indonesia •Linked to dairy consumption, which can be more volatile depending on macreconoimc performance •Low existing EU market share and uncertain growth prospects •Strong presence of regional and international competitors in the Indonesian market Processed cereals (HS 1904) include products produced by roasting cereals, such as breakfast cereals and cereal based snack bars, and prepared cereals in grain form such as oats. Consumer trends The traditional local breakfast in Indonesia consists mainly of fried rice. Breakfast cereals are comparatively expensive and are a relatively new alternative. Although most Indonesians still prefer to eat rice and noodles as part of their daily diet, an increasing number of Indonesians, particularly those who live in the urban environments, have started to consume cereals and bread. In fact, Indonesia has become the world’s second-largest wheat importer and ranks among East Asia’s largest cereal importers.215 The primary target consumer groups are middle and upper-income consumers who are less concerned about the relatively high unit price of breakfast cereals. Increasing consumer disposable income in emerging economies of Asia Pacific is contributing to the growth in demand for breakfast cereals. The rising popularity of Western culture in Indonesia has reportedly helped to boost growth in breakfast cereals among the middle and upper income 215 ©Indonesia Investments, “Urban Lifestyle Indonesia: Consumption Wheat & Bread Products Rises” available at: https://www.indonesia-investments.com/news/news-columns/urban-lifestyles-indonesia-consumptionwheat-bread-products-rises/item5602? 110 Tastes of Europe Indonesia – Market Entry Handbook consumers. Milk consumption has also expanded and that tends to be an aspect that drives the consumption of breakfast cereal. 216 More Indonesians, especially urban consumers have become accustomed to eating cereals with milk for breakfast. One feature of the urban lifestyle is that many urban dwellers are increasingly consuming easy-to-eat food products for breakfast, such as cereals and bread products, as they rush from their homes to their offices. In a city like Jakarta people have to leave early in order to make it on time at the office, given the severe traffic congestion and therefore lack time to cook in the morning.217. In addition to its primary role as a breakfast food, breakfast cereals products will continue to be consumed by Indonesian children as a convenient snack. The market for cereal bars which are rarely eaten at breakfast time, is also growing. Various companies manufacture instant breakfast cereals which just require hot water to be added and can consumed at home or at a workplace. These products are gaining significant share in daily consumption among students and the busy service class because time and cost saving. Some producers have engaged in targeted campaigns to promote the eating of breakfast cereals to consumers in the Indonesian market. Nestlé, the market leader in breakfast cereals in Indonesia, has engaged employees to attend informal women’s networking groups and discuss the nutritional benefits compared with the traditional local breakfast of fried rice. Cereal producers have been making inroads into markets such as Indonesia by promoting cereal as a source of fiber, vitamins and minerals, focusing especially on the benefits for children. Breakfast cereals are perceived as being healthy, offering many physical benefits to consumers. Healthy eating is becoming more popular, younger consumers in particular have started to develop awareness that the consumption of healthy food products is important to lead a more productive and higher quality life. This may include the consumption of cereals for breakfast instead of fried dishes with rice. 216 217 Ibid. Ibid. 111 Tastes of Europe Indonesia – Market Entry Handbook Food manufacturers are responding to the demand for healthier products by providing products with heightened vitamin content, healthier ingredients, lower sugar, cholesterol and fat content. Consumers are increasingly aware about the benefits associated with breakfast cereals and prefer low calorie and high carbohydrate/fiber content products, which are seen in light of weight. This is expected to impact on product sales. Demand for more value-added cereals containing whole wheat, high fiber content and other healthy ingredients is then expected to further increase the sales of breakfast cereals in Indonesia.218 Another factor increasing the attractiveness of breakfast cereals may be government campaigns that promote the consumption of other staple foods than rice. These campaigns have been conducted in recent Indonesian history as the country struggles to produce enough rice to meet domestic demand.219 A depressing influence in the market is price, which will have been exacerbated in 2015 by the government of Indonesia’s decision to increase the price of fuel several times, a move which further diminished consumer purchasing power and boosted the already high rate of inflation. As a result, many Indonesian consumers became more cautious with regards to their spending, with packaged food being no exception. Almost all packaged food categories recorded marginally slower volume growth in 2015 than in 2014.220 The soaring price of fuel, rising regional minimum wages, increasing industrial electricity tariffs and depreciation in the exchange value of the rupiah against the US dollar during 2015 piled considerable pressure on both production and distribution costs for packaged food. The rising prices of raw materials for packaged food production such as flour, cooking oil and sugar as well as packaging materials such as tin cans were also inevitable. Manufacturers therefore had no choice but to increase unit prices in order to maintain margins. Furthermore, many packaged food categories including breakfast cereal products are now sold in smaller packaging formats to make them more affordable to lower-income consumers. This said, the popularity of Western culture and the rising health consciousness of Indonesian consumers is expected to continue to drive market growth in breakfast cereals over the next 5 years. The multiple uses for breakfast cereals will continue to drive demand over the forecast period. Cultural sensitivities Indonesians traditionally offer food as a gift for many occasions (called “oleh-oleh” in Indonesian). Oleh-oleh is often presented in the form of a snack food and is enjoyed by peoples of all ages and income levels. Since the large majority of Indonesians are Muslim, most foods are produced using methods and products that meet halal requirements. U.S. Department of Agriculture, “Indonesia Food Processing Ingredients Update” available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20Processing%20Ingredients_Jakarta_Indon esia_12-8-2015.pdf 219 © Indonesia Investments, “Urban Lifestyle Indonesia: Consumption Wheat & Bread Products Rises” available at: http://www.indonesia-investments.com/news/news-columns/urban-lifestyles-indonesia-consumptionwheat-bread-products-rises/item5602 220 © Source: Euromonitor International, “Packaged Food in Indonesia”, 2015 218 112 Tastes of Europe Indonesia – Market Entry Handbook Challenges for EU products To appeal to consumers in Indonesia, cereal makers must overcome many hurdles, including little-to-no appetite for dairy milk in some regions and a cultural affinity for traditional hot foods such as rice. Finally, it is important to bear in mind that despite local opportunities, challenges remain when doing business on the Indonesian market. Indeed, existing partnerships with neighbouring Asian countries as well as with Australia and New Zealand foster and facilitate trade between those countries and Indonesia. In addition, the lack of available infrastructures, such as a cold chain store system, harbours and other transportation, are also challenges that may persist in the medium-term. Furthermore, regulations and additional policies are also playing an important role in the food and beverage sector. Alternatives for breakfast cereals including eggs, fruits, cereal bar, toasts and yoghurt are expected to remain a key factor hindering industry expansion worldwide. These alternatives are cheaper than the breakfast cereals. Other traditional breakfasts and fast food also affect the sales of cereals. Yoghurt, an alternative to the breakfast cereals, is growing rapidly in the industry. The availability of many local food stalls and ready-to-eat breakfast outlets, which serve large amount of local breakfast delicacies at cheaper rates in major economies, is also expected to negatively impact growth in near future. Offer Domestic offer Two of the top three market leaders in breakfast cereals are domestic producers, suggesting a strong presence of Indonesian companies in the market. Overall domestic production of primary cereals has increased in recent yars. Import In 2015, Indonesia imported EUR 16 million of processed cereals. Imports of processed cereals were increasing at a fast rate until 2013, when imports began to decline. Between 2013 and 2015 Indonesia’s imports of processed declined by 24 percent. The leading exporter of processed cereals in 2011 was the Philippines; however, this changed in 2013, when Malaysia took the overall lead. 113 Tastes of Europe Indonesia – Market Entry Handbook 25000 20000 15000 10000 5000 0 Imported value in 2011 Imported value in 2012 Thailand EU Imported value in 2013 World Imported value in 2014 Malaysia Imported value in 2015 Philippines Figure 24 Indonesian Imports of Processed Cereal, 2011-2015221 Less than 0.2 percent of Indonesia’s processed cereals are imported from the EU (EUR 306,000 in 2015). Germany is the leading EU exporter of processed cereals to Indonesia exporting EUR 159,000 in 2015, less than 0.1 percent of the total imports.222 Export Indonesian exports of processed cereals have been in decline over the past 5 years, total experts have reduced from over EUR 73 million to EUR 15 million in 2015. 80000 70000 60000 50000 40000 30000 20000 10000 0 Exported value in 2011 Philippines Exported value in 2012 China Australia Exported value in 2013 Exported value in 2014 Exported value in 2015 European Union (EU 28) Aggregation World Figure 25 Indonesian Exports of Processed Cereals, 2011-2015223 The largest export market for Indonesian processed cereals by far is the Philippines, which imports over 86 percent of Indonesia’s cereals. China has become a significant export market 221 222 223 © Trade Map, International Trade Center, available at: http://www.trademap.org/ Ibid. Ibid. 114 Tastes of Europe Indonesia – Market Entry Handbook in recent years, in 2011 China only imported EUR 76,000, that jumped to EUR 2.7 million by 2015. Australia was the third biggest market in 2015, importing EUR 2.3 million. The EU imported 1.3 million of Indonesian processed cereals in 2015.224 Mapping of main competitors With 59 percent of retail value sales in 2015, Nestlé Indonesia continued to lead breakfast cereals in Indonesia. The company owes its dominance to a wide brand portfolio, which includes Koko Krunch and Milo – two of the leading brands in children’s breakfast cereals – and Nestlé Corn Flakes, which remained the leading brand in flakes. In terms of taste and quality, the company’s children’s breakfast cereals are considered highly suitable for Indonesian children and remain popular.225 Among the leading packaged food players in Indonesia, multinational companies such as Nestlé Indonesia, Heinz ABC Indonesia and Unilever Indonesia have the strongest footholds due to their early entry, high consumer awareness of their brands and products and the huge budgets allocated by these companies to promotional activities and research and development. During 2015, however, the presence of local companies such as Indofood Sukses Makmur rose, largely due to the tough economic conditions, which prompted consumers to shift towards more affordable packaged food brands. In addition, these players increased the pace of their new product developments and promotional efforts.226 Mayora Group In 2011 Mayora Group ranked second after Nestlé for market share by value in breakfast cerealsInitially founded in 1977 as a home biscuit business, it became a publicly listed company in 1990 and then continued to grow, expanding its structure to cover the ASEAN region, having acquired several marketing offices and production facilities. 227 Their cereal product range, © Trade Map, International Trade Center, available at: http://www.trademap.org/ ©Source: Euromonitor International, “Packaged Food in Indonesia”, 2015 226 Ibid. 227 © EU-Indonesia Business Network, “EIBN Sector Reports – Food & Beverage”, available at: https://www.flandersinvestmentandtrade.com/export/sites/trade/files/news/637150602213204/63715060221 3204_1.pdf 224 225 115 Tastes of Europe Indonesia – Market Entry Handbook called Energen containes milk with cereal and oats, and is advertised as being ‘enriched with complete nutrition.’ PT Santos Jaya Abadi PT Santos Jaya Abadi holds a large market share by value in breakfast cereals. PT Santos Jaya Abadi produces coffee and cereals. The company was founded in 1927 and is based in Jakarta Pusat, Indonesia. Distribution 2015 continued to witness a rapid expansion of modern grocery retailers’ outlets in Indonesia, especially convenience stores, with leading convenience stores chains such as Indomaret, Alfamart and Circle K even expanding into Indonesia’s smaller cities. This provided consumers with easier access to a wider range of packaged food products in categories such as frozen processed food, chilled processed food, dairy products and meal replacement, all of which stimulated consumer spending on packaged food.228 228 © Source: Euromonitor International , “Packaged Food in Indonesia”, 2015 116 Tastes of Europe Indonesia – Market Entry Handbook 3.10 Bread, Pastry, Cakes, Biscuits and other bakery products Strengths Opportunities •Well-attuned to growing consumer health consciousness, as well as prevalance of gift-giving in Indonesia •Good match with increasing convenience-orientation of Indonesian consumers •Government policy increasingly supports move towards healthy meal options away from traditional, highfat foods which drives demand for whole grain and other similar options •Long shelf-life and ease of transport to market for some products Baked Goods Outlook Weaknesses Threats •Consumption opportunities mainly restricted to middle- and upperclasses in Indonesia •Fresh baked goods, which is highest anticipated growth segment, requires domestic production •High competition from regional and domestic producers •Challenging path to expand appeal of European products beyond upper income consumers Consumption As a non-native crop, wheat-based products were not prominent in Indonesia’s agricultural output or culinary traditions, where dietary staples and snacks were more likely to be derived from rice and fresh fruits, respectively. The absence of domestic supply, however, has not precluded strong and growing demand in recent decades. Evolution and forecast Indonesia is now the world’s second largest consumer of wheat grain measured by imports, which have risen more than 60 percent over the past decade. This import volume reflects a growing presence of domestic and international baked-goods producers in Indonesia, catering to greater demand and new consumption preferences. The supply-side of the Indonesian market for wheat-based bakery products has evolved from a production capacity of only 4 mills in 1998 to more than 31 in 2016, with proliferation of domestic and 117 Tastes of Europe Indonesia – Market Entry Handbook international producers and retailers to match. The domestic market for total sales of baked goods in Indonesia exceeded EUR 2 billion for the first time in 2015.229 50.00 45.00 50 40.00 35.00 40 30.00 30 25.00 20.00 20 15.00 10.00 10 5.00 0 Annual expenditure per capita, euro (2015 prices) Annual consumption per capita, kilograms 60 0.00 Thailand Malaysia Philippines consumption Singapore Indonesia EU expenditure Figure 26: ©Consumption and Expenditure on Baked Goods in Selected Markets. Source: AIBI Market Report230 Despite this growth, consumption of baked goods in Indonesia remains below ASEAN peers including Thailand, Malaysia and Singapore. This disparity is partly reflective of comparable income gaps and is likely to close in coming years. Per capita bread consumption in Indonesia showed a compound annual growth rate (CAGR) above 6 percent between 2010 and 2015.231 Notably, during this same reference period, rice consumption remained flat. This reinforces observations that baked goods - particularly various breads - are increasingly being incorporated into Indonesia culinary preferences as side options accompanying rice-based dishes rather than as a replacement for main dietary staples. Increased consumption of baked goods is further driven but currently low prices for the main input commodity, wheat, vis-à-vis those for rice and other food commodities. Consumption criteria With demand for non-traditional baked goods traceable to early contact with Chinese and Dutch traders, contemporary consumption growth is based on widespread gains in disposable income and purchasing power among an expanding middle class. For an increasing number of Indonesians, in fact, baked products are becoming a new food staple. Non-traditional food products such as baked goods like European breads and pastries are considered an ‘aspirational’ product for cosmopolitan, globally-conscious consumers. U.S. Department of Agriculture, “Indonesia Grain and Feed Annual Report 2017,” available at https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Grain%20and%20Feed%20Annual_Jakarta_Indone sia_3-30-2017.pdf. 230 ©International Association of Plant Bakers, “AIBI Bread Market Report 2012” ,July 2013, available at: http://www.aibi.eu/wp-content/uploads/AIBI-Bread-Market-report-2012.pdf 231 © Trade Map, International Trade Centre, available at: www.trademap.org 229 118 Tastes of Europe Indonesia – Market Entry Handbook “Consumption of bread and cakes [in Indonesia] jumped almost 60 per cent in the past four years, the Indonesia Bakery Association estimates.”232 At the same time, growing levels of income and the expansion of Indonesia’s middle class are in part reflective of an emerging service-oriented economy, including in the professional services sector. Whereas traditional Indonesian breakfasts are rice-based with meats and vegetables often as hot meals, consumers - particularly those whose schedules are influenced by working hours - are increasingly seeking practical alternatives. This is a particular driver for growing consumer interest in breakfast and snack-type baked goods. Furthermore, the increasing market for breakfast bakery products is particularly driven by demand growth from younger consumers. Growth is strongest and the demand for baked goods is most pronounced in Indonesia’s emerging urban centres. Disposable incomes are typically higher in Indonesian cities than rural areas still under development; there is also a conducive effect on distribution achieved by urban agglomeration. Finally, as the sectoral employment structure of the Indonesian economy reorients, so too does its gender composition complemented by the increasing labour force participation by women. This has the effect of creating further time scarcities in terms of home cooking and food preparation as women who traditionally filled such roles are increasingly employed. For example, one illustrative statistic shows that the number of female civil servants grew by nearly 3 percent CAGR between 2005 and 2015. Nonetheless, the growth of baked-goods as a replacement for traditional staples - for example, bread-based dishes - has not been as substantial. There have however been recent campaigns by the Indonesian government to replace traditional staples - particularly those that are based around meats, fried rice or other ingredients high in fat - with wheat-based options, particularly breads.233 Despite increasing consumption of baked goods in Indonesia, the largest gains in this trend have heretofore been realised by regional trading partners, with Malaysia and Thailand holding leading import positions at a combined import value of over EUR 40 million in 2015. Baked goods - particularly packaged bread and pastry products - from these Asian producers are typically preferred by middle income consumers in Indonesia whereas imports of European products are more likely to be identified for their higher quality as well as price.234 Nonetheless, the largest player in the Indonesian baked goods market remains the combined output of local artisanal producers. It is estimated that there are more than 11,000 of these small scale suppliers, who meet nearly half of domestic consumption and are well-matched with the unconsolidated nature of Indonesian retail and distribution networks. These artisanal producers typically specialise in the production of low-cost products, often targeted towards particularly price-sensitive consumers estimated to comprise around 60 percent of Indonesia’s population.235 The Economic Times, “Indonesians picking bread over noodles; baked goods consumption jumps 60% in 4 years”, May 2015 available at: https://economictimes.indiatimes.com/news/international/business/indonesianspicking-bread-over-noodles-baked-goods-consumption-jumps-60-in-4-years/articleshow/47380752.cms 233 ©Indonesia Investments, “Urban Lifestyle Indonesia: Consumption Wheat & Bread Products Rises” available at http://www.indonesia-investments.com/news/news-columns/urban-lifestyles-indonesia-consumption-wheatbread-products-rises/item5602. 234 © Trade Map, International Trade Centre, available at: www.trademap.org 235 U.S. Department of Agriculture, “Indonesia - Bakery Products Ingredient” available at http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Bakery%20Products%20Ingredient_Jakarta_Indone sia_11-24-2010.pdf. 232 119 Tastes of Europe Indonesia – Market Entry Handbook Consumer profiles The predominance of artisanal producers has nonetheless been decreasing in recent years with shares gained by some consolidated national producers, such as Nippon Indosari. Nippon Indosari is the current market leader and became a publicly listed company in 2010; it has since doubled its market share for baked goods, being driven by capital investments in a new network of production facilities throughout Indonesia. Distribution of this category of freshly baked goods remains mostly concentrated around nodes serving local or regional markets.236 While locally-established producers such as the example of Nippon Indosari market an increasingly diverse market offering, their permissive conditions and economies of scale are dependent on a broad base of middle-income consumers in Indonesia. European products will initially be most competitive among higher income consumers likely to buy premium baked goods. The challenge in meeting this market will be to supply premium products with sufficient shelf-life to be shipped from Europe, clear customs, and undergo distribution in the Indonesian market without sacrifice to taste or quality. Indonesia’s relatively young demographic structure, with 66 percent of the population between 15 and 64 years of age, further predisposes towards continued growth in baked goods consumption. In general, in Indonesia younger consumers are more willing to eat baked products than older generation that is still used to eating more traditional staple foods. Younger consumers are not only to display more cosmopolitan culinary preferences but are furthermore likely to seek baked goods for their convenience and conformity with ‘urban lifestyle’ image perceptions. 236 Ibid. 120 Tastes of Europe Indonesia – Market Entry Handbook Consumer trends Reflecting the above, consumption demand for European baked goods will likely remain higher for categories of products with longer shelf lives. Industry observers note further that whereas European baked goods are well-positioned to capture the high-end of the market, Japanese and Asian breads and pastries are the preferred choice of upper-middle income consumers whereas local sweet and white breads are primarily consumed by the lower middle-income segment.237 At the disaggregated level, there is also considerable variance between the market shares of leading EU Member States exporting baked goods to Indonesia. This is reflective of the high degree of segmentation in the Indonesian market; for example, while French bakery and pastry products are recognised as premium and there is strong sales growth for boutique outlets such as PAUL, Paris Baguette and Tous Les Jours, the value of French exports under this category was less than EUR 300,000 for 2015 - well behind the leading European exporter, Italy.238 Cultural sensitivities While baked good products are typically compliant with Islamic food practices (halal), the Government of Indonesia passed Law No. 33 in September 2014 requiring all foods sold to obtain halal certification. The population of Indonesia is predominantly Muslim and, additional to meeting the legal requirement, some producers have catered to consumers in Islamic markets by visibly displaying halal certifications on product packaging. Broadly, Indonesian consumers are receptive to international and European products - this extends to include baked goods. Indonesian consumers are increasingly becoming sensitive about food hygiene and product quality. Other things equal, this may have a beneficial effect on Western, including European, products which are more likely to be perceived as reputable and well-produced, and which will tend to be packaged baked goods - a category in which consumers have higher confidence than unpackaged baked goods because Indonesiam © EU-Indonesia Business Network “EIBN Sector Reports - Bakery Ingredients” available at http://eibn.org/upload/EIBNSecRep2016_Bakery_ExecSummary-30347.pdf. 238 © Agriculture and Agri-food Canada, “Foodservice Profile - Indonesia” available at http://www.agr.gc.ca/eng/industry-markets-and-trade/statistics-and-market-information/agriculture-and-foodmarket-information-by-region/asia/market-intelligence/foodservice-profile-indonesia/?id=1468950411582#c 237 121 Tastes of Europe Indonesia – Market Entry Handbook consumers prefer to by specific items from the organized sector rather than from the traditional sources.239 Challenges for EU products The prevailing challenge for EU producers of baked goods seeking entry into the Indonesian market is the distance involved and incumbency of local and competing Asian producers particularly bakeries in Malaysia and Thailand. Establishing consumer bases in Indonesia presents challenges in that the market for freshly baked goods is largely dominated by local, small scale producers. These artisanal producers are able to produce more cheaply and on a much more local, direct level than consolidated competitors, both international and nation-wide. Best performing baked goods originating from Europe are likely to target niche premium or higher value consumption segments with good access to freshness maintenance and distribution infrastructure. Leveraging recognition of traditional quality of these European products will be imperative for the success of these products. Offer The market for baked goods in Indonesia has been growing in recent years and continues to show promise ahead; this growth has been derived from both increasing domestic production as well as import levels. Domestic offer The domestic market for baked goods in Indonesia has been led by pastry sales, including both packaged and unpackaged products. Sales of packaged pastries began to exceed those of unpackaged baked goods around 2013 and the gap has continued to expand since. Likewise, sales growth of packaged breads has marginally exceeded that of unpackaged products, and the overall market for packaged bread products was 1.6 times larger in 2015.240 U.S. Department of Agriculture, Foreign Agricultural Service, “Indonesia Retail Foods – Retail Foods Update” December 2016 available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-222016.pdf 240 © Source: Euromonitor International, “Baked Goods in Indonesia”, 2015 239 122 Total value of sales, euro Millions Tastes of Europe Indonesia – Market Entry Handbook 1,200 1,000 800 Bread 600 Cakes Pastries 400 200 0 2010 2011 2012 2013 2014 2015 Figure 27: Sales Trends of Baked Goods by Selected Product Category in Indonesia Source: Euromonitor241 Sales growth of baked goods in Indonesia is expected to accelerate during the next several years, in tandem with a positive economic outlook for the foreseeable future. The size of the domestic markets for pastries, cakes and bread are estimated to reach EUR 1.5 billion, EUR 550 million and EUR 250 million respectively by 2020.242 Low input commodity prices for baked goods plus professionalization and expansion of the service sector are likely to have further positive effect on total sales values for baked goods. 241 242 © Source: Euromonitor International, “Baked Goods in Indonesia”, 2015 Ibid. 123 Tastes of Europe Indonesia – Market Entry Handbook Import 12 25 10 20 8 15 6 10 4 5 Thousands 30 Total volume of imports, tonnes Total value of imports, euro Millions Indonesia’s imported valued of baked goods nearly doubled between 2010 and 2015 with a final value of more than EUR 55 million during the final year of the reference period. The single largest supplier of baked good products to the Indonesian market has consistently been Malaysia. The combined export position of the EU-28 for baked goods to Indonesia has been roughly on par with that of South Korea and has not yet benefitted from recent demand growth during 2014 and 2015 in a significant way.243 Malaysia [volume] Thailand [volume] South Korea [volume] EU [volume] Malaysia [value] Thailand [value] South Korea [value] EU [value] 2 0 0 2010 2011 2012 2013 2014 2015 Figure 28 Leading Exporters to Indonesia of Bread, Pastry Cakes, Biscuits and Other Bakers' Wares244 Of the EU countries that export baked goods to Indonesia, Italy is the disproportionate leader in terms of total volume and value. There is some variation in terms of the ratio between each country’s exports by volume and value, or the de facto price per tonne. For example, Italian and Spanish exports represented the lowest prices paid per tonne at EUR 2,750 and EUR 2,828, respectively; UK exports of baked goods averaged the highest price paid per tonne, at EUR 6,566.245 Indonesia’s domestic bakery industries are highly dependent on imported ingredients, such as wheat, which cannot be grown natively. This means that as the domestic industry expands and suppliers consolidate, the cohort will remain more vulnerable to external supply shifts than more mature producers able to draw upon domestic supplies. Imports of baked goods are 243 244 245 © Trade Map, International Trade Centre, available at www.trademap.org. © Trade Map, International Trade Center, available at: http://www.trademap.org/ Ibid. 124 Tastes of Europe Indonesia – Market Entry Handbook expected to remain relatively stable into the coming years, but the supply market will become increasingly competitive and require demand growth to match. Total exports, tonnes 0 100 200 300 400 500 600 700 Austria Spain Germany Netherlands Denmark Sweden Belgium France UK Italy Value Volume 0 0.5 1 1.5 2 Total exports, euro Millions Figure 29 Leading European exporters to Indonesia of Bread, Pastry, Cakes, Biscuits and other Bakers’ Wares.246 Export Indonesia is a net exporter of baked goods, having supplied over 140,000 tons at a value of almost EUR 400 million during 2015. Most of this product was delivered to regional trading partners, such as China, Vietnam, Thailand, the Philippines, Malaysia and Singapore. Australia and the United States were also significant receiving markets.247 Indonesia's Exports of Baked Goods (2011-2015) Unit: EUR thousand 500000 400000 300000 200000 100000 0 2011 2012 2013 2014 2015 Export Figure 30: Indonesia's Exports of Baked Goods (2011-2015)248 246 © Trade Map, International Trade Center, available at: http://www.trademap.org/ © Trade Map, International Trade Centre, available at www.trademap.org. 248 © Trade Map, International Trade Center, available at: http://www.trademap.org/ 247 125 Tastes of Europe Indonesia – Market Entry Handbook Competitors The Indonesian market for baked goods is dominated by the collective largesse of independent, artisanal producers, who comprise almost half of total supply. These suppliers typically operate with very low turnover and overhead conditions, catering to highly-localised and price sensitive consumers. However, this composition is shifting as artisanal production moves away from home-based, cottage industry-style output towards professional artisanal bakeries catering to new demand from an emerging upper-middle class. Pangan Rahmat Buana, 0.2 Pondan Pangan Makmur Indonesia, 0.6 Maxim's International, 0.6 Satelit Sriti, 1.4 Marizarasa Sarimurni, 0.7 Private Label, 16.7 Independent, 18 Inmarindotama, 0.3 Nippon Indosari, 11.1 Other, 8.4 Gandum Mas Kencana, 0.3 Artisanal, 45.8 Forisa Nusapersada, 1.5 Dunia Bintang Walet, 2.2 Swanish Boga Industria, 0.6 Figure 31: Composition of Indonesian Baked Goods Market by Producer Shares (percent) Euromonitor International249 The largest consolidated supplier in the Indonesian market is Nippon Indosari, a local firm which first began production in the 1960s. Nippon Indosari is the only producer in Indonesia with a nationwide distribution network and has been increasing its investment in production facilities to match new domestic markets in recent years. The company’s strongest performance is based on its pastry and snacks output, in which it regularly innovates to include new products such as banana-and-chocolate-filled-buns, strawberry-filled dorayaki (filled-pancake style product), pandan (spongecake), and so forth. Nippon Indosari and its suite of products is a household name in Indonesia and models its business on mass distribution and regular consumption by middle and lower-middle income households.250 Furthermore, private label baked goods are becoming an increasingly competitive option appealing to price-sensitive consumers in Indonesia. These are offered by leading retailers such 249 250 © Source: Euromonitor International, “Baked Goods in Indonesia”, 2015 © Source: Euromonitor International, “Baked Goods in Indonesia”, 2015 126 Tastes of Europe Indonesia – Market Entry Handbook as Carrefour and Hero Supermarkets, who are thereby able to realise existing distribution and retail networks. Internationally, EU producers face competition from Indonesia’s regional trading partners particularly Malaysia and Thailand - who further cater to middle and lower income consumers. These products are generally preferred for their higher quality over local artisanal baked goods - which are increasingly being eschewed for concerns over hygiene and quality of ingredients - though they are not likely to reflect any traditional quality or reputation as often accorded to European baked goods. However, while international producers of baked goods outperformed EU suppliers in Indonesia’s total imports, there remain no significant foreign retail suppliers by market share. This differs from on-trade supply, where there is a growing presence of international food service establishments, but these are mostly on a franchise basis and draw from production in situ. Customs and SPS import requirements Most Favoured Nation (MFN) customs applied by Indonesia on imports of European baked goods are typically bound at 5 percent, with some as high as 10 percent. Value Added Tax (VAT) is levied on most imports into Indonesia at a rate of 10 percent. Products in Indonesia are required to be labelled in Indonesian (Bahasa Indonesia), unless it is not possible to find a suitable or similar translation in which case approval to omit Bahasa Indonesia labelling must be obtained from the Attorney General. As aforementioned, all food products imported into Indonesia must further obtain halal certification, regulated by the Ministry of Health and the Ministry of Religious affairs. Specific requirements for food products include a registration product number (ML number) supplied by the Indonesian Food and Drug Control Agency; an expiration date; complete name and address of the importer; certificate from an agency approved by the Indonesian Islamic Council.251 At the international level, there are several active complaints against Indonesia regarding SPS related import restrictions. The Indonesian regulatory environment is generally unstable in a manner that is either trade restrictive or discriminatory - or both - against international producers. SPS restrictions faced by EU exporters to Indonesia, as well as import formalities, documents, and procedures are recorded via the EU Market Access Database (MADB). Distribution Indonesia remains an emerging market, therefore presenting different distribution structures than may be familiar to European producers. With many areas of the Indonesian market still under development, having a greater understanding of distribution and retail avenues is essential for successful market entry. 251 Australian Trade and Investment Commission, “Tariffs and Regulations: Export Markets - Indonesia” available at https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/Indonesia/Doingbusiness/Tariffs-and-regulations. 127 Tastes of Europe Indonesia – Market Entry Handbook Distribution structure and market share The market for baked goods in Indonesia can be stratified into several distinct segments. First, there is the cottage industry base of independent producers catering to localised markets through home or informal production. These artisanal bakers typically sell directly or otherwise figure into Indonesia’s expansive informal economy. Distribution Shares of Store-based Retailers of Baked Goods in Indonesia 100% 90% Distribution share 80% 70% Independent Small Grocers 60% Food & Drink Specialists 50% Supermarkets 40% Hypermarkets 30% Convenience Stores 20% 10% 0% 2010 2011 2012 2013 2014 2015 Figure 32 Distribution Shares of Store-Based Retailers of Baked Goods in Indonesia.252 In 2010, Indonesia was ranked as the third most fragmented grocery retail market in the world which, compounded by geography, population distribution, lacking infrastructure, and the relatively short shelf-life of most baked goods, present challenges for the development of modern trade and distribution channels. The ‘recreation’ function of modern outlets like supermarkets and hypermarkets is important in Indonesia, as 79 percent of consumers are visiting supermarkets/hypermarkets with their families. Jakarta’s growing market culture is encouraging this trend further. However, at the same time, more than 65 percent of consumers prefer to visit traditional markets. 253 Separately, Nippon Indosari has had noted success expanding in recent years through rollout of a rickshaw delivery service for its baked goods. These vendors are integrated within the corporate structure of Nippon Indosari and combine retail and distribution in one service. Following direct artisanal production and sale, the second largest consumer base in Indonesia is through store-based retailing both on- and off-trade. Off-trade retailing predominantly caters to routine middle-income consumers, with the largest outlet under this category being convenience stores after gaining shares over independent small grocers in 2015. Still this share of distribution is surpassed by speciality bakery shops, both as food service suppliers as well as boutique retailers. © Source: Euromonitor International, “Baked Goods in Indonesia”, 2015 U.S. Department of Agriculture, Foreign Agricultural Service, “Indonesia Retail Foods – Retail Foods Update” December 2016 available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-222016.pdf 252 253 128 Tastes of Europe Indonesia – Market Entry Handbook Major off-trade distributors include Carrefour Indonesia and Hero Supermarket, increasingly so through their private label offerings. On-trade, a number of notable baked goods suppliers have emerged in Indonesia in recent years, including many specialising exclusively in bread, pastries, cakes, and other bakery products. Among these, BreadTalk is recognised as an industry leader through its well-based understanding of the domestic market and consumer preferences in Indonesia. It entered the market in 2003 and has since been followed by the entry of new competitors including Tous Les Jours (South Korea) and Paul (France). Challenges for EU products Distribution remains one of the foremost challenges for European baked goods suppliers to Indonesia, as obstacles faced by local and regional producers are only likely to be amplified for those originating from the EU. European entrants should develop well-defined distribution plans and identify strong import-partners to ensure the feasibility of their product in the Indonesian market, including compliance with SPS requirements, expedient customs clearance, and fast delivery to the end retailer or consumer. By some measures, ease of doing business in Indonesia has improved in recent years. There remain, however, several types of in jure and de facto trade barriers which create nonnegligible costs to foreign suppliers. 254 Indonesia ranked below the regional average and comparators including Malaysia, the Philippines, and China during the World Bank Doing Business 2016 assessment. Another important factor in distribution, import costs, revealed mixed results compared to the regional average. World Bank, “Doing Business 2016: Economy Profile 2016 - Indonesia” available at http://www.doingbusiness.org/data/exploreeconomies/indonesia. 254 129 Tastes of Europe Indonesia – Market Entry Handbook 450 Time in hours | Cost in euro 400 350 300 250 Indonesia 200 East Asia & Pacific 150 100 50 0 Time Cost Border Compliance Time Cost Documentary Compliance Figure 33 Comparing Import Costs in Indonesia with the East Asia & Pacific Region. World Bank Administrative barriers to entering the Indonesian market are further complicated by deficient transportation infrastructure once a product is admitted. This particularly applies to ensuring food quality and security preservation while in transit; for example, cold and dry logistics, warehousing and delivery options. 130 Tastes of Europe Indonesia – Market Entry Handbook 3.11 Chocolate and Derived Products and Confectionery Strengths Opportunities •Increasingly suited to multiple giftgiving occasions in Indonesia •Broad-based appeal among Indonesia's large young consumer segment •Relatively long shelf-life and ease of transportation to market with limited refrigeration or cold chain requirements •Increasing awareness of EU product quality relative to regional and domestic competitors Chocolate & Confectionary Outlook Weaknesses Threats •Price sensitivity restricts sales primarily to middle- and upperincome consumers •Most of chocolate and confectionary sales take place in smaller or traditional retailers which are harder to reach for exporters •Low existing EU market share and uncertain growth prospects •High competition and local consumer brand loyalty to domestic producers Consumption Indonesian chocolate and chocolate confectionery consumption has grown considerably over the past years; however, it is still not comparable to chocolate consumption in Europe. Indonesians are now eating about 0.5-0.6 kg of chocolate per year and according to forecasts chocolate consumption in Indonesia is on the rise and may grow by 25 percent over the next five years. 255 Sugar confectionery consumption is even lower than chocolate confectionery consumption. Chocolate consumption in Indonesia is quite low compared to Europe mainly because chocolate is expensive in Indonesia. “For most Indonesians, chocolate is considered a luxury ".256 According to a recent survey among chocolate or sugar confectionery variance, “among any sugar ©Indonesia Investments, “Challenges and Opportunities in Indonesia’s Cocoa Industry”, May 2015, available at: https://www.indonesia-investments.com/news/todays-headlines/challenges-and-opportunities-in-indonesias-cocoa-industry/item5569? 256 The Foodie Magazine “Indonesia’s Love for Chocolate”, April 2016, Available at: http://thefoodiemag.com/indonesias-love-for-chocolate/ 255 131 Tastes of Europe Indonesia – Market Entry Handbook confectionery variance, chocolate and regular candy bar are the most frequently consumed product among consumer. Chocolate lead the market by being regularly consumed by 37 per cent respondent, followed by candy bar by 31per cent respondent. Moreover, lozenges and herbal candy are consumed by 13 per cent respondent, as well as gum by 12 per cent respondent. “ 257 Chocolate consumption is, however, expected to rise rapidly, as the Indonesian middle class is becoming more affluent. Consumer Profile Due to the rise of the middle class and growing health awareness, Indonesian consumers have more capacity to pay extra for better quality products. A more educated and middle-to-high income society tends to pick organic and healthy foods/beverages, even though it costs them more than usual. However, organic chocolate and artisanal chocolate are not yet very popular in Indonesia and traditional locally produced chocolates still lead the market. Higher numbers of Indonesian teenagers and young adults are purchasing chocolate confectionery confectioneries not only as a snack or guilty pleasure but also as a gift for special occasions such as birthdays, Valentine’s Day and Christmas. A number of consumers also include chocolate confectionery confectioneries in goody bags at children’s parties and in parcels which are offered to business partners and relatives during festive periods such as Hari Raya Idul Fitri, Christmas and New Year. Jakpat Blog, “The Sweet Tooth: Candy & Chocolate Consumption Survey”, available at: https://blog.jakpat.net/the-sweet-tooth-candy-and-chocolate-consumption-survey-report/ 257 132 Tastes of Europe Indonesia – Market Entry Handbook Consumer Trends According to recent market studies, it has been projected that the Indonesian consumer will increase in number, due to the growth of the young and urbanised population and improvements in income and consumer confidence. The UN also forecasts that two-thirds of Indonesian consumers will be urbanised by 2050, this means that the consumption for chocolate and confectionery will also rise considerably in the future. Adapting to local market trends is the key for succeeding in the chocolate and confectionery market in Indonesia. European companies should consider adapting their packaging style and product characteristics to meet the needs of the local consumers. For instance, many Asian and Indonesian consumers tend to prefer products that are sweeter and that are available in smaller packaging. More Indonesian consumers are expected to purchase chocolate and confectionery not only as a snack but also as a gift for special occasions such as birthdays, Valentine’s Day and Christmas. Goody bags offered to children at birthday parties and the gift bags offered to friends and associates during festive periods will also contain various chocolate confectionery products. In addition, with many brands being available in many different product and packaging formats, chocolate confectionery will continue to be the most favoured indulgence product for consumers of all ages and almost all income levels.258 Challenges for EU Products Generally, the majority of Indonesians continue to show preference for brands that they perceive to be local, over those that they think are foreign. Consumers trust Indonesian companies and take pride in using local brands. They believe that Indonesian companies understand local consumers and provide better value for money in comparison to foreign brands. This means that the European chocolate and confectionery producers will be at a disadvantaged position when competing with the local chocolate and confectionery producers, as the consumers will prefer local products. Entering the Indonesian market and convincing customers could be even more difficult as Indonesians are brand-loyal, and most consumers are not actively looking to switch brands. Market entry can thus be very challenging for the new and lesser known European chocolate and confectionery brands. 258 © Source: Euromonitor International, “Chocolate and confectionary in Indonesia”, 2015 133 Tastes of Europe Indonesia – Market Entry Handbook Another challenge for the European products is the fact that chocolate and confectionery in Indonesia are still expensive. “For most Indonesians, chocolate is 259 considered a luxury " . It costs around IRD 7,000 (EUR 0.5) to IRD 8,000 (EUR 0.55), to enjoy chocolate in the form of bars in supermarkets. Offer Domestic offer Indonesia is the third largest cocoa producer in the world, but it is exporting most of its cocoa without processing it locally. In 2014, Indonesia produced 285,000 tons of chocolate and confectionery worth of IRD 22.85 trillion (EUR 1.54 billion). This was almost 5 percent more than Indonesia produced in 2013. 260 According to the USDA Foreign Agricultural Service, Indonesia’s chocolate and confectionery production is expected to grow around 4 percent on a yearly basis until 2019.261 Import Chocolate and confectionery make up around 2 percent of Indonesia’s total imports. In 2015, Indonesia imported chocolates and chocolate confectionery for the import value of USD 108 million (EUR 92 million) and the imports mainly came from the other South-East Asian countries including Malaysia and Singapore, but also from China and India.262 During the same year, Indonesia also imported sugar confectionery for the import value of USD 53,5 million (EUR 45,6 million) and the imports came mainly from China, Malaysia and Thailand.263 The Foodie Magazine “Indonesia’s Love for Chocolate”, April 2016, Available at: http://thefoodiemag.com/indonesias-love-for-chocolate/ 260 U.S. Department of Agriculture,“GAIN Report” available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20Processing%20Ingredients_Jakarta_Indon esia_12-8-2015.pdf 261 Ibid 262 AJG Simoes, CA Hidalgo. The Economic Complexity Observatory: An Analytical Tool for Understanding the Dynamics of Economic Development. Workshops at the Twenty-Fifth AAAI Conference on Artificial Intelligence. (2011), available at: https://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/idn/show/1806/2014/ , use of data available under Share Alike Creative Commosns Licese, found Here: https://creativecommons.org/licenses/by-sa/3.0/ 263 Ibid. 259 134 Tastes of Europe Indonesia – Market Entry Handbook Indonesia's Imports of Chocolate and Confectionery by Quantity (20112015) Unit: Tonnes 20000 15000 10000 5000 0 2011 2012 2013 2014 2015 Import Figure 34: Indonesia's Imports of Chocolate and Confectionery by Quantity (2011- 2015)264 The EU as a whole also plays a considerable role in Indonesia’s chocolate and confectionery imports. EU export of chocolate and confectionery products have gradually grown over the past 5 years and constituted 2.6 percent of overall EU agri-food exports in 2015.265 Indonesia's Imports of Chocolate and Confectionery from the EU by value (2011-2015) 20 EUR Mio 15 10 5 0 2011 2012 2013 2014 2015 imports Figure 35: Indonesia's Imports of Chocolate and Confectionery from the EU by Value, 20112015266 © Trade Map, International Trade Center, available at: http://www.trademap.org/ European Commission, DG for Agriculture and Rural Development, “Agri-Food Statistical Factsheet, EUIndonesia” https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outsideeu/countries/agrifood-indonesia_en.pdf. 266 Ibid. 264 265 135 Tastes of Europe Indonesia – Market Entry Handbook Export Chocolate makes up around 2.6 percent of Indonesia’s total exports. In 2014, Indonesia exported chocolates and confectionery amounting to USD 30,6 million (EUR 26 million). These exports went mainly to other South-East Asian countries including the Philippines, Thailand and Malaysia, as well as to South Korea and Singapore. 267 In the same year, Indonesia also exported sugar confectionery for the export value of USD 111 million (EUR 94,6 million) and the exports went mainly to the Philippines, Thailand and Vietnam.268 Indonesia's Exports of Chocolate and Confectinery by Quantity (2011-2015) Unit: Tonnes 25000 20000 15000 10000 5000 0 2011 2012 2013 2014 2015 Exports Figure 36: Indonesia's Exports of Chocolate and Confectionery by Quantity (2011-2015)269 The European Union is also an important trading partner for Indonesia with respect to its exports of chocolate and confectionery. Indonesian exports to the EU have gradually increased over the past five years. AJG Simoes, CA Hidalgo. The Economic Complexity Observatory: An Analytical Tool for Understanding the Dynamics of Economic Development. Workshops at the Twenty-Fifth AAAI Conference on Artificial Intelligence. (2011), available at: https://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/idn/show/1806/2014/ , use of data available under Share Alike Creative Commosns Licese, found Here: https://creativecommons.org/licenses/by-sa/3.0/ 268 Ibid. 269 © Trade Map, International Trade Center, available at: http://www.trademap.org/ 267 136 Tastes of Europe Indonesia – Market Entry Handbook Indonesia's Exports of Chocolate and Confectionery to the EU by Value (2011-2015) 7 6 EUR Mio 5 4 3 2 1 0 2011 2012 2013 2014 2015 export Figure 37 Indonesia's Exports of Chocolate and Confectionery to the EU by Value, 2011-2015270 Mapping the Competition The Indonesian chocolate and confectionery market is dominated by local chocolate and confectionery producers and it is quite difficult for the foreign products to succeed in the Indonesian market.“Nestle, Cadbury's owner Mondelez International, Mars and Ferrero together hold just one-tenth of a $1 billion [89.5 million EUR] market led by homegrown darlings Delfi and Mayora 271 Indah”. Local chocolate brands such as Ceres (produced by the Singaporean company Petra Foods) and Mayora are the most popular confectionery and chocolate brands in Indonesia. Amongst sugar confectionery, a foreign company Perfetti Van Melle has recently managed to become one of the leading confectionery producers. European Commission, DG for Agriculture and Rural Development, “Agri-Food Statistical Factsheet, EUIndonesia” https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outsideeu/countries/agrifood-indonesia_en.pdf. 271 Jakarta Globe, “Global Chocolatiers Dwarfed in Indonesia as Local Champions Dictate Taste“ available at: http://jakartaglobe.beritasatu.com/business/global-chocolatiers-dwarfed-indonesia-local-champions-dictatetaste/ 270 137 Tastes of Europe Indonesia – Market Entry Handbook Ceres (produced by a Singaporean company Petra Foods) Ceres continued to lead chocolate confectionery in 2015 with a retail value share of 52 percent. Ceres markets several leading chocolate confectionery brands, including Silver Queen, Silver Queen Chunky and Delfi (tablets); Top (second leading count line brand); Delfi and Van Houten (standard boxed assortments); and Cha Cha and Chic Choc (bagged selflines/softlines). The target audience of Silver Queen comprises teenagers and young adults, with the brand being positioned as a product that is suitable for enjoyment while socialising with friends or loved ones. Thanks to its wide product coverage, Ceres maintained a clear lead in chocolate confectionery in Indonesia in 2015.272 Mayora The MAYORA group is one of the most renowned names in the Fast-Moving Consumer Goods industries (FMCG). Initially founded in 1977 as a home biscuit business, it became a publicly listed company in 1990 and then continued to grow, expanding its structure to cover the ASEAN region, having acquired several marketing offices and production facilities. Recently, the company was awarded the “Best Manufacturer of Halal Products Award” in the sectors of Biscuit and Wafer, Candy and Chocolate, Cocoa, Coffee and Health foods. The MAYORA group specializes in biscuits, candy, wafer and chocolates, nutrition, coffee, and the brands Torabika Café & Corner. For more information, see Mayora website. Perfetti Van Melle In 2015, Perfetti Van Melle Indonesia extended its leadership in sugar confectionery, posting a value share of 23 percent. The company markets a wide range of sugar confectionery products in Indonesia, including the popular brands Mentos, Alpenliebe, Fruit-tella, Marbels, Golia, Chox and Chupa Chups. The company invested heavily in new product development as well as marketing and promotion to maintain its leadership of the category. It also widened its distribution coverage to reach traditional retail outlets in remote rural areas.273 Challenges to the European Products One challenge that European producers may encounter is Indonesia’s new Halal certification requirement, as most European chocolate and confectionery producers do not currently have the halal certification and, as such, should apply. This could be particularly burdensome and resource consuming for the smaller companies and small artisanal chocolate or confectionery producers. 272 273 © Source: Euromonitor International, “Confectionary in Indonesia”, 2015 © Source: Euromonitor International, “Sugar confectionary in Indonesia”, 2015 138 Tastes of Europe Indonesia – Market Entry Handbook Another challenge that faces the major chocolate and confectionery exporters in Indonesia, such as Mondelez International and Nestlé, is the general difficulty of gaining popularity in the market. As mentioned above, Indonesian consumers prefer local brands over foreign brands. They are very loyal to local brands that they have grown accustomed to and are not very keen on trying out new and lesser-known brands. “Nestle's Gumilar[Nestle Indonesia confectionary business manager Rully Gumilar ]said his firm is trying to find a recipe that balances its global quality standards with local preferences - "the holy grail of the chocolate category" - as well as stepping up product launches and marketing” 274 . This could be more difficult for the smaller European chocolate and confectionery companies that would face resource constraints. Improving the quality of products, trying to apply for Indonesian organic label, and getting halal certification are the potential steps that could help companies succeed in the Indonesian market. The Director of the Mondelez International has noted that Indonesian consumers are extremely price sensitive even though the middle class is becoming more and more affluent. Consumers would choose the similar product that costs less. “For example Delfi's Take-it chocolate fingers, for example, retail at a Jakarta mini-market for 5,500 rupiah ($0.42), around 8 percent less than Nestle's KitKat”, 275which is well loved by Indonesia’s consumers. This also means that small artisanal chocolate brands from Europe might just not succeed in the market, simply The Star, “Big four global chocolatiers hold 10 percent market share” available at: http://www.thestar.com.my/business/business-news/2016/09/13/big-four-global-chocolatiers-hold-10-pctmarket-share/ 275 Ibid. 274 139 Tastes of Europe Indonesia – Market Entry Handbook because the Indonesian consumers would deem these products too expensive. However, as mentioned above, the Indonesian consumers are also becoming more health-conscious and European SMEs will most likely find good opportunities on Indonesian chocolate and confectionery market soon. Distribution An increasing number of upper and middle-income consumers in Indonesia helps the modern market to grow at a fast pace. Now almost all big cities in Indonesia have at least one to three shopping malls, while the small convenience stores like Alfamart and Indomaret can be easily found in every region, both in big cities and in small towns. Smaller working families in Indonesia care more about food safety and quality and are health conscious. Thus, this segment of the population prefers to purchase groceries including foods like chocolate and confectionery in hypermarkets, supermarket, or convenience stores since the quality and safety of foods in these modern markets can be better guaranteed than those in wet markets. Big supermarkets and hypermarkets are also important outlets for European products and the most popular and widely spread supermarkets in Indonesia include Carrefour, which has 50 % of the market share, Hypermart, with 25% of market share and Giant with 20% of the market share. 276 Popular supermarkets also include Super Indo, Food Mart and Hero. Even though ‘off’ distribution channels are more popular for chocolate and confectionery products, there is also a considerable market for ‘on’ distribution channels. As Indonesian consumers are becoming more affluent, dining in restaurants is also becoming increasingly popular. “The increasing busy and hectic lifestyle in urban areas is one of the factors for this high consumption. People have U.S. Department of Agriculture, Economic Research Service, “Indonesia’s modern retail sector” available at: https://www.ers.usda.gov/webdocs/publications/44684/28843_eib97_summary.pdf?v=41304. 276 140 Tastes of Europe Indonesia – Market Entry Handbook less time to do household work, includes cooking; hence, choosing restaurants or home delivery is convenient option to enjoy the daily activities.”277 This means that chocolate and confectionery exporters have also increasing opportunities to sell their products for restaurants. Here chocolate confectionery producers have an advantage as chocolate confectionery is typically more often consumed in restaurants than sugar confectionery. Pipiltin Cocoa, Chokelat Monggo and Hyde are amongst the top-rated restaurants that serve chocolate and its derived products. For sugar confectionery, small kiosks near to consumers’ homes will still be the best-selling outlets. 277 Michal Wasserbauer, “Restaurant market experiencing great growth opportunity in Indonesia” , Cekindo, June 2016, available at: http://www.cekindo.com/restaurant-market-experiencing-great-growth-opportunityin-indonesia.html 141 Tastes of Europe Indonesia – Market Entry Handbook 3.12 Honey Strengths Opportunities •Well-attuned to growing consumer health consciousness •Domestic demand expected to outpace local supply •Honey seen as both nutritional and even considered for medicinal qualities in Indonesia •Long shelf-life and ease of transport to market Honey Outlook Weaknesses Threats •Relatively expensive product unlikely to be regularly purchased by most consumers •Main growth in consumption expected to come from toiletry and other products less suited to high quality EU products •Low existing EU market share and uncertain growth prospects •Strong presence of regional and international competitors in the Indonesian market, including Japan, United States, and New Zealand Consumption Indonesia has the third largest tropical forest in the world after Brazil and Zaire. With 910,100 square kilometers of forest area, Indonesia’s forest land comprises 50 percent of the country’s land area.278 This makes the country full of natural resources, including natural honey. According to information retrieved from the Association of Indonesia Beekeeping, there are several types of local bees in the country which produce honey, with the most farmed ones being Apis Indica, Apis Mellifera, and Apis Cerana. The local demand for honey has grown tremendously over the past few years, not the least because of increasing public awareness of its health benefits. Indonesia produces about 5000 tons of honey per year and it is importing about another 1500 – 1800 tons of honey on a yearly basis.279 Given its vast natural and human resources, as well as growing internal demand, the potential for Indonesia's honey production is enormous. However, there are several challenegs which must be addressed before the industry can catch up to its Asian countries. Key challeges include: 278 279 World Bank, “Forest area, Indonesia”, available at: http://data.worldbank.org/indicator/AG.LND.FRST.K2 © Trade Map, International Trade Center, available at: http://www.trademap.org/ 142 Tastes of Europe Indonesia – Market Entry Handbook - - - Production: Even though 9 out of 11 species of high-quality bees can be found in Indonesia, the high humidity of the country negatively affects the production quantity. In addition, the provision of beekeeping production facilities in the form of colonies, queen bees, equipment and drugs for eradication of pests is still limited. Marketing: Despite increasing public awareness of the honey’s benefits, honey is still generally perceived to be a medicine. Industry structure: Most beekeepers and honey producers are local SMEs, which lack the resources to organise a large-scale production and distribution. There is a lack of big organisations or companies that unite and organise smaller beekeepers under a single voice. Investment and financial issues: Banks are generally not willing to provide credit in the business of beekeeping. R&D: Unlike China, Thailand and Vietnam, Indonesia lacks integrated and wellcoordinated government supported in R&D programmes to develop and upgrade production, processing and marketing activities. Local universities and other scientific institutions do not generally deal with beekeeping activities. All the above issues are de facto hindering the development of local honey production, opening the door to imports of honey to meet the demand. Consumer Profile: Health Concerns The improvement in the category’s performance is likely to be driven by middle-income and upper-income consumers, who are becoming increasingly aware of the importance of healthy foods. This is reflected by increased interest in low-sugar and sugar-free jams and preserves, as well as honey.280 Consumer Trends: How to Market Honey Products The country’s expanding middle class is starting to spend on other discretionary expenditures because of decreasing price sensitivity and increasing income. In addition, following increasing awareness of the benefits of consuming honey products, not only for food consumption but also for medicine, healthcare, bath-soaps, and shampoos, it is therefore very likely that the development of the honey market in Indonesia will be mainly driven by the middle-income and urban residents. Offer Domestic Market The high level of demand on the honey market in Indonesia is due to the fact that the products yielded by the honey-bees are used not only for individual consumption, but also for cigarettes, food, beverage, medicine, milk, bread, bath-soap, shampoo and other kinds of industrial products. Import of Honey Products Compared to other Asian countries, the production of honey in Indonesia is relatively low, with only 5,000 tons produced in 2014. This means that local production in that year could only meet about 20 grams per person. 280 © Source: Euromonitor International, “Spreads in Indonesia”, 2015 143 Tastes of Europe Indonesia – Market Entry Handbook In 2016, Indonesia imported 1636 tons of honey, for a total of 4.6 million EUR. Argentina is the main exporter of honey to Indonesia, followed by Saudi Arabia (27 percent) and Australia (8.6 percent).281 Even though the import volume and value remain relatively low compared to other countries, the consumption is likely to increase over the next few years, in particular because of increasing public awareness to consume honey as a supplement apart from as a medicine. Foreign natural honey exports need to obtain certain licenses and certifications to export honey to Indonesia. According to the United States Department of Agriculture – Foreign Agricultural Service, Indonesian import procedure is the following:282 Figure 38 Indonesia: Import Procedure Flow Chart283 Most importantly, according to the National Agency for Drug and Food Control (BPOM)’s regulations, importers should obtain the SKI permit to have products cleared at the customs.284 © Trade Map, International Trade Centre, available at www.trademap.org. U.S. Department of Agriculture, “USDA – Foreign Agricultural Service, FAIRS country report – Indonesia” available at:: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural%20Import%20Regula tions%20and%20Standards%20-%20Narrative_Jakarta_Indonesia_12-24-2015.pdf 283 U.S. Department of Agriculture, “USDA – Foreign Agricultural Service, FAIRS country report – Indonesia” available at:: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural%20Import%20Regula tions%20and%20Standards%20-%20Narrative_Jakarta_Indonesia_12-24-2015.pdf 284 Ibid. 281 282 144 Tastes of Europe Indonesia – Market Entry Handbook Export of Honey Products Indonesia does not appear among the world’s top exporters of honey. According to the United Nations Food and Agriculture Organization, Indonesia only exported 207 tons of natural honey in 2013, compared to 37,000 tons exported by Vietnam in the same year. The main destination of Indonesia’s honey exports is Singapore followed by Bangladesh and Malaysia. Indonesia’s honey exports to Singapore and Bangladesh as well as to Malaysia are relatively negligent, amounting to 450 000 EUR, 230 000 EUR and 127 000 EUR in 2016 respectively.285 However, Indonesia does not feature among the 12 top honey exporters to the EU, partly because of the EU’s ban on Asian honey that was lifted only in 2013.286 The low volume of honey exports is mainly related to the low levels of honey production in the country, combined with a high demand from local consumers. The country therefore cannot yet export its honey and bee products on the global market as the domestic demand is not fulfilled. Indonesia's Exports of Honey by Quantity (2011-2015) Unit: Tonnes 1000 800 600 400 200 0 2011 2012 2013 2014 2015 Exports Figure 39: Indonesia's Exports of Honey by Quantity (2011-2015)287 Main Competitors on the Market Locally produced honey still dominates Indonesian market, mainly due to their extensive distribution network. However, some imported honey also gained footing, notably those from Saudi Arabia and New Zealand. It is also worth noting that honey produced in Kalimantan and Sumbawa are extremely popular among Indonesian consumers and these types of honey do not have a brand, as they are produced by small-and-medium enterprises (SMEs) and are distributed in small retailers only. Local households normally favor these kinds of honey as they are associated with originality and freshness. © Trade Map, International Trade Center, available at: http://www.trademap.org/ European Commission, DG Agriculture and Rural Development, “EU Market Situation for Honey” available at: http://ec.europa.eu/agriculture/honey/reports/market-situation_en.pdf 287 © Trade Map, International Trade Center, available at: http://www.trademap.org/ 285 286 145 Tastes of Europe Indonesia – Market Entry Handbook Madurasa is the most prominent honey brand in Indonesia and its distribution network spans wide from hypermarket to small retailers. Established in 1985, Madurasa is also one of Indonesia’s oldest honey brands. It started making names by selling honey in sachets and associating it with healthy snacks.288Its product range varies from bottled premium honey for family marketed as Royal Jelly and Bee Pollen, to flavored honey that is popular among schoolchildren. Pramuka Honey is a success story of small business cooperatives belonging to the Indonesian Scout Movement (Gerakan Pramuka Indonesia). The cooperatives have been selling honey since 1970 but the quality was so good that it became popular among Indonesians through word-of-mouth marketing. In 2004, the small cooperatives officially became a legal entity producing local honey named PT Madu Pramuka289. 288 289 Available at: http://www.madurasa.co.id/eng/aboutus (for refrence only, no data used) Available at: http://madupramuka.com/statis-1-profil.html (for refrence only, no data used) 146 Tastes of Europe Indonesia – Market Entry Handbook Arrohmah Black Honey gained popularity among health-conscious Indonesians due to the belief that the black honey – which tastes bitter instead of sweet – could reduce cholesterol levels and cure various heart and respiratory problems. The honey originates from Kalimantan and it is extracted from wild bees endemic to the area. The Arrohmah black honey is sold in small retailers only and costs about 4 EUR for a bottle of 460 grams.290 Al-Shifa Honey is being marketed in Indonesian retailers as high-quality imported honey and is very popular among middle- and upper-class Indonesians. It is produced by the Sunbulah Group in Saudi Arabia, though the honey is derived from various areas in the world including tropical forests of the South America, Australia and the Alps mountains in Northern Europe291. McAdams Manuka Honey from Australia and New Zealand is also a popular choice among Indonesian middle-class family. The McAdams Manuka honey stands out due to its distinctive taste and unique production nature (it is derived from a monofloral honey produced from the nectar of the manuka tree). Many Indonesians are also aware of the vast health benefits of Manuka honey, such as the fact that it has considerably higher level of enzymes than regular honey292. Specific Customs and SPS Requirements According to the Directorate General of Custom of the Republic of Indonesia, import duties on natural honey amount to 5 percent for MFN, plus a 10 percent VAT.293 According to regulations No 12/2015 and 13/2015 of the National Agency for Drug and Food Control (BPOM), importers of food and food ingredients, and thus natural honey, are required to obtain an entry permit (SKI) in order to release the products at customs for each shipment.294 In addition, natural honey products also need to obtain phytosanitary certificates by public officers authorized by the official national plant protection organization. Phytosanitary certificates should be filled with the following information: 1. Name and address of exporter; 2. Number and description of packages; 3. Place of origin; 4. Name of produce and quantity declared; 5. Name of authorised officer, date and signature. Distribution The modality of imports is mainly in bulk packs or in containers. Honey products to the end users are usually imported by local distributors in bulk packages, and then are repacked locally in consumer size packages. Through local importers and agents, products are then distributed to supermarkets, mini markets and drugstores. Some of the biggest local importers and distributors include: Available at: http://maduhitampahitarrohmah.com/ (for refrence only, no data used) Available at: http://www.sunbulahgroup.com/honey-jam.html (for refrence only, no data used) 292 Available at: https://draxe.com/manuka-honey-benefits-uses/ (for refrence only, no data used) 293 Available at: http://www.beacukai.go.id/btki.html(for refrence only, no data used) 294 Under certain circumstances, the BPOM also provides a priority service, issuing a 6-month validity SKI permit an on-line application processing. For more info, please refer to: Australian Government Trade Commission: https://www.austrade.gov.au/ArticleDocuments/1418/IABW_PFB_BPOM.pdf.aspx 290 291 147 Tastes of Europe Indonesia – Market Entry Handbook Elang Biru Indonesia, PT Address: Equity Tower Building, 35th Floor, SCBD Jl. Jend. Sudirman Kav. 52 -53 Jakarta12190 Tel: +62-21 33 500088 Fax: +62-21 29277888 Website: www.madumanuka.co.id Business Line: Importer & Distributor of Honey. Fermanto Bevfoods, CV Address: Jl. Penjernihan II No. 1 Pav Penjompongan Jakarta Pusat 10210 Telp: +62-21 573 2816 Fax: +62-21 573 6678 Website: www.fermantobevfoods.co.id Business Line: Importer, Distributor, Producer of Honey and other food & beverage. Gautama Indah Perkasa, PT Address: Danau Sunter, Jakarta 14350 Telp: +62-21 933 89783 Fax: +62-21 651 4114 Business Line: Importer & Distributor of Honey, snacks and groceries Interfood Sukses Jasindo, PT Address: Jl. Kartini II No. 19 Ruko Pasar Baru Sawah Besar Jakarta 10710 Telp: +62-21 385 2434 Fax: +62-21 385 2435 Email: jerytanajaya@yahoo.com Website: www.interfood.co.id Business Line: Importer & Distributor of Honey, snacks and groceries5. Kartikawira Adisukses, PT Address: Jl. Petojo Barat IV No. 4 Jakarta Pusat 10130 Telp: +62-21 6322 935/ 631 0607 Fax: +62-21 6322 965 Email: sales@kartikawira.com or isbandi_ss@kartikawira.com Business Line: Importer & Distributor of Honey, snacks and groceries6. Mitra Bersaudara, PT Address: Jl. Dewi Sartika Raya No. 239A Cawang Jakarta Timur 13630 Telp: +62-21 801 3333Fax: +62-21 800 1616 Email: contact@mitrabersaudara.com Website: www.mitrabersaudara.com Business Line: Importer & Distributor of Honey and meals (mostly import from SaudiArabia). Nirwana Lestari, PT Address: Jl. Raya Narogong Km 7., Bojong Menteng Bekasi Jawa Barat 17117 Telp: +62-21 8204055 Fax: +62-21 8204055 Email: info@nirwanalestari.com Website: www.nirwanalestari.com 148 Tastes of Europe Indonesia – Market Entry Handbook Business Line: Importer & Distributor of Honey, snacks and groceries. Pandurasa Kharisma, PT Address: Jl. Indokarya II Blok G No. 5 Sunter Agung Podomoro Jakarta 14340 Telp: +62-21 650 5335 Fax: +62-21 650 5328 Email: pandukha@cbn.net.id or sales@pandurasa.co.id Website: www.pandurasa.co.id Business Line: Importer & Distributor of Honey, snacks and groceries. Safarindo Internusa, PT Address: Jl. Kemang Timur Raya No. 16 Jakarta Telp: +62-21 719 9156 Fax: +62-21 719 9147 Email: info@safarindo.com Website: www.safarindo.com Product: Honey, snacks, and groceries. Sukanda Djaya, PT Address: MM 2100 Industrial Town Jl. Irian Blok FF-2 Cibitung Bekasi Jawa Barat 17520 Telp: +62-21 898 1246 Fax: +62-21 8998 2010 Website: www.sukandadjaya.com Business Line: Importer & Distributor of Honey, snacks and groceries. Seafer General Food, PT Address: Jl. Wonosari No. 3 Kendal Jawa Tengah 51351 Telp: +62-294 383333 Fax: +62-294 382078 Email: marketing@seafer.co.id . 149 Tastes of Europe Indonesia – Market Entry Handbook 3.13 Gums Resins and Plant Extracts Strengths Opportunities •Well-attuned to growing consumer health consciousness •High value per unit export sector for EU •Gum resins and plant extracts seen as both nutritional and even considered for medicinal qualities in Indonesia •Long shelf-life and ease of transport to market Gum Resins & Plant Extracts Outlook Weaknesses Threats •Relatively expensive product unlikely to be regularly purchased by most consumers •Price sensitive and limited scope of in-demand products in Indonesia at current stage of development •Low existing EU market share and uncertain growth prospects •Strong presence of domestic producers, contributing to Indonesia's substantial regional exports Consumption The gums resins market in Indonesia holds vast potential as local consumers and industries have for years been accustomed to frequently utilising the commodities for various purposes from personal household consumption to the manufacturing of intermediate goods. Resin gum is locally known as damar. Damar forests are commonly found in Kalimantan, Sulawesi, Maluku and Papua and the country has been cultivating resin gum even prior to the World War II. In Indonesia, resin wood has been used to produce pulp that will be processed further to become paper. Resin-made papers are sold for a premium price due to its high durability. The sap from resin wood is commonly added in the mixture of rubber to improve its sturdiness, eventually improving the quality of finished products such as tires or shoe soles. It has also been a common practice in Indonesia to mix resin gum in paints used to dye the batik textile, which is commonly donned among Indonesians during formal events. For food, the resin gums are also used by the food and beverages industry for natural colouring. The list of other Indonesian products that utilise resin in their production process includes plastics, textile, paint, ink and matchsticks. 150 Tastes of Europe Indonesia – Market Entry Handbook Damar originates from its latin Agathis dammara, the plantation of which has been developed in various areas in Indonesia in the islands of Java, Sulawesi and Maluku. Medium-sized resin farms in Indonesia normally utilise the trees’ sap and turn it into copal gum, which would then be used for various consumer goods and medical products, such as health balms, in addition to intermediate industrial goods. The amount of resin gums utilised by households remains limited, though the sector has a very significant upside potential. Volume growth in gum used for candy and bubble gum, for example, is set to remain positive over the forecast period, mainly thanks to its much smaller sales base compared to other types of confectionery. In Indonesia, there are three prominent gum brands: Happydent, Big Babol and Mentos. For these companies, robust growth would be warranted going forward as improved distribution is expected to further ensure product availability, further fueling volume sales. The strategies of the leading gum manufacturers, which involve price promotions and new product development, are also likely to further boost growth in gum over 2015-2020.295 Industry Profile Resin gum is seen as an environmentally friendly production inputs as its processing does not generate too much hazardous waste, while its processing cost is relatively low compared to other factory production inputs used for the same function. European resin gums have to compete with the locally produced commodities. The most famous one is the Damar Mata Kucing (Cat Eye Resin Gum), which is the most expensive type of resin gum in Indonesia that is produced from Lampung in the west, to Maluku Islands located in Indonesia’s far east. Other types of resin gums include Damar Daging (Meat Resin Gum), Damar Batu, Damar Tulang (Bone Rasin Gum) and Damar Supit. Damar Mata Kucing (Cat Eye Resin Gum), is the most expensive and the most widely used resin gum in Indonesia. Its sap is extracted from Shorea javanica and is used from cosmetics, perfume, colouring, and paint. Plantations of Damar Mata Kucing can be found in Lampung, a province located in the southern part of Sumatera island. This resin gum is known for its bright yellow color and transparent texture. Damar Daging (Meat Rasin Gum) got its name from its dark red color and thick texture, which resembles fresh red meat. The Meat Resin Gum is mainly used for colouring. Damar Batu (Rock Rasin Gum) is low quality resin gums that is collected by farmers on the forest floor and has formed naturally from weal on tree trunks. It is commonly used in the production of incense, candles and paint. Offer Domestic Market of Resin Gum in Indonesia and Import Gums, resins and plant extract are among the most strategic commodities that are exported from EU Member States to Indonesia. The commodities are ranked 13th in the top EU Agrifood exports to Indonesia, with shipped goods amounting to EUR 15 million in 2015, increasing from EUR 12 million in 2011. 295 © Source: Euromonitor International, “Confectionary in Indonesia”, 2015 151 Tastes of Europe Indonesia – Market Entry Handbook Figure 40 Evolution of 20 Top EU Agri-Food Exports to Indonesia, 2011-2015296 The prices in Indonesia largely depend on the quality of the resin gum. In the local wholesale market, the highest quality resin gum could be sold in IRD 24,000 per kilogram, or EUR 1.6 per kilogram. Meanwhile, the low-quality resin gum is available for half the price, as cheap as IRD 12,000 (EUR 0.8). The picture on the left shows a high-quality resin gum in Indonesia, which stands out due to its glowing, clean and transparent look, with gold commonly being its color. For the Indonesian food market, resin gums are also the major ingredient to produce chewing gum. The rapid expansion of modern retail outlets such as supermarkets or hypermarkets and convenience stores paved the way for the improved distribution of gum, especially chewing gum, which is geared towards modern retail channels. Meanwhile, gum manufacturers and distributors continued to provide independent small grocers with products as well as supplying attractive point-of-sale materials. For the chewing gum market, there are three prominent gum brands controlling market share in Indonesia: Happydent, Big Babol and Mentos. European Commission, DG for Agriculture and Rural Development, “Agrifood in Indonesia” Available at: http://ec.europa.eu/agriculture/trade-analysis/statistics/outside-eu/countries/agrifood-indonesia_en.pdf 296 152 Tastes of Europe Indonesia – Market Entry Handbook Indonesia's Imports of Gums Resins and Plant Extracts by Value (2011-2015) Unit: EUR Thousand 70000 60000 50000 40000 30000 20000 10000 0 2011 2012 2013 2014 2015 Imports Figure 41: Indonesia's Imports of Gums Resins and Plant Extracts by Value (2011-2015)297 Export Indonesia is a major exporter for resin gum, with export to India, Germany, the Philippines, France, Belgium, United Arab Emirates, Bangladesh, Pakistan and India. In 2014, the price of resin gum sold in Indonesia averaged between USD 1,200-2,080 (EUR 1073 1860) - per global metric tons, relatively cheap compared to global export price of USD 1,000-1,500 (EUR 8941341) per global metric ton in the international market.298 More than 50 percent of resin gums produced in Indonesia are exported to China, the biggest consumer. European nations such as France, Germany and Portugal are also among the biggest buyers of Indonesian resin gums, which have been known for its excellent quality and distinctive nature. France is a notably big importer, as their share of purchase account for 36 tons annually, or 25 percent of total procurement of Indonesian resin gums every year, the second-biggest buyer after China. The share of France’s purchase is 5 times bigger than Germany, which is the third-biggest buyer. 297 298 © Trade Map, International Trade Center, available at: http://www.trademap.org/ Gum resin prices compiled using publically available market informationand the help of local consultants. 153 Tastes of Europe Indonesia – Market Entry Handbook Figure 42 Countries importing Indonesian-made Gum Resins (kg)299 Lampung, a province in Indonesia that is known for producing high-quality resin gums, have shipped the commodity to Europe, Middle East, South Asia and the Philippines. It is the main production hub in Indonesia for the Damar Mata Kucing, or the Cat Eye Resin Gum, but was recently hit by the collapse of commodity prices, including resin gum prices. Local people in Indonesia refer to resin gum forests as “repong”, which has been the source of income for local people for a long time, as resins have been used for a long time in the traditional medicine. The province produces three grades of resin gums based on their quality; AC, AB and ABC, with the latter being the highest quality of resin gums that are exported overseas.300 Indonesia's Exports of Gums Resins and Plant Extracts by Value (2011-2015) Unit: EUR Thousand 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2011 2012 2013 2014 2015 Exports Figure 43: Indonesia's Exports of Gums Resins and Plant Extracts by Value (2011-2015)301 299 300 301 © Trade Map, International Trade Centre, available at www.trademap.org. © Trade Map, International Trade Centre, available at www.trademap.org. © Trade Map, International Trade Center, available at: www.trademap.org. 154 Tastes of Europe Indonesia – Market Entry Handbook Distribution As intermediate goods utilised to process the finished goods, resin gums are shipped mostly to various industries. Local plantations of resin gums normally cooperate with industries to provide the necessary amount of the commodities. For European resin gum producers, the growing pharmaceutical and paper industries in Sumatera and Java provide opportunities. Challenges and Main Competitors for the European Products The resin gum market in Indonesia offers lucrative potential for European producers, but it was worth noting that the Indonesian market for resin gums is still controlled by local producers, who have upper hand in industry network. This is particularly due to the fact that the resin gums in Indonesia are mainly utilised as intermediate goods that support the production process of finished goods. Another factor worth mentioning is the fact that resin gums in Indonesia have its own distinctiveness and exclusiveness and local industries might not find European-produced resin gums as good substitutes. The resin gum of Mata Kucing, or Cat’s Eye, is a reliable first-class product with idiosyncratic quality traits that might not be found in other products. Among the biggest resin gum producers in Indonesia is state-controlled Perum Perhutani. The state-owned company oversees 95,085 hectares of resin gum plantation. The company focuses on producing copal resin gums that were used by the paper industry. Perum Perhutani supplies two types of copal resin gum; superior quality and primary quality. For more information, please refer to the Perum Perhutani webpage. Lately, certain industries have also shifted to utilise gums derived from oleo pines, using them as substitute for gums from resin. Oleo pine gum, which is used in medicine and cosmetics, is a brittle, transparent, glassy solid, a natural organic compound, mainly composed of resins, possess chemical activity when dissolved in many organic solvents, though it is insoluble in water. For more information please consult the websites of Indonesia’s major gums and resins producers or traders. 155 Tastes of Europe Indonesia – Market Entry Handbook 3.14 Cotton and Live Plants Strengths Opportunities •Growing demand for cut flowers, with competitive EU export position and seasonal complementarity •Large number of varieties in demand which are not produced locally •Well-suited for increasing prevalance of gift-giving in Indonesia, including celebration of foreign holidays •Recognized quality and desiribility of EU exported plant products Cotton & Live Plants Outlook Weaknesses Threats •Relatively expensive product unlikely to be regularly purchased by most consumers •Long distance to market and many products are time and temperature sensitive •Increase in domestic or regional production •Consumer preferences do not take hold or shift to other forms of ceremonial decoration and gift-giving Consumption In 2016, Indonesian cotton consumption estimate is increased to 3.05 million bales from the previous MY 2015/16 of 3.0 million bales.302 This increase is driven by the expansion of domestic players. For live plants, including cut flowers, ornamental foliage, bulbs, roots and the like, the Indonesian market is relatively small. Statistical data on consumption of these products is not available. Consumer Profiles One of the main consumers of cotton in Indonesia is the spinning sector, which produces spun yarn and sewing thread. The sector is expanding, having grown from 251 companies in 2012 to 285 companies in 2015. According to industry sources, as of 2013 the Indonesian spinning industry consumed a total of 2.6 MMT of fiber as raw material annually, 26 percent of which was cotton. 302 U.S. Department of Agriculture, “Indonesia Cotton and Products Report” available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Cotton%20and%20Products%20Annual_Jakarta_I ndonesia_3-31-2017.pdf 156 Tastes of Europe Indonesia – Market Entry Handbook In the cut flowers market, consumer preferences differ between Jakarta and other larger cities in Indonesia. In Jakarta, giving flowers for all social occasions, such as birthdays, weddings and illness has become rather common and substitutes for personal visits. As a result, Jakarta has become by far the largest market for flowers in Indonesia and consumes approximately 76 percent of the total consumption. In Jakarta, more than 900,000 stems of cut flowers are sold per week, accounting for an approximate value of EUR 4.53 million per year, whereas the total amount for all major cities is estimated to be EUR 6.04 million per year.303 Consumer Trends In marketing year (MY) 2014/15, Indonesia increased its imports of cotton by approximately 12 percent compared to 2013/14. Despite robust consumption-driven import demand, consumption is expected to decline in 2015/16 and 2016/17. One of the reasons is that global economic conditions lowered the price of crude oil, drawing down polyester and synthetic fiber prices. Industry reports that the current price of polyester stands at approximately USD 0.85/kg with only two percent waste, while the price of middling grade cotton stands at approximately USD 1.7/kg with 10 percent waste on carded cotton yarn production and 23 percent waste on combed cotton yarn production. Indonesian spinners rely heavily on imported cotton. Unlike manmade fiber spinners, (who generally hold one week’s stocks on hand), cotton spinners must hold a minimum of 2 month’s stocks plus one month “on-the-way” shipment stocks. Cotton therefore requires more capital compared to using manmade fibers.304 With regards to cut flowers, commercial floriculture production in Southeast Asia was historically developed because of increasing need for low cost flowers by the European cut flower market place. Unlike other regions, such as Africa, south and Central America, in which cut flowers are mainly produced for export, in Asia the market potential for cut flowers has rapidly changed to include opportunities for supplying the local market as well. This unique development is on account of, among others, high population densities, and the consumer perception which has been promoted heavily by the European flower industry that the use of fresh flowers in one’s everyday life represents an improved, quality lifestyle.305 Indonesia is no exception to this trend. Over the years, it has seen its industry grow to satisfy a significant domestic demand for cut flowers, foliage and potted plants. With a population of nearly 250 million, it is one of the world’s most heavily populated countries. However, its floricultural industry remains relatively small, mainly due to lack of knowledge and infrastructure. As the owner of MJ Flora, a leading Indonesian ornamental horticultural company stated “Many wealthy people travel to America or to the Netherlands and see different varieties. They come back and ask ‘why can’t we do that here?’ I tell them ‘we can, except we don’t have the knowledge.”306 © Food and Agricultural Organisation of the United Nations, 1998, Toto Sutater and Kusumah Effendie “Cut Flower Production Development in Asia: Cut flowers production in Indonesia” available at: http://www.fao.org/docrep/005/ac452e/ac452e05.htm#fn5 . Reproduced with Permission. 304 U.S. Department of Agriculture, “Indonesia Cotton and Products Report” available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Cotton%20and%20Products%20Annual_Jakarta_I ndonesia_3-31-2017.pdf 305 © Food and Agricultural Organisation of the United Nations, 1998, Heidi C. Wernett, “ Cut Flower Production Development in Asia: Potential of Commercial Floriculture in Asia: Opportunities for cut flowers development” available at: http://www.fao.org/docrep/005/ac452e/ac452e0c.htm. Reproduced with Permission. 306 Marc Zienkiewicz, “A blooming Market in Asia”, Seedworld available at: http://seedworld.com/bloomingmarket-asia 303 157 Tastes of Europe Indonesia – Market Entry Handbook Challenges for EU products Indonesia’s currency remains weak, with exchange rates reaching IRD 13,367/EUR 1 as of March 3, 2016 compared to IRD 13,022/EUR 0.9 on March 5, 2015. The weak rupiah led to depressed consumer purchasing power, while the global economic slowdown reduced export demand for Indonesian textile products. As a result, Indonesian mills have faced an over-supply scenario since the middle of 2015. This constitutes a challenge for foreign companies not only for cotton, but across sectors. An additional general challenge for foreign companies is preference of the consumers to local products. Offer Domestic Offer Indonesia's exports of cotton represent 1.5 percent of the world exports. Indonesian cotton production is currently very low, as farmers still continue to face better incentives to grow alternative products such as rice or corn. The few Indonesian farmers that still grow cotton have limited access to high yielding varieties and cultivation practices. Increased land conversion to nonagricultural uses also reduces the area dedicated to cotton. The Directorate General for Estate Crops of the Indonesian Ministry of Agriculture (DGEC, MOA) reported that in 2015/16, most cotton was grown on marginal lands, mostly in South Sulawesi. It was also reported that farmers in Central Java no longer grow cotton. U.S. Department of Agriculture Foreign Agricultural Service estimates that Indonesian cotton production will remain stagnant at 5,000 bales in 2016/17. In 2017/18 Indonesia’s cotton production is forecast to decline to am mare 3,000 bales, as it is expected that farmers will continue to convert cotton production to corn and other crops. Currently, the volume 158 Tastes of Europe Indonesia – Market Entry Handbook of domestic cotton production contributes to less than 0.25 per cent of Indonesia’s total cotton demand.307 Indonesia's exports of live plants represent 0.2 percent of world total. Its ranking in world exports is 39. Its imports for this product represent 0 percent of world total, and its ranking in world importers is 104.308 As is the case with other horticultural products, Indonesia has a potential for growth in the domestic market and local production for export of live plants. This is due to growth of the middle class who are becoming increasingly aware of the benefits of fresh horticultural produce. Another development which may benefit local horticultural production is the depreciation of the rupiah against the US dollar, resulting in a decline in consumer purchasing power which makes imported products less competitive. However, that potential is largely hampered by lack of knowledge on post-harvest management, inconsistent supply and poor infrastructure. The local market of cut flowers and ornamental plants is developing rapidly, though highquality planting material is still lacking. The market consists of a number of confined markets, larger cities and their supply regions, with no integrated domestic market. Import Cotton is ranked sixth among the top 20 EU agricultural food exports to Indonesia. In 2015, the cotton share in the EU agricultural food exports was 4.2 percent. Evolution over the last 5 years has not been stable, showing sharp increases followed by sharp decreases. Table below shows Indonesia’s imports of cotton from the EU over the period of 2011-2015. 70 60 50 40 30 20 10 0 Value in M EUR 2011 2012 2013 2014 2015 Figure 44 Indonesian Imports of Cotton from the EU 309 Large, export-oriented manufacturers in Indonesia, with stronger cash flows are expanding their capacity through the procurement and installment of new machinery. Unlike smaller mills using 20-year-old technology, these mills are using newer and more efficient cotton spinning technology. However, further rupiah depreciation, combined with higher labour and electricity costs, depressed consumer purchasing power, and slow demand from major export destinations U.S Department of Agriculture Foreign Agricultural Service, “Indonesia: Cotton and Products Annual: Indonesia Cotton and Products Annual Report 2017” , March 2017, available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Cotton%20and%20Products%20Annual_Jakarta_I ndonesia_3-31-2017.pdf 308 © Trade Map, International Trade Center, “List of supplying markets for the product imported by Indonesia in 2015” available at: http://www.trademap.org/Country_SelProductCountry.aspx 309 “Agri-Food Trade Statistical Factsheet: European Union – Indonesia” available at: https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifoodindonesia_en.pdf. 307 159 Tastes of Europe Indonesia – Market Entry Handbook in ASEAN and Europe will reduce Indonesian cotton imports in MY 2015/16. Spinners must also utilise stocks built during the surge of cotton imports in MY2014/15 prior to making additional imports. Based on import data and the above-mentioned factors, it is estimated that for MY 2015/16 Indonesian will import cotton amounting to 2.5 million bales, compared to 3.345 million bales in MY 2014/15. It is also forecasted that for MY 2016/17 Indonesian cotton imports will amount to 2.7 million bales based on the anticipated implementation of the GOI’s trade deregulation, which is expected to reduce import costs.310 Between August and December 2015, Brazilian origin cotton led exports to Indonesia, accounting for 44 percent of the market. The United States, Australia, and India followed with 21, 13, and 8.2 percent market shares respectively. Despite quality issues, Indian, Brazilian, and African cotton are considered adequate by Indonesian industry standards. Indonesia’s primary yarn export destinations during calendar year 2015 were China (74 percent), Japan (12 percent), and South Korea (5 percent).311 The value of imports of live plants from the EU to Indonesia in 2015 was USD 733,000 (EUR 674,550), which constituted 30 percent of Indonesia’s imports in this product category. That value has not considerably changed between 2011 and 2014. However, from 2014 to 2015 there was a significant increase. Most of EU exports of live plants are from the Netherlands, which is ranked first in this category in share of world exports. Other important exporters in term of imported value are China, Ecuador and Chile.312 Indonesia is not considered to be a major export destination for the EU in this category relative to other countries. Main export destinations are the Russian Federation (21.3 percent of total EU exports of plants and floriculture products in 2014) and Switzerland (20.7 percent), followed by the US (10.2percent) and Norway (8.8 percent).313 “U.S. Department of Agriculture, “Indonesia Cotton and Products Report” available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Cotton%20and%20Products%20Annual_Jakarta_I ndonesia_3-31-2017.pdf 311 Ibid. 312 © Trade Map, International Trade Centre, available at www.trademap.org. 313 Ibid. 310 160 Tastes of Europe Indonesia – Market Entry Handbook 2.5 2 1.5 Value in M EUR 1 0.5 0 2011 2012 2013 2014 2015 Figure 45 Imports of Live Plants from the EU to Indonesia314 120 100 80 60 40 20 0 -20 -40 -60 2011-2015 2014-2015 Figure 46 Growth in Value of Indonesian Imports of Live plants from the EU (% p.a.)315 Export The value of cotton exports to the EU was EUR 4 million. Over the past 5 years, exports from Indonesia to the EU decreased, most notably between 2014 and 2015. “Food Trade Statistical Factsheet: European Union – Indonesia” available at: https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifoodindonesia_en.pdf. 315 © Trade Map, International Trade Center, “List of supplying markets for the product imported by Indonesia in 2015” available at: http://www.trademap.org/Country_SelProductCountry.aspx 314 161 Tastes of Europe Indonesia – Market Entry Handbook 35 30 25 20 Value in M EUR 15 10 5 0 2011 2012 2013 2014 2015 Figure 47 Indonesian Exports of Cotton to the EU316 The value of live plants exports from Indonesia to the EU in 2015 was USD 4.04 million (EUR 3.71 million), which constituted 13 percent of Indonesia’s exports in this product category. Over the past 5 years, there has been a growth of 147 percent p.a. in exported value. The most significant increase occurred between 2014 and 2015. While in some Member States the value of imports decreased, in others (especially Poland, Italy, France and Spain) it has dramatically increased overall.317 The role of the EU as an export destination for Indonesia in this category is relatively minor. Main importing markets are Kenya (28.1 percent of total EU imports of plants and floriculture products in 2014) Ethiopia (10.6 percent) and Costa Rica (9.3 percent).318 6 5 4 3 Value in M EUR 2 1 0 2011 2012 2013 2014 2015 Figure 48 Indonesian Exports of Live Plants to the EU319 “Food Trade Statistical Factsheet: European Union – Indonesia” available at: https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifoodindonesia_en.pdf. 317 © Trade Map, International Trade Centre, available at www.trademap.org. 318 European Commission, “Working Document, Civil Dialogue Group - Horticultural Products: Flowers and Ornamental Plants” available at https://ec.europa.eu/agriculture/civil-dialogue-groups/horticulture-olivesspirits_en. 319 Ibid. 316 162 Tastes of Europe Indonesia – Market Entry Handbook 3500 3000 2500 2000 1500 1000 2011-2015 500 2014-2015 0 -500 Figure 49 Growth in Value of Indonesian Exports of Live plants to the EU (% p.a.)320 Mapping Main Competitors on the Market Several ornamental companies operate in Indonesia. Two prominent ones which are active internationally are: AGRO21 Gemilang - The company was established in 1986. Initially it produced fruit plants, but it has grown since then and has for long been dealing with plants nerseis. For more information wisit the company website. MJ Flora – The company produces a variety of plants products, including cut foliage, tropical cut flowers and bulbous plants, tip cuttings, rooted cuttings, air layers, canes, tissue culture micro-cuttings, flowering landscape as well as indoor plants for interiorscape use. The company holds a total growing area of about 6 hectares (13.2 acres), situated in the tropics on the island of Java, Indonesia. The company shows awarness for international standards such as Coroperate Social Responsibility, declaring on their website that the Company’s management include men and women from different ethnic groups, as well as that the company does not employ children or undrage individuals. For more information, visit company’s website. Specific customs and SPS requirements for import There is no import duty or VAT in Indonesia on import of raw cotton. In December 31, 2015 a new regulation by the Indonesian Ministry of Finance for the establishment of a logistic bonded center became effective (see details in the distribution section below). Cotton imported and temporarily stored at the logistic bonded center will be exempted from any import related taxes, including value added tax, sales tax on luxury goods, excise tax, and income tax. The imported cotton will also enjoy suspensions of import duties. 320 © Trade Map, International Trade Centre, available at www.trademap.org. 163 Tastes of Europe Indonesia – Market Entry Handbook The Indonesian textile industry including spinners is supportive of this new regulation as it will simplify the procedures and reduce costs to import cotton.321 For live plants which fall under the category of horticultural products, the situation is less encouraging. Indonesia applies a tariff of 11.1 percent on imported live plants. In 2012, new regulations on horticultural imports were introduced. “Horticulture can only enter Indonesia at select ports, which excludes the busiest port of Tanjung Priok in Jakarta. New regulations also state that only registered importers can deal with horticulture imports. To become a registered horticulture importer a firm must get a recommendation from the designated directorate general at the Ministry of Agriculture.”322 This has resulted in many complaints against Indonesia, including WTO disputes. In 2015, the Indonesian Ministry of Trade (MOT) issued regulation 71/2015, updating Indonesia’s import rules on horticultural products. The new import rules outlined in MOT 71/2015 supersede MOT 16/2013, 47/2013, and 40/2015, but makes few substantial changes. Import licenses are still required and quantities will be allocated subject to the importer’s cold storage capacity. MOT eliminated the 80 percent rule, which imposed punitive measures on importers that used less than 80 percent of the quota allotted under their import permits. The new regulation also specifies that the total import allocation will be set annually and that importers are no longer required to register as horticultural product importers. 323 Specifically with regards to living plants, seeds and other planting materials, there is a requirement for a phytosanitary certificate issued by the approved authority in the country of origin stating that they are free from pests or diseases.324 Challenges for EU Products As can be seen above, the main challenges for European exports arise from the low value of the Indonesian currency, which decreases customers’ purchasing power, along with the customers’ loyalty to local products. In the case of live plants, there are additional challenges U.S. Department of Agriculture, “Indonesia Cotton and Products Report” available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Cotton%20and%20Products%20Annual_Jakarta_I ndonesia_3-31-2017.pdf 322 Titik Anas, “Indonesia’s new protectionist trade policies: a blast from the past”, Eastasia Forum, June 2012, available at: http://www.eastasiaforum.org/2012/06/18/indonesia-s-new-protectionist-trade-policies-a-blastfrom-the-past/ 323 U.S. Department of Agriculture, “Indonesia: Ministry of Trade Changes Horticulture Import Regulation” available at: http://www.fas.usda.gov/data/indonesia-ministry-trade-changes-horticulture-import-regulation, 324 Australian Trade and Investment Commission, “Doing Business Indonesia”, available at: https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/Indonesia/Doing-business/Tariffsand-regulations 321 164 Tastes of Europe Indonesia – Market Entry Handbook such as the presence of a customs tariff (11.1 percent), restrictions or prohibition on certain species of flora and fauna and certification requirements. Distribution In the cotton sector, to improve the efficiency and effectiveness of imports into Indonesia, the Indonesian Custom and Excise Office held socialisation on the establishment of the Indonesian Logistics Bonded Center (PLB, Pusat Logistik Berikat) in September 2015. The Indonesian Logistics Bonded Center will serve as a temporary a storage center for goods before they are re-exported or sent to areas outside of the logistics bonded center. The advantage of the logistic bonded center for cotton imports is that imported cotton which is currently transshipped and temporarily stored in Kuala Lumpur or Singapore will be able to be imported directly to Indonesia. The cotton will remain property of the supplier, allowing spinners to buy as needed directly from the logistic bonded center. After the regulation on this issue became effective, the first center opened in March 2016.325 For live plants and flowers, distribution is mainly done through wholesale centers. One wholesale market is located at Berastagi, especially on Tuesdays and Fridays, where flowers are traded and distributed to different markets and flower shops in Medan. Another center is located at Batu. Some of the growers act as traders as well and packing of flowers is done at their home. According to the UN Food and Agriculture Organization, the current system is not sufficient, as there is a need for a well-established wholesale market in Jakarta. USDA Global Agricultural Information Network, Indonesia Cotton and Products Annual Report 2016, report number ID1607, 28 March 2016, p. 4, https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Cotton%20and%20Products%20Annual_Jakarta_I ndonesia_3-28-2016.pdf 325 165 Tastes of Europe Indonesia – Market Entry Handbook 4. COMMUNICATION 4.1 How does the Consumer get Influenced: By whom and how? Before exporting to Indonesia, it is essential for a European company to consider the country’s consumer market, including where and how to connect with the local customers. As the purchasing power continues to increase in Indonesia, outlooks for F&B retail sector expansion, including hypermarkets, supermarkets, and minimarkets remain promising. Industrial and urban areas, such as Jakarta, Makassar, Surabaya and Bandung, accommodate larger preference and demand for foreign goods. In those areas more international groceries are present, providing imported, higher-price, higher-quality, larger assortment options for Indonesian middle and upper-class consumers. For those families with both working parents, the modern markets provide one-stop solution for several purposes, since in one building Case Study: Go-Jek complex you can also find laundry services, beauty services, in house cafes Go-Jek is a start-up based in Jakarta that utilises and restaurants, floral shops, ATMs, ojek, motorcycle taxis, to transport people and home delivery services etc. goods. Go-Jek differentiates itself with its The convenience stores, such as such as Alfamart and Indomaret, which are mostly popular among younger consumer group, are also rapidly expanding. Unlike, the local minimarkets, convenience stores also offer ready-to-eat foods and a dining area. Other smaller food retailers are locally owned groceries (Warungs) and the minimarkets, both catering to similar client groups. The lower income groups are more likely to purchase from Warungs for their convenience and affordable prices. The convenience stores and the minimarkets can often be found in residential areas or next to gasoline stations. They operate in a more flexible manner, often according to opened for 24 hours. transparent pricing and driver tracking systems, which assure customers of its security and reliability. Go-Jek offers an instant courier service, delivery of goods within 90 minutes to anywhere in the city, as well as a shopping service, whereby they shop for and deliver food, tickets, medicines or anything under IDR 1 million and consumers pay with cash on delivery. Over 50 companies in Jakarta currently use Go-Jek’s services to deliver their products, documents and even their employees. For consumer business companies, this service can help bypass indirect distributors and reach customers in remote areas, including Warungs, as well as better understand customer buying patterns, exercise better control on the delivery cycle and cut costs. their local customers’ needs: for example, being Traditional markets also remain an important retailer in Indonesia. Like small grocers, they rely on personalised services, local product offerings, and location to remain competitive.326 The consumers associate traditional markets with lower costs. They prefer buying fresh meat and seafood at traditional markets whereas, dairy and processed foods are purchased in modern markets. Also, another comparison made between traditional and modern food retailers is the product information that is believed to be more transparent and forthcoming at the modern retailers. 326 U.S. Department of Agriculture, “Indonesia: Retail Foods: Retail Foods Update”, available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-222016.pdf. 166 Tastes of Europe Indonesia – Market Entry Handbook Managing the product distributors is the most crucial capability for driving growth in fragmented trade. They underline that conducting performance reviews by evaluating their performance, financial returns, sales performance, and outlet coverage can significantly improve the sales outcome. Trade-promotion optimization (TPO) tools allow for better tradeinvestment decisions. TPO tools are used to measure the effects of a promotion on the entire category on both the manufacturer and the retailer, and for developing guidelines for optimal promotions by retailer, geographic region, and category. Furthermore, carrying out in-house trainings of the sales representatives on the product background and traits plays great role in the sales performance. The sales force has the potential of being the on-site promotional body and providing potential clients with attractive information works in favor of the latter. How to successfully present the products to the consumer? While an increasing share of Indonesian consumers are exhibiting higher levels of sophistication, the overall consumer habits introduce larger disparities between the urbanised customers and those living in remote, hardly accessible areas. The urban, more modernised consumer tends to consider attributes such as trust, quality of the product and production methods in their purchase decisions. At the same time, consumers in remote areas are still driven by basic daily needs and strongly influenced by the price factor. Consumers in Indonesia tend to be influenced by in-store promotions and Point of purchase displays. Hereby, the actual, real-life contact with the promoted product allows personal experience, builds trust and more likely leads to a purchase. However, since Indonesian consumer base is more fragmented than those in Europe, product owners and retailers are required to tailor their marketing strategies and build more differentiated commercial relationships within one marketplace. That is because the local client base has vastly different levels of disposable income as well as different needs and wants. Another reason is that different client groups shop in different markets: families with extended needs will prefer markets with larger assortment, whereas smaller households can mostly satisfy their needs in smaller markets. Therefore, the producers should consider customised packaging for different selling channels. Foreign producers have to consider that not only the brand but also the product itself can be completely new to the local consumer. Hereby, we shall ask how to make cheese or Champagne or olives appealing for someone who has not come across with the product before. Often, the local consumers are not aware of the cooking options where the unfamiliar products shall be used or how they should be treated. Outdoor pop-up cooking stands and in-store point of purchase displays, which introduce where and how foreign ingredients can be used and whih offer free tasting samples have great impact on winning the local’s preference. Additionally, disseminating information materials along with the products, for example attaching mini-sized handbooks or leaflets with recipes where those products can be used, will simplify the purchase decision. Additionally, selling a foreign product together with a local product - for example, combining foreign barbeque sauce together with local meat product, will automatically draw the customer’s interest to the unfamiliar side product, if they are familiar or used to buying the local side product. Also, two foreign products can be combined which automatically guarantees a wider client base for both products instead of one. To conclude, each and every marketing decision shall derive from an in-depth analysis of the commercial venue and consumer groups to which particular goods are targeted. Also, the follow-up on promotional campaigns allow improving and applying more suitable marketing techniques. Traditional promotion channels – TV, Radio, print periodicals 167 Tastes of Europe Indonesia – Market Entry Handbook The traditional media, including the most popular information channel – TV – continues to dominate across the whole country. As such, television is the primary channel through which Indonesian consumers obtain information about products and brands across most income levels. That being said, digital media is gaining importance in urban areas. Word of mouth via relatives, friends and colleagues, as well as in-store promotions, also plays important roles in influencing purchase decisions. The most widely read print (and online) magazine, focusing on culinary topics in Indonesia, is “Foodies magazine” (www.thefoodiemag.com). It has a circulation number of 30,000 and is widely distributed in hotels, cafes, restaurants in Jakarta and Bali. Foodie Magazine focuses primarily on reports related to Indonesian food and the magazine has very high degree of Indonesian context, unlike online magazines “Epicure Indonesia” (www.epicureasia.com) and “Exquisite Taste Indonesia” (www.exquisite-taste-magazine.com) which still retain a large share of content from overseas. Modern promotion channels – Online platforms 450 400 25 350 20 300 250 15 200 10 150 Telephone Subscribers Internet Users as Proportion of Overall Population 30 Millions Indonesia’s Internet usage has risen sharply over the last few years and consumers – especially the middle-income segment – are more connected than ever, with easy access to information. Social networking is the most popular in the key cities, and while Indonesia leads the region in terms of overall connectedness, active users of social media and online platforms as proportion of overall population remains relatively low. This implies a huge, untapped potential for consumer business companies to engage their consumers through digital platforms as Internet penetration takes off. Internet Users as Percentage of Overall Population Fixed Telephone Subscriptions Mobile Phone Subscriptions 100 5 50 0 0 Figure 50 Indonesian Communication Channels327 While Facebook, Instagram and Twitter are some of the more popular social media platforms, the Line, WhatsApp, Path and BlackBerry Messenger are also used as part of e-commerce 327 World Bank, World Bank Data, available at https://data.worldbank.org/country/indonesia. 168 Tastes of Europe Indonesia – Market Entry Handbook business strategies among the local companies. Also, some Indonesians turn to Youtube for F&B related searches showing cooking shows, videos, recipes or new cooking techniques. Instagram is particularly popular when sharing culinary and related lifestyle experiences. While the internet and social media are widely and actively used in Jakarta - which has been dubbed the social media capital of the world – consumers tend not to use this channel for commercial purposes at this point in time. However, the trend of using social media for commercial purposes among producers and retailers is rising. Therefore, advertising F&B products and services on social media is gaining importance and is more frequently used to influence the consumer’s purchase decisions. The online platforms are used to seek information on products, share product reviews, user experiences and comment on products and services. Therefore, the online word of mouth plays great role in succeeding in the local market. The competition for the limited TV advertisement slots in Indonesia’s ten national TV stations has become intense among mass marketing companies. Coupled with the typically lower returns on investment (ROIs) from traditional media – ROIs from TV advertisements are estimated to be only about half that of Social Media advertisements – companies have increasingly begun to turn to the digital space to strengthen their marketing strategies. Despite Indonesia’s nascent digital market, many global companies have managed to successfully deploy social media to achieve their marketing objectives. Such efforts will certainly continue and help to expand the role of social media in influencing consumer decisions as Internet penetration rates continue to increase. Some other food and beverage online mediums and food blogs in Indonesia include: The Indonesian blog landscape does not offer any standout platforms related to local F&B sector, although there are some culinary websites, such as “Epicure Indonesia” (www.epicureasia.com) and “Exquisite Taste Indonesia” (www.exquisite-tastemagazine.com) that the locals and expats utilise when searching for F&B information in Indonesia. In fact, the latter particularly focuses on gourmet food and wine in Indonesia. Two of other online F&B related platforms are the “Zoomato” (www.zomato.com/indonesia) and “Qraved Everytime” (www.qraved.com). The former comprises of an international online search engine for dining out options, including in Indonesia. The latter is a more comprehensive F&B online hub, including an online journal, blog, a dining guide, recommendations etc. Some of the most popular food and beverage related TV shows in Indonesia include: The F&B related TV shows have lately been on the downgrade due to the decreasing interest among the local viewers. Nevertheless, some of the F&B TV shows being broadcast include: • • • The Chef’s Table at Net TV The MasterChef and Junior MasterChef Indonesia at RCTI. Asian Food Channel (AFC) is a food-focused channel that entertains viewers with a range of local and international content from lifestyle to travelogue program formats. The AFC is available in more than 10 countries, including in Indonesia on First Media Channel 76 (Jakarta) & 40 (Surabaya), on Big TV Channel 209, Matrix TV Channel 25, Indovision Channel 240, Skynindo Channel 50, Nexmedia Channel 210, Topas TV Channel 302, Play Media Channel 240, Biznet Channel 308, ICTA Channel 10 SD. 169 Tastes of Europe Indonesia – Market Entry Handbook • Food Network is a lifestyle network that connects viewers to the food-related topics. The Food Network is available in more than 10 countries in Asia Pacific, including in Indonesia on Indovision Channel 241, Okevision Channel 241 and on Play Media Channel 241. 4.2 Example of current communication campaigns made by main investor Example #1 - Oreo In the end of 2014 the Oreo launched a campaign called “Asyiknya Bersama” (translated as “Fun Together”) that introduced ideas on how the whole family can have fun together with Oreo cookies. The company successfully captures the importance of family in Indonesia and leverages on that concept. Customers were encouraged to send photos and tweet about their fun family activities around certain themes by using the hashtag #AsyiknyaBersama (transl. Fun together). The campaign also engages Indonesian celebrities who endorse the products on social media. Their advertisement clip has been viewed more than 870,000 times on YouTube as of September 2016. The vast usage of digital devices has increased video advertisement, allowing customers to be reached through a ‘story-telling’ approach, making product promotion meaningful and relevant. With the case of Oreo, Indonesians are keen on taking photos and sharing these on social media, thereby making the campaign very successful. Once a campaign is published online, it starts being shared and re-posted, meaning that a successful campaign can be shared by millions of internet users without the brand owner having to make much effort in disseminating the information. Currently the Oreo Twitter page entitled “Nikmati Oreo Sesukamu” promotes the use of the same named hashtag that in translation means “Enjoy Unlimited Oreo”. As of 2016, the Twitter account has 9,584 tweets. The “Nikmati Oreo Sesukamu” most watched YouTube video has almost 3 million views. In 2014 the Mini Oreo was launched in Indonesia with a marketing campaign delivered on digital media channels and mainly on Facebook. They decided to move ahead from traditional television promotion that often is seen as too saturated with advertisement. The Mini Oreo Facebook campaign entails many cartoon-like videos with music and special effects that scored a 5-point increase in purchase intent for the Oreo brand and reached 18.6 million young adults within a 6-week campaign. Another Oreo campaign launched in 2016, entitled “Wonderfilled” tries to connect with Indonesians by using the Ramadhan. Since the Ramadhan period is associated with giving gifts, Oreo’s biscuits leverage on that concept by urging people to hand their products to one another. Their campaign urges consumers to ask themselves: "I wonder if I gave an Oreo?" - deriving from the idea of reconnecting and celebrating existing relationships. Example #2 – AQUA AQUA, the bottled-water product belonging to the Danone Group starting from 2001, is another successful branding example from Indonesia. One of Danone’s AQUA campaigns, launched in 2015, inspires and encourages genuine acts of kindness in everyday situations. The acts of everyday heroes should reflect the traits of purity, generosity and transparency ‘just like water’ is associated with in Indonesia. Their marketing strategy includes television commercial elements combined with extensive social media promotion. They have released video clips showing hidden camera footage of genuine kindness on the streets of Indonesia, such as pregnant lady being offered a seat, a person being helped to carry heavy bags upstairs or a person collecting a dropped wallet and bringing it to the owner. The videos derive from the core elements of social responsibility that builds up the trust and value to be associated with 170 Tastes of Europe Indonesia – Market Entry Handbook the brand and product. The campaign also encourages other people to share their stories of genuine kindness online. Another Danone’s AQUA campaign comprises of several television commercials, depicting funny situations where a person does a silly mistake due to dehydration. Each of these commercials are concluded with a hashtag #adaAqua (transl. “(Have you) got water?'). The adaAqua videos on YouTube have gathered millions of views and the campaign delivered over 450,000 uses of #adaAqua hashtag. They SehatAQUA (translated as “Healthy AQUA”) is present on most popular social media accounts, including on Facebook with over 2 million page likes, on Twitter with almost 260 000 followers, on Instagram with over 50 000 followers and on YouTube. Their YouTube channel, established in 2010, hosts some 156 videos and has 5 838 subscribers and over 27 million views. 171 Tastes of Europe Indonesia – Market Entry Handbook 5. DOS AND DON’TS Indonesians are among the friendliest and most hospitable people on the planet. However, Indonesians are also very indirect and unpredictable, as a “yes” accompanied by wide smile might not necessarily translate to a sought-after approval for an agreement. They can also be sensitive to slights: their friendliness can cause them to expect the same degree of reciprocity from their counterpart. Here are some tips on doing business in Indonesia:328 DO • • • • Speak slowly without raising your voice. Most Indonesians speak in a low-toned, subdued voice with carefully constructed words and people who speak in high would come across as aggressive. Avoid excessive physical contact in the first meeting as a simple, brief handshake is supposed to be enough. Indonesians are generally conservative, and some men and women could even avoid shaking the hands of their opposite sex, preferring to introduce themselves by nodding their head and smiling instead. Smile when you meet people you know. Javanese people appreciate a ‘polite smile’, while bending down a bit when passing a group of older people is considered polite. It is highly recommended to address someone by using specific terms before mentioning the name. The hierarchical references are similar to, for example, Japan (“San” for older person, “Kun” for similar age colleagues, and “Chan” for younger friends). Bapak (Pak) for Mr Ibu (Bu) for Mrs. Mas for young man Mbak for Miss/ young woman • • • Take off your shoes before entering a house and, especially a place of worship like mosque. When eating, receiving or giving something, always use your right hand. Both the Muslim and Hindu faiths abhor the use of the left hand – it is considered unclean. When shaking hands, offering a gift or eating, it is proper etiquette to always use your right hand. Try not to point in public, and definitely not with your left hand or your right index finger. This is seen as rude. If you have to point, use your right thumb with the fingers folded underneath. Dealing with someone face-to-face is the only effective way of doing business in Indonesia, so take your time building up strong business relationships. Initial meetings with potential clients may be more about getting to know you; business may not even be discussed. Be prepared to exercise patience in business. Indonesians like to give matters sufficient consideration and don’t make hasty decisions. If negotiating, avoid pressure tactics – they’re likely to backfire. 328 For further detailed information on Indonesian Language, Culture, Customs, and Business Etiquette, see: Indonesian Business Etiquette, Language and Culture” available; http://www.commisceo-global.com/countryguides/indonesia-guide 172 Tastes of Europe Indonesia – Market Entry Handbook DON’T • Never take every yes as a yes. Indonesians endeavor to be both gracious and polite. Since saying “No” to someone is considered impolite, don’t assume that a positive response means you have agreement. You should interpret a, “Yes, but–” as a clear “No.” It is up to the listener to read between the lines and pay attention to body language to get the real message. • Do not shout and voice your expressions in unnecessarily strong tone, whether in anger or in joy. Generally speaking, Indonesians rarely show their dislike or reservations. Therefore, expressing anger in public through tone of voice, loudness or body language is always deemed inappropriate. • Keep in mind that religious Muslims pray five times a day, so do not schedule any meetings or lunch dates during certain times, such as Friday afternoon at noon. • Avoid using red ink when writing a person’s name. It is considered impolite, as red was originally used to record the names of the deceased. • Avoid criticizing in public and being too straightforward. The concept of saving face, as well as respect and loyalty, is prevalent in the Indonesian culture. While you may be used to openly air your displeasure, in Indonesia this would be considered extremely disrespectful and bad etiquette. Indonesians hate confrontation due to the potential loss of face. To be polite they may tell you what they think you want to hear and mask their feelings under a veil of civility, but if an Indonesian begins to avoid you or act coldly towards you, then you have probably offended him. • You should never touch someone else’s head; in Indonesia it is commonly believed that the soul inhabits the head, which is therefore considered sacred. • It is strongly discouraged to exert pressure when dealing business, particularly when it is related to timing and deadlines. Patience is highly appreciated as one of the keys in winning business deal in Indonesia, while rushing an Indonesian counterparty for approval might even backfire. • In Indonesia it’s rude to talk while eating. Conversation is reserved for before or after the meal. If you are a dinner guest, wait to be shown your place – you will have been allocated a specific seat. In formal situations men are served before women. Wait to be invited to eat before you start. • Don’t be offended when people ask you a few personal questions. It’s just the way they show friendliness and you can only smile and don’t have to answer the question if you don’t want to. • Indonesians value time highly but do not have strict views towards unpunctuality. Do not be upset if an Indonesian, notably an important government official, come late to the meeting – maintain kindness and patience, and do not raise the issue of their tardiness at all during discussion. Key Facts and Considerations Business culture: Indonesia is a mainly Muslim country: even if you aren’t Muslim yourself, you should be acquainted with the major Muslim practices and holidays. For example, bringing alcohol as a gift to a practicing and devout Muslim is inappropriate as it is forbidden in Islam. To the Indonesians generally (and in particular to the Javanese), form and face are extremely important. Public shows of deference to one's elders or superiors lead to the 'Bapak Syndrome' (the boss is always correct, and only he or she can decide). Business relationships are based on trust in Indonesia: It is important to make personal contact with potential partners when doing business in Indonesia. The key to success in 173 Tastes of Europe Indonesia – Market Entry Handbook negotiating a business partnership in Indonesia is clear communication and development of long-term relationship. It is important to be very well prepared for the first meeting, as technical data and pricing are very often discussed from the beginning. Indonesian partners are usually reluctant to provide information on turnover, competition, and share of the market before they meet in person. However, they will be more open once they meet and tend to release information face-to-face. Business is personal in Indonesia: Because of that, spend time through communication to build a strong relationship. Dealing with someone face-to-face is the only effective way of doing business. Indonesians abhor confrontation due to the potential loss of face. To be polite, they may tell you what they think you want to hear. If you offend them, they will mask their feelings and maintain a veil of civility. If an Indonesian begins to avoid you or acts coldly towards you, there is a serious problem. Organisational structure: The manager is expected to make decisions and to convey them, in detail, to subordinates. The subordinate is then expected to carry out those instructions precisely without any deviation (no more and no less), even in case that these instructions or decisions are flawed. A subordinate would not disagree with the boss – and especially not in public. At peer level, managers will be expected to reach decisions through a consensus– forming process, which can prove very time–consuming. It is important that during these peer level discussions all parties strive to maintain the harmony of the group. Any individual who is perceived to be causing disharmony is likely to be viewed with suspicion. Business card: When you meet someone for the first time in a business environment, you should introduce yourself with your full name and your organisation. Present a business card to each person you are meeting. Offer your card with the printing positioned in a way that the recipient can read it. Shaking hands is followed by the exchange of business cards. Business cards should display your title. This helps enhance your image and credibility. Address each person using his/her title plus full name. A title may be an honorific title or an academic title. Rank and status is very important in this culture. One important honorific title is for Muslims who have made a pilgrimage to Mecca. Haji is the title for a man, Hajjah is for a woman. Mr., Madam, Mrs. or Miss are used if a person does not have a title. A man is addressed as Pak (Mr.) or Bapak (Sir). A lady is addressed as Ibu. People are normally called by their first name (for example Mr. Robert or Miss Susan), rather than using their last name. Time and meetings: Time is not important; the relationship is the key issue. Time is elastic in Indonesia – in fact it is referred to as “rubber time”. Do not be surprised if meetings start late or finish late. Meetings may not necessarily start on time and guests may arrive late due to traffic conditions. People often do not confirm their participation in meetings/events, or they confirm at a much later stage than is the case in the Europe. Last minute cancellations of meetings are fairly common, so it is important to build flexibility into visit programmes to accommodate last minute changes. Negotiations can be lengthier than expectations: Multiple meetings may be necessary in order to come to a final decision or agreement. Refrain from hurrying your Indonesian business partners along, as this may be taken as an offense. Keep in mind that religious Muslims pray 174 Tastes of Europe Indonesia – Market Entry Handbook five times a day: if you conduct business with Indonesian Muslims, you should not schedule any meetings or lunch dates during these times. Prayer times are listed at the local mosque. Language and communication style: The official language is Bahasa Indonesia. English is widely spoken by young people but interpretation may be required for business meetings, particularly outside Jakarta and other major cities in Indonesia. Although there are significant numbers of fluent English speakers, foreign language levels are, on the whole, nowhere near as good as in neighboring Singapore and Malaysia. It may be that several senior figures in an Indonesian delegation are very weak in English and that a translator is needed. In any event be aware of the possibility of misunderstanding and ensure that English is used in a very “user friendly way”. It is respectful to leave a pause before answering a question and, by Western standards, these pauses can seem quite lengthy. Do not be tempted to break the pause by speaking. Be patient and allow your contacts the space to communicate in a comfortable manner. The use of body language and facial expressions is limited, making it difficult for more expressive cultures to interpret responses. Do not be disquieted by a seeming lack of fervour, this is the normal cultural approach and is not an indication of lack of interest. Refreshments and Gifts: The giving of small gifts to help develop and maintain business relationships is also an indigenous Indonesian custom. Gifts are not usually exchanged during first meetings but can be offered at subsequent events. To avoid any hint of corruption, give small, corporate gifts. Gifts should always be opened in front of the giver. The giving of gifts is quite common in Indonesian society as it reflects the communal nature of traditional life. Souvenirs or small food items are usually given to coworkers when a manager returns from a long trip. Traditional Indonesian society considers the giving of refreshments to guests as a very important display of respect and politeness. If you are the host of a meeting with a Bapak, you should make sure that some refreshment is offered. If you are the guest you will most probably be offered tea or coffee. It is normally advisable to accept even if you are not thirsty. A guest should wait for the host to indicate that it is permissible to drink. Attire and clothing: Business attire is generally conservative. Women should dress conservatively ensuring that they are well covered from ankle to neck. Tight fitting clothes are best avoided. Dress in the office should be formal. Problems can develop in multicultural offices if the foreign professionals wear blue jeans and T-shirts to the office. The Indonesian co-workers perceived this as informal and disrespectful on the part of the expatriate. 175 Tastes of Europe Indonesia – Market Entry Handbook 6. SYNOPSIS 6.1 Strengths, Weaknesses, Opportunities and Threats Analysis Strengths SWOT Weaknesses General ➢ Southeast Asia’s largest potential market; ➢ Indonesia is the fourth most populous country in the world (256 million people); ➢ Sustainable economic growth (Real annual GDP growth in 2015: 4.8%) ➢ Sustainable FDI growth; ➢ Consistent development leading to considerable foreign government and multilateral support. Product and Consumer Related ➢ Real economic growth is sustainable at 4 percent to 6 percent in the medium term due to remarkably stable domestic consumer demand; ➢ Most of the population are on the consumer class; ➢ Increased demand for dairy products due to increased health consciousness, westernised diets, growing middle class and rising incomes. Consumers value EU food as healthy, top quality; ➢ Consumer expenditure on F&B has been gradually increasing and consumers now spend a considerable amount of their budget to F&B; ➢ Consumers are becoming aware of food safety issues and start to prefer healthier food. General ➢ Inadequate infrastructure; ➢ Java is the main area for commercial opportunities; ➢ Persistent corruption and lack of transparency; ➢ High levels of income inequality; ➢ Regulatory revisions might cause business uncertainty especially for foreign investments. Product and Consumer Related ➢ High logistics and transportation costs to move products to market; ➢ Geographically fragmented across many large and small islands, the country has a growing consumer base but is difficult to navigate. Opportunities Threats General General 176 Tastes of Europe Indonesia – Market Entry Handbook ➢ With over 220 million consumers, Indonesia represents Southeast Asia’s largest potential market; ➢ Major destination for FDI in Asia; ➢ The Masterplan for the Acceleration and Expansion of Indonesia's Economic Development Plan (MP3EI 2011-2025 has positioned Java to be the main economic corridor for the food and beverage industry; ➢ Transitioning from lower to middle income society. ➢ High rates of inflation may lead to a decrease in spending; ➢ Exchange rate depreciation may discourage import consumption. Product and Consumer Related Product and Consumer Related ➢ Indonesia has great market potential for European exporters of branded and specialty food products, as well as for suppliers of food ingredients and packaging; ➢ Rising disposable incomes levels have resulted in increased consumer spending for a wide range of products and services, which is backed by the rapid growth of the middle class; ➢ A young and growing Indonesian population that demand westernised products; ➢ Increased urbanisation where professionals have less time for cooking, etc., and, as such, are keen on buying packed imported foods; ➢ A growing awareness of healthy lifestyle products; ➢ A growing Indonesian tourism industry that demands imported products; ➢ Cold chain is starting to expand in Indonesia. ➢ Meeting halal requirements for the world’s largest Muslim population may be challenging; ➢ By 2019, halal certification will be mandatory for all food, beverage, drugs, cosmetics, chemicals, and organic and agricultural biotech products sold in Indonesia, as well as machinery and equipment used in processing these products, subject to further implementing regulations; ➢ Strict government regulations and control of the alcoholic beverage industry; ➢ Prohibition of advertisements in certain sectors such as alcoholic beverages; ➢ High tariffs on imports especially alcoholic beverages that may run up to 150 percent of market price, which has led to high retail prices; ➢ Increased marketing strategy is needed for EU products such as dairy, chocolate and derived products and confectionaries, as Indonesians tend to prefer the local brands over the foreign brands; ➢ Chocolate, its derived products and confectionery are still viewed as luxury food, therefore, demand is low; ➢ The demand for dairy free, gluten free and sugar free products is increasing. 177 Tastes of Europe Indonesia – Market Entry Handbook Table 3 S.W.O.T. Analysis 6.2 Key Criteria for Success Product • • • • • • • Indonesia has great market potential for European exporters of branded and specialty food products, as well as for suppliers of food ingredients and packaging; There is a growing awareness of healthy lifestyle products; By 2019, halal certification will be mandatory for all food, beverage, drugs, cosmetics, chemicals, and organic and agricultural biotech products sold in Indonesia, as well as machinery and equipment used in processing these products, subject to further implementing regulations; Strict government regulations and control of the alcoholic beverage industry; Temperate fresh fruit, processed fruits and vegetables and beef are mostly imported; Western cuisine is becoming more common and western products such as breakfast cereals, spreads and baked goods are often consumed in the place of traditional rice or noodle breakfasts; Changing dietary habits are driving consumption growth of milk, yoghurt, cheese, pasta, meat nuggets, sausages, and red meats. Promotion • • • • • Consumers in Indonesia tend to be influenced by in-store promotions and point of purchase displays. Therefore, the actual, real-life contact with the promoted product allows personal experience, builds trust and more likely leads to a purchase; There is the prohibition of advertisements in certain sectors such as alcoholic beverages. Hence, promoting alcoholic beverages in Indonesia will be hard; Producers should consider customised packaging for different selling channels; The traditional media, including the most popular information channel – TV – continues to dominate across the whole country. While digital media is gaining importance in urban areas, Television is the primary channel through which Indonesian consumers obtain information about products and brands across most income levels; The trend of using social media for commercial purposes among producers and retailers is rising. Therefore, advertising F&B products and services on social media is gaining importance and is more frequently used to influence the consumer’s purchase decisions. The online platforms are used to seek information on products, share product reviews, user experiences and comment on products and services. Therefore, the online word of mouth plays 178 Tastes of Europe Indonesia – Market Entry Handbook great role in succeeding in the local market. Placement • • • • • Industrial and urban areas, such as Jakarta, Makassar, Surabaya and Bandung, accommodate larger preference and demand for foreign goods. In those areas more international groceries are present, providing imported, higher-price, higher-quality, larger assortment options for Indonesian middle and upper class consumers; The convenience stores, such as such as Alfamart and Indomaret, which are mostly popular among younger consumer group, are also rapidly expanding; Convenience stores and the Minimarkets can often be found in residential areas or next to gasoline stations. They operate in a more flexible manner, often according to their local customers’ needs, for example being opened for 24 hours; Traditional markets also remain an important retailer in Indonesia. Consumers prefer buying fresh meat and seafood at traditional markets whereas, dairy and processed foods are purchased in modern markets; Client groups shop in different markets: families with extended needs will prefer markets with larger assortment, whereas smaller households can mostly satisfy their needs in smaller markets. Price • • • • Rising disposable incomes levels have resulted in increased consumer spending for a wide range of products and services, which is backed by the rapid growth of the middle class; Even though Indonesia’s rising middle class is willing to pay more for quality goods and imported foreign goods, they are still relatively price sensitive and find foreign products too expensive. When calculating the price, thorough market research is recommended; Considering traditional retailers’ dominance among the retail channels, package-size flexibility and low prices are a must in order to be on the same competitive level with other products (local food products continue to be strong sellers because of a lower price); It is also recommended to discuss the price with the local distributors, to determine what would be the realistic price on the market. Table 4 Key Criteria for Success 179 Tastes of Europe Indonesia – Market Entry Handbook 7. SUPPORT SERVICE DIRECTORY 7.1 European Union Organizations Several EU funded or co-funded projects within Indonesia offer a range of business facilitation services and information providing important insights into the Indonesian market. Depending on your company profile these services can be free or fee based; and are available for companies from any EU Member State. • The EU-Indonesia Business Network (EIBN) The EU-Indonesia Business Network (EIBN) was initiated in August 2013 as a five-year program co-funded by the European Commission, and is the product of a partnership between EKONID, EuroCham Indonesia, IFCCI, INA, BritCham, EUROCHAMBRES and CCI Barcelona. The aim of the EU-Indonesia Business Network is to enhance and diversify trade and European business investment in Indonesia, while promoting the country as a gateway to ASEAN. EIBN seeks to contribute to a more coherent and effective EU strategy for supporting and attracting European businesses, specifically SME’s, both those already in Indonesia and those expanding their activities. Contact: Address: C/O EKONID. Jl. H. Agus Salim No. 115, Jakarta 10310 Website: http://www.eibn.org/en/page/contacts_new Telephone: +62 21 3154685 E-mail: info@eibn.org • The European Chamber of Commerce in Indonesia (EuroCham) The European Chamber of Commerce in Indonesia (EuroCham) is the principal business organisation in Indonesia, which promotes European business interests and represents European member companies. EuroCham maintains close working relationships with the European Commission, European Union Delegation, European Bilateral Chambers of Commerce in Indonesia, and European Embassies in Indonesia. EuroCham's mission is to serve the member companies by being the voice of European business in Indonesia and by lobbying on trade and investment related issues. Contact: Address: Wisma Metropolitan 1, 13th Floor Jl. Jend Sudirman Kav. 29-31 Jakarta, 12920 Indonesia Website: http://www.eurocham.or.id/ Telephone: (+62 21) 571 0085 E- mail: info@eurocham.or.id • EU-ASEAN Business Council (EU-ABC) The EU-ASEAN Business Council (EU-ABC) is the primary voice for European Business within the ASEAN region, being endorsed as it is by the European Commission and recognised as such by ASEAN. Independent of both bodies, the Council has been established to help promote the interests of European businesses operating within ASEAN and to advocate for changes in policies and regulations which would help promote trade and investment between Europe and the ASEAN region. As such, the Council works on a sectorial and cross-industry basis to help improve the investment and trading conditions for European Businesses in the 180 Tastes of Europe Indonesia – Market Entry Handbook ASEAN region through influencing policy and decision makers throughout the region and in the EU, as well as acting as a platform for the exchange of information and ideas amongst its members and regional players within the ASEAN region. Contact: Address: 1 Phillip St #12-01. Royal One Phillip. Singapore 048692 Website: http://eu-asean.eu/ Telephone: +65 6836 6681 E-mail: info@eu-asean.eu 181 Tastes of Europe Indonesia – Market Entry Handbook 7.2 Directory of EU Member States’ Embassies Individual Member States offer commercial support and services for companies from their country of origin. Make enquiries to see what services are available and if there are any upcoming events you can participate in. EU Member State Austria Address Website Contact information Jalan Diponegoro 44 Menteng, Jakarta Pusat 10310 Deutsche Bank Building 16th floor. Jalan Imam Bonjol 80. 10310 Jakarta Jakarta 10310, 34-36, Jalan Imam Bonjol Menara Mulia-Suite 2801. Jl. Gatot Subroto Kav. 9-11. Jakarta 12930 http://www.austrian-embassy.or/ +62 21 23554005 http://indonesia.diplomatie.belgium.be/en +62 21 316 20 30 http://www.mfa.bg/embassies/indonesia/setlang/en +62 21 390 40 48 http://id.mvep.hr/en +0062 21 525 7822, 525 76 11 Cyprus Menara Sudirman 7th Floor B JI. Jendral Sudirman KAV 60 Jakarta 12190 http://www.mfa.gov.cy/mfa/mfa2006.nsf/0/49c95b 70b5a9bb1dc22571b70033c49e?OpenDocument +6221 522683739 Czech Republic Denmark Jl. Gereja Theresia 20, Menteng, Jakarta http://www.mzv.cz/jakarta/en/ 10350 Menara Rajawali, 25th FloorJl. DR Ide http://indonesien.um.dk/ Anak Agung Gde AgungKawasan Mega KuninganJakarta 12950P.O. Box 4459 Jl. Pinang Emas III/17, Pondok Indah http://www.consulateestoniajakarta.com/contact-us +62 21 2396112 Menara Rajawali 9th Jl. Mega Kuningan. Lot 5.1, Kuningan. 12950 Jakarta. Jl. MH. Thamrin n°20 Jakarta Pusat 10350 http://www.finland.or.id/ +62 212 939 3000 http://www.ambafrance-id.org/-Francais- +(62-21) 2355 7600 Belgium Bulgaria Croatia Estonia Finland France +62 (21) 576 1478 +62 021-766 6060 182 Tastes of Europe Indonesia – Market Entry Handbook Germany Jl. M.H. Thamrin 1 Jakarta 10310 http://www.jakarta.diplo.de/Vertretung/jakarta/en/ Startseite.html +(62-21) 3985 5000 Greece Plaza 89,12th floor,Suite 1203, JL. Rasuna Said, kav. X-7 No 6, Jakarta http://www.mfa.gr/missionsabroad/en/indonesia.ht ml +(006221) 5207776 Hungary Jalan Rasuna Said X/3. Kuningan, Jakarta 12950 Indonesia World Trade Centre 1 L-14 Jl.Jend. Sudirman kave 29-31 Jakarta 12920 Jalan Diponegoro no. 45 - Menteng Jakarta 10310 Indonesia http://www.mfa.gov.hu/kulkepviselet/ID/en/ + 62 21 520 3459 https://www.dfa.ie/irish-embassy/indonesia/ +62 21 280 94300 http://www.ambjakarta.esteri.it/Ambasciata_Jakart• a + 0062 (0) 21 31 93 74 45 Sentra Pemuda 5-6, Jalan Pemuda No. 61, Rawamangun, Jakarta 13220 Jalan Jeruk No. 4, Menteng, Jakarta 10350 http://www.consulate.lv/ + 62 21 2957 501 http://www.honoraryconsuls.lt/countries/indonesia + 62 21 2553 9496 Embassy in Thailand is accredited for Indonesia Q House Lumphini 17th Floor 1 South Sathorn Road Tungmahamek Sathorn Bangkok 10120 Thailand No representation http://bangkok.mae.lu/en/L-Ambassade + 66 (0)2 677 7360 Jalan HR Rasuna Said Kav.S-3 Jakarta 12950 Indonesia http://indonesia.nlembassy.org/ Ireland Italy • Latvia Lithuania Luxembourg Malta Netherlands • No representation • No representation +62 21 524 82 00 183 Tastes of Europe Indonesia – Market Entry Handbook Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom H.R. Jl. Rasuna Said Kav.X Blok IV/3 12950 Jakarta Jl. Indramayu No. 2A, Menteng, Jakarta 10310, Indonesia http://www.dzakarta.msz.gov.pl/en/home_page + (+ 62 21) 25 25 938-40 http://www.embassyportugaljakarta.or.id +62-21 3190-8030 Jl. Teuku Cik Di Tiro 42 A, Menteng, Jakarta Pusat 10310 Jl Prof Hm Yamin Sh 29 Menteng Jakarta Pusat 10310, Tlp 021-3101068, 3151429, Indonesia The Embassy in Australia is accredited for Indonesia 26 Akame Circuit O'Malley 2606 ACT Australia Jl. Haji Agus Salim, 61 Jakarta Pusat – 10350 http://jakarta.mae.ro/en + (0062-21) 390.04.89 https://www.mzv.sk/web/jakarta-en/about_us +62 21 3101068 http://canberra.embassy.si/en +61 2 6290 0000 http://www.exteriores.gob.es/Embajadas/YAKAR TA/es +62 21 314 23 55 Menara Rajawali, 9th floor Kawasan Mega Kuningan, Lot 5.1 12950 Jakarta Jl Patra Kuningan Raya Blok L5-6 Jakarta. 12950 http://www.swedenabroad.com/enGB/Embassies/Jakarta/ +62 21 2553 5900 https://www.gov.uk/government/world/organisatio ns/british-embassy-jakarta/office/passport-andconsular-services-jakarta +62 21 2356 5200 Table 5 Directory of EU Member States’ Embassies 7.3 Other organizations and service providers Other service providers that offer business facilitation and assistance for companies are often provided on a fee paying basis. These service providers often work with, or are part of, the commercial sections of their respective governments and embassies. 184 Tastes of Europe Indonesia – Market Entry Handbook Chamber Website Address Contact BRITCHAM Indonesia http://www.britcham.or.id/ Wisma Metropolitan I F/15, Jln. Jend. Sudirman Kav. 29 - 31, Jakarta - 12920 BRI II, 15th Fl. Suite 1501 Jl. Jend. Sudirman No. 44-46, Jakarta 10210 Indonesia Tel.: +62 21 5229453 Email: busdev@britcham.or.id Jl. Wijaya II No. 36, Kebayoran Baru Jakarta Selatan, Indonesia Tel. +62 21 7397161 E-mail: contacts@ifcci.com IBAI Italian Business Association Indonesia http://id.ibai.or.id/ IFCCI Indonesian French Chamber http://www.ifcci.com/ SBA Swedish Business Association in Indonesia http://www.sbaindo.org/ INAIndonesian Benelux Chamber of Commerce http://www.ina.or.id/ Phone: +62-21-5713540 Email: megsinta@dnet.net.id or luigicarlo.gastel@pirelli.com Please contact the SBA via their website: http://www.sbaindo.org/?page_id=32 Menara Jamsostek Building Tower A 20th floor, Jl. Jend. Gatot Subroto No. 38, Jakarta 12710 Tel. +62-21-52902177 Email. ina@ina.or.id 185 Tastes of Europe Indonesia – Market Entry Handbook AHK GermanIndonesian Chamber of Industry and Commerce http://indonesien.ahk.de/en/ Indonesian Netherlands Association http://www.ina.or.id/ Indonesian Chamber of Commerce and Industry http://www.bsd-kadin.org/ Jl. H. Agus Salim No. 115, Jakarta 10310 P.O. Box 3151, Jakarta 10031, Indonesia Menara Jamsostek Tower A, 20th Floor Jl. Gatot Subroto No. 38. Jakarta 12710 Tel: +62-21-3154685 For enquiries: http://qms.ekonid.com/en/page/redirect/UYGrwx Menara KADIN Indonesia, 24th Floor Jl. H. R. Rasuna Said X-5 Kav. 2-3 Jakarta 12950 INDONESIA Tel: +62-21-5274503 Tel. +62 21 52902177 E-mail: ina@ina.or.id Email: info@bsd-kadin.org Table 6 Chambers of Commerce and Other Associations Service Provider Austrian Economic Chambers Oesterreichisch e Kontrollbank Aktiengesellsch aft (OeKB) Website https://www.wko.at/Content.Nod e/wi r/Austrian_Economic_Chambers_ Hom e.html http://www.oekb.at/ Address Wiedner Hauptstraße 63 1045 Vienna, Austria Telephone Tel: +43 5 90 900 Fax: +43 5 90 900 250 Email: office@wko.at Oesterreichische Kontrollbank Aktiengesellschaft Am Hof 4; Strauchgasse 3 1011 Vienna, Austria Tel: +43 1 53127-2859 Fax: +43 1 53127-5698 186 Tastes of Europe Indonesia – Market Entry Handbook Email: corporate.communications@ oekb.at Brussels Invest & Export http://www.investexport.irisnet.be/en/nos-services Brussels Invest & Export Foreign trade and foreign investments service of the Brussels Regional Public Service Avenue Louise 500/4 1050 Brussels, Belgium Tel: +32 (0)2 800 40 00 Fax: +32 (0)2 800 40 01 Email: info@brusselsinvestexport.b e Finexpo Service http://diplomatie.belgium.be/en/p olic y/economic_diplomacy/finexpo/ FPS Foreign Affairs, Foreign Trade and Development Cooperation, rue des Petits Carmes 15 1000 Brussels, Belgium Email: finexpo@diplobel.fed.be Delcredere | Ducroire http://www.delcredereducroire.be /en /about-us/mission/ Delcredere - Ducroire Rue Montoyerstraat 3, 1000 Brussels, Belgium Tel: + 32 (0)2 788 88 00 Fax: + 32 (0)2 788 88 10 Email: businessdevelopment@crede ndogr oup.com Wallonia http://www.awex.be/deDE/Pages/Home.aspx AWEX-Regionalbüro Eupen Hütte, 79/20 4700 Eupen Belgium Tel: 32-87-56.82.19 Fax: 3287-77.33.50 Email: mail@awex.be Belgium Corporation for International Investment http://www.bmisbi.be/en/produits.html SBI Avenue de Tervueren 168, bte 9 B1150 Brussels, Belgium Tel: +32 2 776 01 00 Fax: +32 2 770 66 38 Email: info@bmi-sbi.be Bulgarian Chamber of Commerce and Industry http://www.bcci.bg/bcciservices.html 9 Iskar Str., 1058, Sofia , Bulgaria Tel: +359 2 8117 400, 987 26 31 Fax: +359 2 987 32 09 Email: bcci@bcci.bg 187 Tastes of Europe Indonesia – Market Entry Handbook Ministry of Economy, Republic of Bulgaria http://www.mi.government.bg/bg/ 8, Slavyanska Str., 1052 Sofia, Bulgaria th emes/informacionni-resursi-naevropeiskiya-sayuz-koito-mogatda-se- izpolzvat-ot-targovskiteoperatori- 350-335.html http://customs.bg/en/page/150 National Customs Agency Rakovski 47 Sofia 1202 Bulgaria Tel: +359 2 9407001 Fax: +359 2 987 2190 Email: edocs@mi.government.bg Trade Service http://www.mcit.gov.cy/mcit/trad Trade Service Ministry of Energy, e/ts.nsf/All/5F12C634BFA9CF8F Commerce, Industry and Tourism 1421 C2257BE10030AD5C?OpenDoc Nicosia Cyprus ument Tel: +357 22 867123 Fax: +357 22 375120 Email: ts@mcit.gov.cy OEB: Cyprus Employers and Industrialists Federation http://en.oeb.org.cy/ 2 Acropoleos Ave. & Glafkou Str, P.O Box 21657 1511 Nicosia Cyprus Tel: +357 22 66 51 02 Fax: +357 22 66 94 59 Email: info@oeb.org.cy Germany Trade & Invest http://www.gtai.de/GTAI/Navigat ion/EN/Trade/Service/informatio n- service.html http://kina.um.dk/en/the-tradecouncil/products-and-services/ Villemombler Straße 76 53123 Bonn, Germany Tel: +49 228 249 93-0 Fax: +49 228 249 93-212 Tel: +45 33 92 05 00 Email: eksportraadet@um.dk Tel: +372 604 0060 Fax: +372 604 0061 Email: koda@koda.ee The National Customs Agency The Trade Council The Danish Business Authority http://danishbusinessauthority.dk/ eu-and-international Ministry of Foreign Affairs of Denmark Asiatisk Plads 2 DK-1448 Copenhagen, Denmark Langelinie Allé 17 2100 Copenhagen, Denmark Estonian Chamber of Commerce and Industry http://www.koda.ee/en/chamberof- commerce/services-2/ Main office in Tallinn: Toom-Kooli 17 10130, Tallinn, Estonia Tel: +359 2 9859 4210 Email: pr@customs.bg Tel: +4535291000 Email: erst@erst.dk 188 Tastes of Europe Indonesia – Market Entry Handbook Enterprise Greece http://www.investingreece.gov.gr/ 109 Vasilisis Sophias Avenue 115 21 Athens, Greece Spain Export and Invest http://www.icex.es/icex/es/index. html ICEX España Exportación Inversiones Paseo de la Castellana 14 28046 Madrid Spain Finnpartnership http://www.finnpartnership.fi/ww w/en/ Uudenmaankatu 16 A, 3rd floor 00120 Helsinki, Finland Nordic Project Fund http://www.nopef.com/pages/eng/ no pef/about-nopef.php Tel: +358 (0)10 618 003 Email: info@nopef.com Viexpo http://www.viexpo.fi/services/ Tekes http://www.tekes.fi/en/programm es- and-services/grow-and-goglobal/ Nordic Environment Finance Corporation NEFCO, PB 241, FI-00171 Helsingfors, Finland Runeberginkatu 11 FI-68600 Pietarsaari, Finland P.O.Box 69, FI-00101 Helsinki, Finland Visiting Address: Kyllikinportti 2, LänsiPasila FIN-00101 Helsinki, Finland Business France http://www.businessfrance.fr UCCIFE: Chambres de Commerce et d'Industrie Françaises à l'Etranger http://www.ccifranceinternational.org/ 77, Boulevard Saint-Jacques 75014 Paris, France 46 avenue de la Grande Armée, CS 50071, 75 858 Paris Cedex 17 , France http://www.businessfrance.fr /contact/ Tel: +33 01 4069 3760 Fax: +33 01 4069 3783 Email: infos@uccife.org Budapest Chamber of Commerce and Industry (BCCI) http://www.bkik.hu/en# Krisztina krt 99, 1016 Budapest, Hungary Tel: +36 (1) 488 2000 Fax: +36 (1) 488 2108 Email: ugyfelszolgalat@bkik.hu Tel: +30 210 335 5700 Fax: +30 210 324 2079 Email: info@enterprisegreece.gov.g r Tel: +900 349 000 Contact Form: http://www.icex.es/icex/es/n avegac ion-principal/que-esicex/contacto/formulario-decontacto/index.html Tel: +358 9 348 434 Email: fp@finnpartnership.fi Tel: +358 6 781 6440 Email: viexpo@viexpo.fi Tel: +358 29 50 55000 Email: kirjaamo@tekes.fi 189 Tastes of Europe Indonesia – Market Entry Handbook Hungarian Foundation for Enterprise Promotion http://www.mva.hu/english.php Szépvölgyi út 135., Budapest, III. 1277 Budapest 23, Pf: 4, Hungary Tel: +36 1 883 0800 Fax: +36 1 883 0841 Email: info@mva.hu Enterprise Ireland http://www.enterpriseireland.com/en/ExportAssistance/ Bord Bia (Irish Food Board) www.bordbia.ie/ Italian Trade Agency http://www.ice.gov.it/home.htm Via Liszt 21, 00144 Roma, Italy Tel: +39 06 5992 9439 Email: ice@pec.ice.it Regione Emilia Romagne http://imprese.regione.emiliaromagna.it/ Viale Aldo Moro 44, 40127 Bologna, Italy Kaunas Chamber of Commerce, Industry and Crafts http://chamber.lt/EN/Home/Servi ces Luxinnovation http://en.luxinnovation.lu/Service s Kaunas Chamber of Commerce K. Donelaicio str. 8, 44213 Kaunas, Lithuania 7, rue Alcide de Gasperi L-1615 Luxembourg Tel: +39 051 5276309 Email: sportelloestero@regione.emi lia- romagna.it Tel: +370 37 229212 Email: chamber@chamber.lt Investment and Development Agency of Latvia http://www.liaa.gov.lv/en 2 Perses Street, Riga, LV-1442, Latvia Latvian Guarantee Agency http://www.lga.lv/index.php?id=1 &L=1 Zigfrīda Annas Meierovica bulvāris 14, Rīga, 1050, Latvia Tel: +352 43 6263 Ext.1 Fax: +352 43 8120 Email: info@luxinnovation.lu Tel: +371 67039400 Fax: +371 67039401 Email: liaa@liaa.gov.lv Tel: +371 67216081 Fax: +371 67359374 Email: lga@lga.lv 190 Tastes of Europe Indonesia – Market Entry Handbook GRTU Malta Chamber of SMEs http://www.grtu.org.mt/index.php /about-grtu/about-grtu GRTU, Malta Chamber of SMEs Exchange Buildings, Republic Street, Valletta, Malta Tel: +356 21232881 Contact Form: http://www.grtu.org.mt/inde x.php/ contact-us Chamber of Commerce Amsterdam http://www.kvk.nl/english/interna tion al-trade/ De Ruyterkade 51013, Amsterdam, The Netherlands Tel: +31 20 531 40 00 Email: info@amsterdam.kvk.nl Netherlands Enterprise Agency http://english.rvo.nl/home/about(RVO) / Agentschap NL (AGNL) rvonl/what-is-rvonl RVO.nl in The Hague (Centre Court) Prinses Beatrixlaan 2 2595 AL The Hague, The Netherlands Postal address: P.O. Box 93144 2509 AC The Hague, The Netherlands Tel: +31 88 602 50 00 Fax: +31 88 602 90 23 Contact Form: http://english.rvo.nl/home/ab out- rvonl/what-isrvonl/contact-form Polish Agency for Enterprise Development http://en.parp.gov.pl/ Polska Agencja Rozwoju Przedsiębiorczości ul. Paoska 81/83, 00834 Warsaw, Poland Tel: +22 432 80 80, 432 71 25 Fax: +22 432 86 20 Email: biuro@parp.gov.pl AICEP Portugal Global http://www.portugalglobal.pt/EN/ Pag es/Index.aspx http://www.almi.se/English/ N/a Tel: +46 0771 55 85 00 Email: info.lanadm@almi.se Slovak Investment and Trade Development Agency, Trnavská cesta 100 821 01 Bratislava, Slovak Republic Tel: +421 2 58 260 100, 101 Fax: +421 2 58 260 109 Email: sario@sario.sk Innovationsbro nAB SARIO (Slovak Investment and Trade Development Agency); and Slovak Chamber of Commerce and Industry http://www.sario.sk/en 191 Tastes of Europe Indonesia – Market Entry Handbook United Kingdom Trade and Investment (UKTI) https://www.gov.uk/government/ UKTI head office (General Enquiries) 1 organisations/uk-trade-investment Victoria Street London, SW1H 0ET, UK Tel: +44 020 7215 5000 Email: enquiries@ukti.gsi.gov.uk Table 7 Service Providers LOCAL BODIES AND ASSOCIATIONS Organisation Website Address Contact Indonesian Food and Beverage producers association (GAPMMI) http://www.gapmmi.or.id/ Sekretariat GAPMMI Gedung Annex Lantai 2 (Kompleks PPM Manajemen) Jl. Menteng Raya No. 9-19 Jakarta Pusat 10340 Tel. (021) 39899830 Email: gapmmi@cbn.net.id National Agency of Food and Drug Control (NA-DFC) http://www.pom.go.id/new/index. php/home/en Jl. Percetakan Negara No.23 - Jakarta 10560 Indonesia Tel : (021) 4244691/42883309/42883 462 Email : ppid@pom.go.id Ministry of Trade of the Republic of Indonesia http://www.kemendag.go.id/en M. I. RidwanRais Road, No. 5 Central Jakarta 1011 Tel: (021) 3858171 Email: contact.us@kemendag.go. id (Only in local language) 192 Tastes of Europe Indonesia – Market Entry Handbook Ministry of Agriculture of the Republic of Indonesia http://www.pertanian.go.id/ (Only Jl. Harsono RM. No. 3, Ragunan-Jakarta in local language) 12550, Indonesia National Investment Coordinating Body (BKMP) http://www6.bkpm.go.id/ Agricultural Quarantine Agency-Ministry of Agriculture of the Republic of Indonesia http://karantina.pertanian.go.id Jl. Jend. Gatot Subroto No. 44, Jakarta 12190 P.O. Box 3186, Indonesia Gedung E Lantai 1,5,7 Jl. Harsono RM.3 Ragunan Jakarta Selatan 12550 Indonesia Tel: 021-7806131, 0217804116. Email : webmaster@pertanian.go. id Tel: +62 21 520 2050 Email: info@bkpm.go.id Tel: +62 21-7816480 – 84 Email: infokarantina@pertanian. go.id / humaskarantina@pertania n.go.id Table 8 Local Bodies and Associations 7.4 Calendar of trade events and exhibitions Attending trade events and exhibitions can help promote your product in Indonesia as well as forge relationships with industry figures and useful business contacts. Event Focus Date Recurrence City East Food Indonesia For the Indonesian and ASEAN F&B sector 26-29 July 2018 Annual Surabaya Website http://eastfoodin donesia.com/ Venue Organiser details Grand City – Surabaya KRISTAMEDIA PRATAMA 193 Tastes of Europe Indonesia – Market Entry Handbook Event Focus Date Recurrence Cafe and Brasserie International Indonesia Expo International Exhibition for the Café & Brasserie Industry 8-10 Septemb Annual er 2017 Allpack Indonesia Food Processing & Packaging 1-4 Novemb er 2017 Food Ingredients Indonesia Food and beverage ingredients. Global audiences. 3-5 October 2017 Annual Annual City Website Venue Jakarta http://www.cafebra sserie-expo.co.id Jakarta Convention Center Jakarta http://allpackindonesia.com/ JIExpo – Kemayoran, Jakarta Jakarta http://www.figlobal Jakarta .com/asiaInternational indonesia/ Expo, Indonesia Organiser details Email: info@kristamedia. com Tel: +62-21. 6345861 Reed Panorama Exhibitions Email: info@reedpanoram a.com; cafebrasser ie@reedpanorama. com Tel: +62 21 2556 5000 KRISTAMEDIA PRATAMA Email: info@kristamedia. com Tel: +62-21. 6345861 UBM Contact: http://www.figloba l.com/asiaindonesia/about/ev ent-contact Tel: +44 (0) 20 7921 5000 (U.K. Head Office) 194 Tastes of Europe Indonesia – Market Entry Handbook Event Focus SIAL Interfood ASEAN Indonesia For the Indonesian and ASEAN F&B Industry Health Ingredients Southeast Asia Vitamins, dietary supplements for children, fortified and functional food and beverag es, and healthy snacks with various health benefi ts. International Seafood and Meat Expo (IISM) Cold chain and refrigeration industries Date 22-25 Novemb er 2017 27-29 March 2018 Recurrence Annual Annual 28-30 Septemb Annual er 2017 City Jakarta Jakarta Jakarta Website Venue Organiser details http://sialinterfood. com/ Jakarta International Expo, Kemayoran, Indonesia KRISTAMEDIA PRATAMA Email: info@kristamedia. com Tel: +62-21. 6345861 http://www.figlobal Jakarta .com/hisoutheastasi International a/ Expo UBM Contact: http://www.figloba l.com/hisoutheasta sia/about/eventcontact Tel: +44 (0) 20 7921 5000 (U.K. Head Office) http://www.iismexpo.com/ Jiexpo Kemayoran Jakarta Indonesia PT. PELITA PROMO INTERNUSA Email: iism@pelitapromo. com Tel: 62-2153660804 195 Tastes of Europe Indonesia – Market Entry Handbook Event Food & Hotel Indonesia Food, hotel and tourism Bali Indo Fisheries Expo & Forum Focus Bakery, meat, poultry, dairy, seefood, confectioner y, frozen foods. Food & Beverages, Hospitality Equipment, Services & Interiors, Bakery. Date Recurrence 10-13 April 2019 1-3 March 2018 Animal feed, aquaculture 4-6 July breeds, 2018 equipment. City Jakarta Website Venue http://foodhotelind Jiexpo onesia.com/exhibiti Kemayoran ng/exhibit-profile/ Once every 2 years Bali http://fhtbali.com/ Bali Nusa Dua Convention Center Annual Jakarta http://www.indofis heries.org/ Jakarta Convention Center, Jakarta Organiser details PAMERINDO Indonesia Email: Wiwiek@pamerin do.com Tel: +62 21 2525 320 PAMERINDO Indonesia Email: Wiwiek@pamerin do.com Tel: +62 21 2525 320 PT. NAPINDO MEDIA ASHATAMA Email: info@indofisheries .org Tel: +6221 8650962 Table 9 Calendar of Trade Events and Exhibitions 196 Tastes of Europe Indonesia – Market Entry Handbook ANNEX I: GI PRODUCTS REGISTERED IN INDONESIA Indonesia has been developing the concept of GIs since 2001, creating the legal framework for them through Law 15/2001 on Marks and Government Regulation 52/2007, covering the further development of the GI system. Up to now more than 35 well-known Indonesian products have followed the GI route and been officially registered as GIs in Indonesia by the body responsible: the Directorate General of Intellectual Property. Currently, there are only three European products listed as a GI in Indonesia. This number is however expected to increase, according to the study carried out by the EU-Indonesia Trade Cooperation Facility, because the Indonesian intellectual property laws are improving as well as the Indonesian enforcement authorities are becoming more aware of the GIs protection and enforcement. European products protected as GIs currently include: Product Name Registration ID Product Type Registering Entity Champagne ID G 000000002 Wine Comite Interprofessional Du Vin De Champagne (CIVC) France Parmigiano Reggiano ID G 000000009 Cheese Consarzio Del Formaggio Reggiano" (Italy) Grana Padano ID G 000000045 Cheese Consorzio per la Tutela del Formaggio Grana Padano Kuasa : Andromeda, BA., SH AMR Partnership (Italy) "Parmigiano Table 10 EU GI Products Registered in Indonesia 197 - Tastes of Europe Indonesia – Market Entry Handbook ANNEX II: DATABASE OF PROFESSIONAL BUYERS Buyers: 1. Wholesale, Hypermarket and Supermarket outlets329 Retail Name & Ownership Sales Market Type /Year 2014 Carrefour/Trans Trans Retail Sales of Mart Indonesia, PT. Trans PT Retail (Local per Indonesia November 2012) in 2014: IDR 15.85 trillion Giant Hypermart Hero Supemarket Tbk, PT (Dairy Farm –Hongkong) Matahari Putra Prima Sales of Hero retail group in 2014: IDR 13.5 trillion Sales of PT. No. of Outlets 2014/2015 As of September 2015: 90 Carrefour & Transmart outlets; 1 Groserindo outlet Locations (city/region) Purchasing Agent Type Jakarta and its surrounding several cities in Banten West Java, Central Java & East Java, Palembang, Medan, Batam, Makassar, Pontianak, Denpasar, Palu (28 cities) Direct Agent/ As of June 2015 53 Giant Extra outlets, 120 Giant Express outlets Jakarta, several cities in Banten, West Java, Central Java, East Java; Bali, Bandar, Lampung, Bengkulu, Jambi, Pakanbaru, Banjarmasin, Balikpapan, Samarinda, Batam, Kupang, Medan, Binjay, Palembang Direct Agent/ As of Oct 2015 Jakarta, several cities in Banten, West Java, Direct Agent/ Importer, Distributor Importer, Distributor U.S. Department of Agriculture, “Indonesia: Retail Foods: Retail Foods Update”, available at: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Jakarta_Indonesia_12-22-2016.pdf 329 198 Tastes of Europe Indonesia – Market Entry Handbook Retail Name & Market Type Ownership Tbk, PT (Local Temasek, Singapore) Indogrosir Indomarco Prismatama,PT Sales /Year 2014 Matahari Putra Prima Tbk in 2014: IDR 13.59 trillion No. of Outlets 2014/2015 N/A As of November 2015: 111 Hypermart outlets 16 outlets Lotte Mart (former Makro Wholesale) Lotte Shopping Indonesia, PT (South Korea per Oct 2008) N/A As of November 2015: 24 wholesaler Format outlets 13 hypermarket Locations (city/region) Central Java, East Java, North, Sumatera, Riau, Jambi, South Sumatera, Bengkulu, Bandar Lampung, Pontianak, Central Kalimantan, South Kalimantan, Balikpapan, Samarinda, North Sulawesi, Gorontalo, Palopo, Makassar, Kendari, Papua, Kupang, Bali, Maluku, Bangka Belitung, Lombok Jakarta, Tangerang, Bekasi, Bandung, Semarang, Yogyakarta, Surabaya, Palembang, Pakanbaru, Medan, Samarinda, Pontianak, Bogor, Banjarmasin, Manado Jakarta, Tangerang, Serang, Bekasi, Bandung, Semarang, Yogyakarta, Solo, Sidoarjo, Medan, Pakanbaru, Palembang, Bali, Makassar, Banjarmasin, Balikpapan, Cirebon, Purchasing Agent Type Importer, Distributor Direct Agent/ Importer, Distributor Direct Agent/ Importer, Distributor 199 Tastes of Europe Indonesia – Market Entry Handbook Retail Name & Market Type Ownership Save Max Super Grocer Emporium Indonesia, PT (Gunung Sewu Group) (Local) AMSL Indonesia, PT (Japan) AEON Alfa Midi (bigger than minimarket but smaller than supermarket) Midi Utama Indonesia Tbk, PT Food Mart group/Food Mart Gourmet Matahari Putra Prima Tbk, PT (Local Temasek, Singapore) Hero (Local) Hero Supemarket Tbk, PT (Dairy Farm Sales /Year 2014 No. of Outlets 2014/2015 format outlets As Of November 2015: 2 outlet Locations (city/region) N/A As of November 2015: 1 outlet Tangerang Agent/ Importer, Distributor Net revenue in 2014: IDR 6.02 trillion From Alfamidi, Alfa Express & Lawson Putra Prima Tbk in 2014: As of June 2015: Jakarta, Bogor, Tangerang, Depo, Surabaya, Makassar, Samarinda, Medan, Malang, Bali Direct Agent/ Jakarta, Tangerang, Bogor, Krawang, Cirebon, Klaten, Purwokerto, Yogjakarta, Surabaya, Jember, Bali, Balikpapan, Samarinda, Ambon, Padang, Medan, Palembang Jakarta, Bekasi, Bogor District, Tangerang, Tangerang Selatan, Direct Agent/ IDR 13.59 trillion Net revenue from Hero retail group in 2014: IDR 833 Alfamidi outlets As of Oct 2015: 24 large and 48 middle outlets As of June 2015 Hero: 35 outlets Bogor Tangerang, Cibubur Purchasing Agent Type Agent/ Importer, Distributor Importer, Distributor Importer, Distributor. Direct Agent/ Importer, 200 Tastes of Europe Indonesia – Market Entry Handbook Retail Name & Market Type Ownership Sales /Year 2014 –Hongkong) 13.56 trillion Farmers Market Lion Superindo Supra Boga Lestari Tbk, PT (Local) Lion Superindo – Gelael, PT Net revenue 2014 from Framers Market & Ranch Market: IDR1.64 trillion As of June 2015: N/A As of August 2015: (Local Delhaize Belgium) SPAR Ramayana Lestari Sentosa Tbk No. of Outlets 2014/2015 Jason supermarket 2 outlets N/A Locations (city/region) Purchasing Agent Type Bandung, Yogyakarta, Surabaya, Sidoarjo, Malang, Bali, Mataram, Tembaga Pura, Timika, Makassar, Balikpapan Jakarta, Bogor, Tangerang, Bekasi, Kerawang Distributor. 14 outlets Direct Agent/ Importer, Distributor Direct Agent/ 127 outlets Jakarta, several cities in Banten, West Java, Central Java & East Java; Palembang (19 cities) As of September 2015: 8 outlets Bogor, Cibubur, Cibitung, Jakarta, Cilegon, Serang, Malang Agent/Importer, Distributor Importer, Distributor Table 11 Buyers 2. High-end Supermarkets and Specialty Stores330 330 Ibid 201 Tastes of Europe Indonesia – Market Entry Handbook Retail Name & Market Type Ownership Sales /Year 2014 Bali Deli – specialty store Cipta Adi Karsa, PT (Local) Dijon Food Specialties Alamboga Internusa, PT (Local) N/A The Food Hall (formerly Sogo) –specialty store Panen Lestari Internusa, PT (Local) N/A Kemchicks – specialty store Boga Catur Rata, PT (Local) N/A Lucky Supermarket Group Local N/A No. of Outlets 2014/2015 As of November 2015: 1 outlet As of November 2015: 1 outlet As of November 2015: 13 food hall Outlets, 13 daily food hall outlets 1 “The Market” outlets As of November 2015: 2 outlets As of November 2015: Locations (city/region) Purchasing Agent Type Bali Agent/Importer, Distributor Bali Direct, Agent/Importer, Distributor Jakarta, Tangerang Depok, Bekasi, Bandung, Bali, Cikarang Agent/Importer, Distributor Jakarta Agent/Importer, Distributor Jakarta, Surabaya, Medan, Direct, Agent/Importer, Distributor 4 Grand Lucky outlets, 202 Tastes of Europe Indonesia – Market Entry Handbook Pepito – Speciality store Ranch Market – specialty store Sentral Retailindo Dewata, PT (Local) Supra Boga Lestari Tbk, PT (Local) All Fresh Local Net revenue 2014 from Framers Market & Ranch Market: IDR1.64 trillion N/A Jakarta Fruit Market Local N/A Total Buah Local N/A 3 Berastagi outlets, 7 Rejeki Fruit boutiques 3 Hokky outlets As of November 2015 : 12 outlets As of November 2015: 13 outlets As of November 2015: 10 outlets As of November 2015: 5 outlets As of November 2015: 21 outlets Bali Agent/Importer, Distributor Jakarta, Surabaya, Balikpapan, Tangerang Selatan Direct, Jakarta, Bogor, Bekasi, Tangerang Agent/Importer, Distributor. Jakarta Agent/Importer, Distributor. Agent/Importer, Distributor. Jakarta, Bandung, Surabaya, Agent/Importer, Bali, Distributor. Cikarang Table 12 High End Supermarkets 203 Tastes of Europe Indonesia – Market Entry Handbook 3. Convenience Store/Minimarket Outlets331 Retail Name Ownership Sales/Year & 2014 Market Type Alfa Sumber Net revenue Minimarket Alfaria 2014: IDR36.74 Trijaya, Tbk, trillion PT (Local) Circle K Circleka N/A (convenience) Indonesia Utama, PT (Franchise) Indomaret Indomarco Net Sales 2014: Prismatama, IDR 41.06 PT trillion (Local) Star Mart PT Hero Net revenue Supermarket from Hero retail Tbk, PT) group in 2014: (Local) IDR 11.913.56 trillion Yomart Yomart Rukun Selalu, PT & Griya Pratama, PT Seven Eleven Modern Sevel Sales of PT Indonesia, PT Modern International (Franchise) Tbk (Parent 331 No. of Outlets 2014/2015 Net revenue 2014: IDR36.74 trillion Locations (city/region) Purchasing Agent Type Jakarta, Bogor, Bekasi, Tangerang, Java, Bali, Sumatera, Kalimantan, Sulawesi (16 provinces) Jakarta, Batam, Bandung, Bali, Yogyakarta, Surabaya, Makassar Java , Madura, Bali, Sumatera, Sulawesi, Kalimantan Agent/ Importer, Distributor. As of June 2015: 97 outlets Jakarta Agent/Importer, Distributor. As of November 2014: 211 outlets West java Agent/Importer, Distributor. As of Dec 2014: Jakarta, Tangerang, Depok Direct As of November 2104: More than 500 outlets As of August 2015: 11,400 outlets 190 outlets Agent/ Importer, Distributor. Agent/ Importer, Distributor. Agent/Importer, Distributor. Ibid 204 Tastes of Europe Indonesia – Market Entry Handbook Company) in 2014: IDR 1.43 trillion Rajawali Mart Rajawali Nusindo, PT (Local) As of November 2014: 150 outlets Bali, Medan, Makassar, Jakarta (11 cities) Agent/Importer, Distributor. Table 13 Convenience Stores Journalists Name Position Contact Details The Jakarta Post Endy M. Bayuni Editor in Chief editorial@thejakartapost.com Kornelius Purba Senior Managing Editor editorial@thejakartapost.com Primastuti Handayani Managing Editor https://twitter.com/primastutih Bayu Widhiatmoko Anton Hermansyah Callistasia Anggun Wijaya Head of Multimedia Reporter Reporter Erika Anindita Dewi Reporter Liza Yosephine Reporter https://twitter.com/liza_yosephin Marguerite Afra Sapiie Reporter https://www.linkedin.com/in/margueriteafra https://www.linkedin.com/in/bayu-widhiatmoko-89651523 https://www.linkedin.com/in/anton-hermansyah-9240a08a https://twitter.com/callistasia_w https://www.linkedin.com/in/eadewi The Jakarta Globe (Multimedia including TV) M. Al Azhari Managing Editor https://www.linkedin.com/in/muhamad-al-azhari-886835a Sylviana Hamdani Editor https://www.linkedin.com/in/sylviana-hamdani-35462530 205 Tastes of Europe Indonesia – Market Entry Handbook Edo Karensa Reporter https://www.linkedin.com/in/edokarensa Tabita Diela Reporter https://www.linkedin.com/in/tabita-diela-a9356a46 Amal Ganesha Reporter https://uk.linkedin.com/in/agwarganegara22 Bisnis Indonesia (In Bahasa Indonesian) M. Syahran W. Lubis Editor Martin Sihombing News Editor redaksi@bisnis.com https://twitter.com/hombing293 Media Indonesia (In Bahasa Indonesian) Djadjat Sudradjat Senior Editor redaksi.micom@mediaindonesia.com Iis Zatnika Editor/Journalist https://www.linkedin.com/in/iis-zatnika-5a757a48 Usman Kansong Editorial Board https://www.linkedin.com/in/usman-kansong-44345b24 Table 14 Journalists Bloggers Name of the Blog/Blogger Blog Address Wanderbites http://www.wanderbites.com/category/jakarta-restaurant-review/ AnakJajan/ Julia Veronica & Marius Tjenderasa- https://anakjajan.com/ EatandTreats / Stanislaus Hans Danial http://eatandtreats.blogspot.com/ MyFunFooDiary/ Mullie Marlina http://myfunfoodiary.com/ 206 Tastes of Europe Indonesia – Market Entry Handbook CulinaryBonanza/ Ellyna Tjohnardi http://www.culinarybonanza.com/ TheHungryDoctor/ Fillipus Verdi http://www.thehungrydoctor.net/ TheFoodEscape / Disy Caroline and Yu Kato http://thefoodescape.com Foodirectory / Andrey & Windy http://foodirectory.blogspot.com/p/about.html Table 15 Bloggers VIP Cooks Vindex Tengker As the head judge of MasterChef Indonesia and Executive Chef at Four Seasons Hotel Jakarta, Vindex Tengker is one of the most well-known celebrity chefs inIndonesia. Vindex began his career as a specialist chef in Indonesian cuisine at the “Amandari Resort” in Bali, then left the resort island in the search of new influences in Los Angeles, Boston, Philadelphia and Berlin where he broadened his culinary technique and discovered new ingredients. Vindex’s cuisine showcases the rich Indonesian culinary history in a more refined way. Each dish strives to reveal the essence of an ingredient and unveil the unpretentious character of a spice or herb like lemon grass, turmeric, ginger, tamarind and kaffir lime leaves. His LinkedIn profile: https://www.linkedin.com/in/vindex-tengker-b92a8714 Chef Felix Budisetiawan (The Dharmawangsa Jakarta) Chef Felix, who was born and raised in Bali, realized his passion in culinary when he started to help for the family business and carried on as a culinary school student in Nusa Dua, Bali, where he studied several managerial aspects of the culinary industry. His expertise expands to the 207 Tastes of Europe Indonesia – Market Entry Handbook gastronomic arts of traditional and modern Indonesian as well as French cooking style with the simple yet flavorsome and mouthwatering cuisines, with specialization in Indonesian cooking style. In 2006, Chef Felix moved to Jakarta and challenged himself to be a part of international hotel chains. He was appointed as Executive Chef at Sheraton, followed by other well-known city hotels in Jakarta and Surabaya. Taking challenge to explore Asia’s culinary world, Chef Felix, who also loves painting and is an interior design enthusiast, return to the metropolitan city of Jakarta and joined The Dharmawangsa Jakarta. His LinkedIn profile: https://www.linkedin.com/in/felix-budisetiawan-97639b6 Chandra Yudaswara (Exodus) Chef Chandra stole the public attention after hosting the TV show ‘Chef’s Table’, while being responsibility of several high-profile restaurants in Jakarta including Bacco, Exodus, and Domicile Jakarta. Growing up with a chef dad who dedicated his life in the hotelier and culinary business, Chandra spent his childhood running around kitchens, trying out food, and meeting Indonesian and foreign chefs. It is not just the cooking and the food that inspired him, but also the philosophy and the grit behind the art of cooking itself; the long hours, the hard work, and the complains that colors all chefs daily routine motivated him and made him the successful chef he is today. Starting his career in one of Jakarta’s most sophisticated Indonesian-clad brand in the country, The Dharmawangsa Jakarta where he was promoted to Demi chef de Partie, he later took a position in a 5 star hotel in Dubai. He returned to Jakarta and assumed the position of Chef de Cuisine of hotel Grand Hyatt, Jakarta, and later Executive Chef of Negev restaurant. His LinkedIn profile: https://www.linkedin.com/in/chandra-yudasswara-73112232 Gilles Marx (Amuz) 208 Tastes of Europe Indonesia – Market Entry Handbook Born in a family fond of cooking, Gilles Marx already loved French culinary world since childhood. His home kitchen at Miestesheim, Northern France, was the witness of his early pace in the culinary world. His course of a career spanned from the age of 17, when he worked at the restaurant La Poele d’Or, which holds one Michelin Star. He was moving in an increasingly unstoppable pace by continually working at Michelin-starred restaurants, such as Le Paris Restaurant, Chef Pierre Orsi, Le Cote St Jacques, and Le Taillevant. He came to Indonesia in 1998 and became the Executive Chef in a restaurant at a hotel in Jakarta. He grew to be well known in both Indonesia and International culinary world; evident from the numerous awards he has received. Gilles is one of the best chefs the nation owns, who is also a media personality. His LinkedIn profile: https://www.linkedin.com/in/chef-gilles-marx-13240326 209 210 HOW TO OBTAIN EU PUBLICATIONS Free publications: • one copy: via EU Bookshop (http://bookshop.europa.eu); • more than one copy or posters/maps: from the European Union’s representations (http://ec.europa.eu/represent_en.htm); from the delegations in non-EU countries (http://eeas.europa.eu/delegations/index_en.htm); by contacting the Europe Direct service (http://europa.eu/europedirect/index_en.htm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) (*). (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). Priced publications: • via EU Bookshop (http://bookshop.europa.eu). 211
