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Indonesia Food and Drink Report Q3 2011
Business Monitor International, June 2011, Pages: 102
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 near-term domestic demand outlook for Indonesia looks positive on the back of optimistic consumer confidence, continued tourist arrivals and strong retail sales growth. However, persistent inflation remains a major risk to our domestic demand outlook, as elevated consumer prices could potentially dampen consumer demand over the coming quarters. Longer term, strong macroeconomic fundamentals and favourable demographics mean that the Indonesian consumer sector has the potential to be regarded in the same light as the economies of Brazil, Russia, India and China.
Headline Industry Data
- Food Consumption Growth For 2011 = +8.4%; Compound Annual Average Growth To 2015 = +9.1%
- Alcoholic Drinks Sales Growth For 2011 =+9.6%; Compound Annual Average Growth To 2015 = +9.9%
- Soft Drinks Sales Growth For 2011 = +11.5%; Compound Annual Average Growth To 2015 = +12.3%
- Mass Grocery Retail Sales Growth For 2011 = +10.9%; Compound Annual Average Growth To 2015 = +11.3%
Key Company Trends
Massive Retail Potential Attracting the Sights of Global Retailers – Representing its latest bid to capitalise on the burgeoning potential in EMs, German wholesale giant Metro plans to set up stores in Indonesia by 2012. Despite the growing prevalence of modern retail in Indonesia, traditional retail will continue to account for a significant proportion of overall grocery retail sales over the medium term. The proprietors of these independent outlets represent the core customer base for Metro's cash and carry outlets, which suggests to us that there is massive growth potential for Metro to capitalise on.
Super Group and Petra Deepening Their Coffee Push – Petra Foods and instant beverage maker Super Group have established a US$1.5mn joint venture, Ceres Super, for the Indonesian market. The motivation behind the joint venture is largely owing to rising incomes in the country (which translates into a growing consumer base for coffee products) and the stable economy and political situation in the country, according to the CEO of Petra Foods John Chuang. The joint venture will offer 3-in-1 coffee mix products at more than 400,000 stores across Indonesia.
Key Risks To Outlook
Persistent food price inflation is the biggest risk to our domestic demand outlook for 2011. Although we expect food inflationary pressures to moderate over the latter half of 2011 (given that commodity markets remain fundamentally well-supplied), there is a risk that food prices could continue to remain at elevated levels, and in turn dampen domestic spending growth. Given that Indonesia is still a developing economy and that the food component makes up a large 36.2% of the consumer price basket, higher food prices will divert a significant chunk of incomes away from consumer goods. While the prospect of monetary tightening – our country risk team is pencilling in two more 25 basis point (bps) rate hikes by end-2011 – could adversely impact the consumer sector, inflation is realistically a far bigger demand risk and consequently the bank's steps to combat rising inflationary pressures should be demand supportive.
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