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Indonesia Food and Drink Report Q1 2012
Business Monitor International, Dec 2011, Pages: 105
Business Monitor International's 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.
Indonesian GDP growth came in at a strong 6.5% year-on-year (y-o-y) in Q211 for a third straight quarter, marking the economy’s continued domestic demand-driven resilience in the face of mounting external pressures. BMI continues to like Indonesia as a regional outperformer, with countries more dependent on external trade, such as Singapore, feeling the effect of a protracted slowdown in exports. The Indonesian consumer remains in good shape, and this is borne out in a strong showing in retail and consumer confidence. Looking over the long term, robust macroeconomic fundamentals, an enticing demographic profile and the spread of organised retail underpin a highly dynamic consumer growth story in Indonesia.
Headline Industry Data:
- Food consumption growth for 2012 = +7.0%; CAGR forecast to 2016 = +7.7%
- Alcoholic drinks sales growth for 2012 = +9.5%; CAGR forecast to 2016 = +11.9%
- Soft drinks sales growth for 2012 = +9.7%; CAGR forecast to 2016 = +10.1%
- Mass grocery retail sales growth for 2012 = +12.3%; CAGR forecast to 2016 = +11.7%
Key Industry Trends:
Catching The Sights Of Multinational Retailers
Indonesia’s potential has clearly attracted the sights of multinational retailers. South Korean retailer Lotte Department Store plans to launch five new outlets in several cities in Indonesia by 2018. Although Lotte revealed that it has no plans to acquire Indonesian retailer Matahari Putra Prima, this is unlikely to cause a dent in Lotte’s expansionary ambitions in Indonesia; BMI expects the retailer will continue to commit investments to expand its Indonesian footprint. Meanwhile, Germany-based grocery store operator Metro Group has revealed plans to launch its first cash-and-carry outlet in Indonesia by 2012. Looking to capitalise on growing consumer affluence, Carrefour Indonesia plans to open its first premium outlet in early 2012 and aims to gradually convert between two and four Alfa Retailindo outlets into high-end supermarkets each year from 2012 onwards.
Indonesia Featuring Strongly On Food Companies’ Radars
Anglo-Dutch consumer goods group Unilever is set to make a EUR550mn (US$750mn) investment in its Indonesian operations in a bid to expand its business footprint in the country. According to Unilever’s chief supply chain officer, Pier Luigi Sigismondi, the new facilities will allow the company to continue its expansion drive in a niche market where it has strong category positions across its portfolio. Meanwhile, Swiss food group Nestlé has started building a US$200mn factory in Karawang, Indonesia, to manufacture infant cereals, chocolate malt drinks and milk powder. The factory, expected to be ready by the beginning of 2013, will generate more than 600 jobs.
Risk To Outlook
Global Headwinds Could Dampen Indonesia’s Growth
BMI is becoming increasingly concerned that another global financial crisis could play out over the coming quarters given the ongoing problems facing the developed world and the unsustainable nature of China’s growth boom. Should this scenario materialise, Indonesia’s economic growth and consumer sentiment will inevitably suffer a hit, as was the case in late 2008. However, BMI does not believe the negative impact on growth would be as harsh as was witnessed during the global economic downturn in 2008-2009, and even then, Indonesia managed to post respectable 4.6% growth. BMI is optimistic that the country’s growth will continue to hold up strongly in the face of an impending global and regional slowdown and that the country will outperform many of its regional peers in 2012.
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