Indonesia Food and Drink Report Q3 2012

The 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.

Indonesia has an ace up its sleeve relative to Asia's more external demand-driven economies.

Consumption comprises approximately 63.6% of Indonesia's economy, endowing it with a considerable buffer against an external slowdown. The Indonesian consumer remains in good shape, and this is borne out in a strong showing in retail, although we acknowledge growing downside risks to our near-term domestic demand outlook. Looking 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 = +7.7%; CAGR forecast to 2016 = +7.2%

- Alcoholic drinks sales growth for 2012 = +11.5%; CAGR forecast to 2016 = +9.4%

- Soft drinks sales growth for 2012 = +12.7%; CAGR forecast to 2016 = +9.7%

- Mass grocery retail sales growth for 2012 = +13.0%; CAGR forecast to 2016 = +11.0%
Key Industry Trends Indonesia Steadily Adopting Consumerism – While per capita food consumption levels in Indonesia are relatively low, the country is on the cusp of a consumer spending boom as the lower-and-middle classes reap the fruits of the country's rapid economic boom over the coming years. Unsurprisingly, Indonesia continues to hold a great deal of interest to global and regional consumer-facing firms. Swiss food giant Nestlé announced in June 2011 that it plans to invest around US$100mn in Indonesia to expand its production operations, which follows its investment of US$200mn in 2010. British-Dutch fast-moving consumer goods company Unilever has also been eager to hop on the Indonesia consumer bandwagon as it plans to invest up to US$600mn in the country through 2013.

Retail A Big Attraction In Indonesia – French-owned subsidiary retailer Carrefour Indonesia has revealed plans to launch between five and 10 new stores during 2012, concentrating on areas in eastern Indonesia. Indonesian retailer Indomaret is set to open 1,000 new outlets throughout the country in 2012.

The retailer expects to deliver 30% growth in total sales to IDR23.4trn (US$2.62bn) during 2012. As an ageing population weighs on the growth prospects of the Japanese mass grocery retail (MGR) sector,
local convenience store retailer FamilyMart plans to open around 600 outlets in Indonesia and the Philippines. The retailer plans to have around 300 stores in each of these countries by 2015. While the aforementioned foreign retailers have found relative ease in expanding their footprint across Indonesia,
Lawson faced expansion hurdles in the country. The Jakarta City Tourism Agency has ordered Lawson to suspend operations in the city as it lacks certain necessary permits.

Risk To Outlook One of the more obvious headwinds that Indonesia faces in 2012 is a slowing regional economy. The developing hard landing in China means that regional growth will be subdued compared to the heady rates of 2010-11, and trade in particular is set to suffer. Indeed, Indonesia's own links to China have become considerably deeper since the enactment of the ASEAN-China Free Trade Agreement, and exports to the mainland now account for approximately 13.4% of total exports, passing the US, Japan,
and the eurozone to become one of Indonesia's largest markets.

Accelerating inflationary pressures represent another downside risk to our near-term domestic demand outlook. Food price inflation has ticked up from 4.6% year-on-year in March to 6.7% in April.

Furthermore, core inflation looks to have bottomed out at a high 4.3% and could begin ticking higher once again as well. High oil prices could again curtail consumer as the middle class finds its disposable income pressured by both energy prices and bleed through effects. With all signs pointing to rising inflation, our Country Risk team expects the central bank to introduce a rate hike of 25 basis points to 6.00% by end 2012. Tightening credit conditions will inevitably dampen consumer appetite for discretionary goods. SHOW LESS READ MORE >

BMI Industry View 7

SWOT Analysis 9

Indonesia Food Industry SWOT 9

Indonesia Drink Industry SWOT 10

Indonesia Mass Grocery Retail Industry SWOT 11

Business Environment 12

BMI’s Core Global Industry Views 12
Table: BMI’s Core Views 22

Asia Pacific Risk/Reward Ratings 23
Table: Asia Pacific Food & Drink Risk/Reward Ratings, Q312 27

Indonesia’s Risk/Reward Rating 28

Macroeconomic Outlook 29
Table: Indonesia – Economic Activity 32

Industry Forecast Scenario 33

Consumer Outlook 33

Growing Headwinds For The Indonesian Consumer 33

Food 37

Food Consumption 37
Table: Food Consumption Indicators – Historical Data & Forecasts 38

Canned Food 38
Table: Value/Volume Sales, selected food sub-sectors – Historical Data & Forecasts 39

Confectionery 39
Table: Value/Volume Sales, selected food sub-sectors – Historical Data & Forecasts 41

Trade 41

Table Indonesia Food & Drink Trade Indicators – Historical Data & Forecasts 42

Drink 43

Hot Drinks 43
Table: Indonesia Beverage Sub-Sectors – Value Sales – Historical Data & Forecasts 44

Alcoholic Drinks 44
Table: Indonesia Beverage Sub-Sectors – Value Sales – Historical Data & Forecasts 45

Soft Drinks 46
Table: Indonesia Beverage Sub-Sectors – Value Sales – Historical Data & Forecasts 48

Mass Grocery Retail 49
Table: Indonesia Mass Grocery Retail Sales by Format 51
Table: Grocery Retail Sales by Format (%) – Historical Data & Forecasts 51

Food 52

Key Industry Trends And Developments 52

Indonesia Steadily Adopting Consumerism 52

Setting Sights On Indonesian Potential 53

Tapping Into The Fast-Food Potential 54

Witnessing Strong Revenue Showing 55

Market Overview 56

Food Production 56

Confectionery 56

Halal 57

Agriculture 57

Organics 58

Drink 59

Key Industry Trends And Developments 59

CCA Could Lean On Indonesia To Mitigate Near-Term Domestic Headwinds 59

Exciting Beer Prospects Capturing The Sights Of Regional Brewers 60

Drinks Sector Remains An Investment Magnet 61

Market Overview 62

Soft Drinks 62

Alcoholic Drinks 62

Hot Drinks 63

Mass Grocery Retail 64

Key Industry Trends And Developments 64

Retail A Big Attraction In Indonesia 64

Traditional Retailers Facing Greater Pressure On Market Share 65

Market Overview 66
Table: Structure of Indonesia's Mass Grocery Retail Sector – Estimated Number of Outlets by Format 69
Table: Structure of Indonesia's Mass Grocery Retail Sector – Sales by Format (IDRbn) 69
Table: Structure of Indonesia's Mass Grocery Retail Sector – Sales by Format (US$mn) 69
Table: Average Annual Sales by Format – 2011 70

Competitive Landscape 71
Table: Key Players in Indonesia's Food Sector 71
Table: Key Players in Indonesia's Drink Sector 72
Table: Key Players in Indonesia's Mass Grocery Retail Sector, 2012 73

Company Monitor 74

Food 74

Indofood Sukses Makmur Terbuka 74

PT Charoen Pokphand Indonesia Tbk 76

Nestlé Indonesia 78

Mayora Indah Tbk 80

PT Unilever Indonesia Tbk 84

Drink 87

Coca-Cola Amatil (CCA) 87

Aqua Golden Mississippi (Aqua) 91

Mass Grocery Retail 93

Matahari Putra Prima 93

Carrefour 96

Hero Supermarket Tbk 99

Risk/Reward Ratings Methodology 101
Table: Rewards 101
Table: Risks 102

Weighting 102
Table: Weighting 102

BMI Food & Drink Industry Glossary 103

Food & Drink 103

Mass Grocery Retail 103

BMI Food & Drink Forecasting & Sourcing 105

How We Generate Our Industry Forecasts 105

Sourcing 106