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Indonesia Food and Drink Report Q4 2008
Business Monitor International, Nov 2008, Pages: 71
This Indonesia Food Drink Report provides independent forecasts and competitive intelligence on Indonesia's food and drink industry.
Rising food prices, a shaky global economic environment and falling consumer spending power are all weighing on Indonesia’s food, drink and mass grocery retail sectors. However, despite this, this report is still forecasting food consumption to grow by 61% up to 2012, reaching a value of US$83.3bn. Meanwhile, as can be seen in this newly published Indonesia Food & Drink Report Q408, the country’s leading food and beverage producers are still recording strong sales, while the major retailers continue to expand aggressively.
Leading Indonesian food company PT Indofood Sukses Makmur, has announced that it is acquiring a 69% stake in dairy producer Indolakto, in a deal worth US$350mn. Indofood has remained resilient in the face of a consumer downturn but has still grabbed the opportunity to diversify. Indofood’s profits in the first half climbed to IDR827.5bn (US$88.8mn), an increase of 54%. Indonesian retailer Matahari, meanwhile, has announced a sales increase of 24.6% for the first six months of the year to IDR5.2trn (US$572.6mn), driven by the company's supermarket division. The president of the company described the performance as ‘extraordinary’ considering that current operating conditions are particularly tough, with the government raising fuel prices in May 2008 and food prices also soaring. Indofood, however, is clearly concerned about what lies ahead for the economy. In September 2008, the company announced that it was still intently focusing on cost-cutting, as it seeks to ward off the need for price increases, without undermining sales and profitability.
Price increases are likely to be extremely unpopular with consumers who have suffered from severe rises already this year. In fact, the finance ministry has been so concerned that it has sought to reassure consumers that the month of dusk-to-dawn fasting during Ramadan, followed by the Eid al-Fitr festivities, will not stoke already high food price inflation. Stockpiling for evening consumption and higher spending during end-of-month celebrations saw Indonesian inflation soar during Ramadan in 2007. One company that apparently is not feeling bullish about the Indonesian market is Dutch wholesaler SHV Makro. In July 2008, the company announced that it would be divesting its Indonesian subsidiary. This decision is surprising as with 19 wholesale outlets and annual sales of around US$300mn, Makro was among the top five players in a mass grocery sector.
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