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Indonesia Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 82
Indonesia Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Indonesia's food and drink industry.
The Indonesian economy is poised for solid growth in 2010 and 2011 as it shrugs off the minimal side effects from the global slowdown. Thanks to a large domestic consumption base that renders the Indonesian economy less vulnerable to external shocks, Indonesia’s long-term economic fundamentals remain strong and the country continues to hold massive potential for food and drink (F&D) players. The enticing growth prospects on offer here have already attracted major F&D players such as Nestlé, AEON and Carrefour and, with Indonesia an increasingly important jewel in these companies’ cap, expansionary investments will only intensify going forward.
Headline Industry Data
- 2011 Food Consumption = +8.1%; forecast to 2015 = +55% 2011
- Alcoholic Drinks Sales = +10.9%; forecast to 2015 = +64.4% 2011
- Soft Drinks Sales = +11.5%; forecast to 2015 = +80.3% 2011
- Mass Grocery Retail Sales = +9.9%; forecast to 2015 = 69.7%
Key Company Trends
Matahari’s Sale Not Indicative Of Domestic Demand Weakness – Ongoing speculation surrounding Indonesian retailer Matahari’s divestment of its hypermarket and supermarket operations may appear to be at odds with our bullish retail outlook. However, BMI believes the sale is not indicative of domestic market weakness, particularly in view of the reported acquisition interest from Lotte Shopping, Carlyle Group and Wal-Mart. Matahari's sale could instead be viewed as part of Lippo Group's (Matahari's parent company) broader strategy to sharpen its core focus on its higher-margin healthcare and property businesses.
Encouraging Financial Results Underscores Domestic Demand Strength – Driven largely by Indonesia’s domestic demand strength, Indofood, a leading processed food manufacturer, has again delivered stellar financial results, reporting a 43% year-on-year (y-o-y) increase in net profit to IDR2.2trn (US$246.4mn) for the nine months to September 2010. This was attributed to impressive performance in its consumer branded products division (CBP). CBP’s trading debut on October 7 2010 has allowed the firm to secure more than IDR6.29trn (US$704.5mn), underscoring positive investor sentiment towards the firm’s future prospects. Unilever Indonesia’s financials are yet another indication of the country’s strong potential for growth. The FMCG player posted an 8.7% growth in its net sales, to IDR14.7trn (US$1.6bn), and a 12% increase in its net profit, to IDR2.6trn (US$291.2mn), for the nine months to September 2010.
Key Risks To Outlook Surge In Foreign Direct Investment – Should the Indonesian government’s policies towards facilitating investment growth prove more effective than anticipated, there would be massive inflows of FDI, which would place upward pressure on our economic growth forecasts. Government efforts towards achieving self-sufficiency and improving infrastructure could lift the rural population out of poverty sooner than expected. This would in turn bolster private consumption growth and could potentially drive Indonesia’s real GDP growth to reach an annual average of 7% going forward.
Increasingly Regulated Retail Sector - The risks to our outlook for the Indonesian retail sector are mixed. Should speculation surrounding the government’s legislative move to clamp down on hypermarket store openings prove founded, retailers will shift their focus to the less-regulated supermarket and convenience store sectors, given that there would likely be much less interference in these sectors from regulators. This poses a downside risk to our hypermarket growth forecasts, while placing an upside risk to our supermarket and convenience sector forecasts.
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