05 July 2018
Viona Ong / Business Development Manager / NZTE Jakarta
Indonesia is a tough market to crack for food and beverage exporters – but the prize is a big one, with East Asia’s biggest foodservice market and a growing middle class that’s embracing dining out and food delivery. Read on to explore Indonesia’s foodservice opportunity for New Zealand F&B exporters – as well as some challenges to overcome.
With 260 million people, Indonesia has the largest population in East Asia and the fourth largest on earth. That’s a big market by any standards.
But the real growth engine for food and beverage in Indonesia is its emerging middle class. Over 50 million Indonesians are now considered middle-class, and this group is still growing by five million people annually.
Imagine a country with twice the population of Australia, and the equivalent of New Zealand’s population added every year - that’s the scale of the middle-class market in Indonesia.
However, Indonesia remains one of the toughest markets to tackle in East Asia, with logistics and regulatory challenges making life hard for overseas F&B companies.
The keys to success in Indonesia are being realistic, being persistent, and thinking smart about where opportunities lie. Foodservice is one promising area for New Zealand companies to capture fresh potential from a growing middle class and get a foothold in the Indonesian market.
The Indonesian foodservice opportunity
Indonesia’s foodservice market is currently worth US$30 billion, making it the biggest in the ASEAN region and the seventh biggest globally – and the expanding middle class is driving further growth.
From high-end hotels, bars and restaurants, to fast food outlets, cafes and street-corner juice bars offering ‘grab and go’ beverages, new establishments are opening all the time.
Indonesians are keen to splash out and try new dining experiences, and restaurants offering Western-style cuisine are becoming more popular - particularly in Bali, which is fast becoming the place to be for high-end dining in Indonesia.
With more and more people eating out, foodservice operators are making use of Instagram and Facebook to develop a devoted following amongst consumers. Cities like Jakarta are home to fast-growing digital communities.
Middle-class Indonesians are also increasingly time-poor, especially in the big cities. Jakarta is infamous for traffic jams, with around 10 million people on the roads every day. Getting to and from work can take hours, making it a challenge to prepare meals at home.
Delivery services like Go-Food (part of a multi-purpose shopping and lifestyle app called Go-Jek) use motorcycle riders who can zip around through traffic jams to deliver to homes or offices. For customers with no time to leave the office for lunch, or who want dinner delivered ready-to-eat after a long day, the convenience of food delivery makes it well worth the extra cost.
What it means for New Zealand
Whether fine dining, fast food or delivery services, here are a few reasons why foodservice offers good potential for New Zealand businesses targeting Indonesia:
Foodservice operators are hungry for imported goods. As Indonesia’s foodservice sector grows, ingredient supply is becoming stretched, especially for premium Western-style foods. Restaurant, hotel and café operators are pushing their distributors for more options, and those distributors are in turn looking overseas for suppliers.
Import barriers deter potential competitors. It’s not always easy to get your products into market, but once you’re there, Indonesia offers lower competition than some East Asian markets – along with the largest population in East Asia and increasingly wealthy consumers.
Market entry is easier for foodservice than retail. It’s faster and easier to get imported food products certified for foodservice than for retail sales (including halal certification), meaning a quicker path to market – although long delays are still possible.
Cafés and bakeries offer good opportunities. As coffee becomes more popular, cafes are springing up to match, along with catering businesses supplying them with pastries and other sweet treats. High-end bakeries are also growing in number in the large cities. That’s good news for suppliers of high-quality ingredients and flavours.
Fast-food chains have big reach and potential for the right suppliers. KFC, Burger King and McDonalds offer access even to rural areas of Indonesia. Most of these chains are pushing aggressively for market share and growth in smaller centres, meaning good growth potential for suppliers who can deliver in volume.
Dealing with the challenges
So there’s plenty of potential – but as mentioned earlier, Indonesia isn’t an easy market to tackle, and you should go in with your eyes open.
If you’re interested in Indonesian foodservice opportunities, keep these three points in mind:
1. Nationwide distribution is a challenge. Indonesia is an archipelago, with more than 13,000 islands. True nationwide distribution is very tough, if not impossible - be wary of distributors that make bold claims in this area. For foodservice opportunities, the big game is in Jakarta and Bali, so it can be easier to focus there first.
2. Think ahead on halal. Given the size of Indonesia’s Muslim population, halal certification (if relevant for your product type) can broaden your opportunities hugely. Make sure you obtain a certificate that’s specifically recognised by Indonesian authorities. Halal certification is currently voluntary in Indonesia, but there’s a political push to make it mandatory, so getting certified may be a good idea in the long run. Find out more in NZTE's market guide on Indonesia.
3. Be prepared for red tape and regulatory shifts. Indonesia’s food import laws require registration at both product and factory level, and the rules can change quickly. Seasonal import quotas also apply to some goods, especially fresh produce. Be prepared for delays in getting products approved for sale – three to six months at least – and keep in close contact with your distributor for early indications of any problems.
Indonesia can be a difficult market, with its own set of challenges - but once you get in, a growing population and middle class means there’s plenty of potential for businesses that take the right approach.