Viona Ong, NZTE Business Development Manager, Indonesia: Good morning. Selamat pagi. Today I will share with you a little bit more about Indonesian market because some of you might not have any experience yet with Indonesia, but for those who have ever tried to enter Indonesian market or have been in Indonesia market, you will know Indonesia is not an easy market. We are probably the toughest market to enter in the whole East Asia region.
But difficult doesn’t mean it is impossible. But again, if you look at why Indonesia is a difficult market, it goes back again to our government. Our current government, especially, they have a more nationalistic view of the economy so that translates into a more protectionist policy when it comes to international trade, and then it becomes even more important, especially in the food and beverage sector because then there is the thing that really touches all of the people of Indonesia, so they want to be seen as being able to profit for the country. They want to be seen as self-sufficient so that’s why they always want to balance their trade to make it still stay positive – import not too much compared to the export, although it might not necessarily reflect that the real import demand in the market because we actually need a lot of import products still.
So again I feel like it is a difficult market to enter due to the regulations so not so much of the free trade agreement problem because we’ve actually already have free trade agreement with New Zealand so it’s not a problem of import tariff; it is more about the non-import tariff trade barriers.
We’ve also had a lot of companies from New Zealand or from a lot of other countries in the world that have managed to enter Indonesian market. They have finally been able to access Indonesian 260 million population and we are already now the fourth largest population in the whole world. But then if you look at this whole population, which segment in our population that relates more to New Zealand companies? I would say that it is our middle class consumers, like around this year we’ve got about  million middle class consumer already and then it is still growing by about five million every year so you see like our middle class, they are growing in numbers, they are growing in their disposable income and the good news also for companies is that our middle class consumer they like to spend, they really like to spend so, like, you can see our pay cheque is usually around 25th every month so during this time a lot of companies will do a lot of promotions in the market because they know this is the time that people still have a lot of money so I can spend, but if you do it like let’s say at the 22, 23rd every month, nobody will bother because no money left.
So like today we'll focus more on the food service sector. Why is that? I will explain more but when we say ‘food service in Indonesia, it will usually cover places like hotels, restaurants, cafes, bars, and then bars, there are also some like now we call healthy bar, juice bar so this is a recent trend also in our industry, and then one more would be catering services.
So why food service? You see here our food service market, the value itself is already $US30 billion and still growing. We are currently the biggest market in the whole South East Asia region so this is the right place to be and then we are the seventh biggest globally, so food service, another event that’s there we have in our market is that if you compare with retail market, for example, retail will usually take you longer to enter the market because the registration process itself, the fastest is six months and it can go up to one year or even more than one year depending on your product and the ingredients that you have but food service usually if you have all the documents ready within 3-6 months you can already be in the market.
And then Indonesia we are an archipelago country so we have about 13,000 islands all over Indonesia. There is a huge country and that makes distribution also difficult but again if you focus on food service and then the one that is more relevant to New Zealand products because usually your product will be more in the middle and upmarket so there are two key cities that you should target. The first one would be Jakarta because that is the highest value for food service market in Indonesia and then second is Bali.
Why Bali? Because Bali is the most popular tourist destination and these are already two of the most concentrated high-end restaurants in Indonesia so if you haven’t been to Bali you should because now there is a direct flight between Christchurch and Bali.
Here if you talk about food service – oh, you can’t see clearly – but anyway, if you talk about food service it is always related to Jakarta, our most important market, and then Jakarta you can’t separate it from traffic. I hope you can see it better but, yeah, you can Google Jakarta traffic and then you’ll see.
So just an overview also about Jakarta day; so me, I live in Jakarta, I work in Jakarta so I represent, like, about 10 other million people of Jakarta that have to go through this traffic every day. We will start our day very early in the morning – 5.30/6:00am and then we get ready. I have to leave my house at 6.30 sharp. I cannot be later than that because five minutes extra late and then I will be stuck in traffic for 30 minutes more so there is a huge problem.
And then my house to office, it is only 10km but it will take me about one and a half to two hours just to get to my office and that is on a good normal traffic day so a good normal traffic day means no rain and when I was in Auckland I said it is Auckland rush hour you multiply by 10 but then in Christchurch, because there’s no traffic so I don’t know how to multiply it.
So then I get to office, I work lunchtime, work and then around 5.30-6pm it is off work. Off work if I want to go back home straight because I’m tired from working, okay, I can, I drive my car but then it will take me another two or three hours getting stuck in traffic because there’s more cars during the off work time and then so you can 6pm offer, three hours in the traffic I get home at 9pm and then because I drive, I’m too tired to eat so although I’m really hungry, I just like go straight to bed so I’m sleeping hungry.
That’s why yesterday I was happy again because they brought me a lot of food so I’m happy so you see this is the problem that we have in Jakarta and when there is a problem there’s also a solution because of course I cannot go on like that every day, not eating dinner so what we do, we have this thing called GoJeck, so this GoJeck application is actually an Uber inspired application but instead of using cars it’s using motorbikes because we have to get around the traffic in Jakarta so motorbikes makes it more easy to access.
Every Indonesian would have this application because this is our survival kit. It started with the transport services to get people across but then later on they also have other services like you can ask them to deliver package or if you don’t want to get stuck in traffic going out you can just ask them to do your groceries for you. They can even come and clean your house with Go-Clean. You need a hairstylist? They have Go-Glam. See, they have everything.
But the one that is related to food and beverage would be Go-Food. So Go-Food is a food delivery application that has helped us to also get through the traffic so instead of us going out and buy food or eating at a restaurant we can just ask the GoJeck driver to go and then buy the food for us. So not sure if you can see this but this is a long line of GoJeck driver in green jacket, lining up for us because we ask them to buy ice coffee so this picture is taken from a coffee shop named [Tuku].
The coffee shop itself is very small. It’s only like maybe 2x3 metres with no seating space so it’s only coffee takeaway but it got so popular and then that is driven by a system also of GoJeck applications. So we just ask them to buy for us and then deliver so it gets so popular until like the Tuku itself, they limit the number of coffee that one driver can buy to only 10 because it can, like, go up, up to 20. How is that? It’s very popular among office workers. During afternoon coffee time they will order this, like the whole office order so it’s getting also difficult because how can, like, one Go-Jack driver carry 50 cups so, yeah, that makes it easier with just limitation of 10.
This Tuku story is one of the many success story made possible by the existence of GoJeck applications. Now we are seeing more and more restaurants, cafes or even, like, bubble tea shops. They also register at applications and then having their sales increase a lot so we are having more restaurants and then we are having also more sales created out of these applications.
It is so easy not to start a food and beverage business because even housewives, as long as they can cook, as long as they can provide you food or drinks they can already make their own [unintelligible] restaurants here and then your own house can be your place for business so this is one trend that we use also to avoid the traffic and still get food. That has also expanded to a lot of cities outside of Jakarta, not just Jakarta now.
And then another thing also is dining out. Our middle class populations also now, because we have more money to spend we are not afraid to go out and eat and when we go out and eat it’s not always like just very mainstream places. Now more and more people like to go and have, like, more dinners at Western restaurants. They would have their meals along with their wine so both of these trends, GoJeck and then also the dining out, has contributed to the growth of our food service industry. We are now seeing a lot more establishment of new restaurants, cafes, hotels but also the value increase a lot.
So how does this growth in food service relate to New Zealand companies? Again, it’s because now we are seeing more demand in the market so that also translates to more and more of this end customers asking their distributors to provide them with more supplies because what we are seeing now in the market, these places are lacking supplies. So, for example, I’ve just come back from food export in Bali before I came to Auckland, so I met with a lot of importers there and then they asked me to provide them like do you have any contacts for butter? Do you have contacts for cheese? I need more wine; can you provide me with some more selections? So this has also shown to us that our food service industry is growing and people are asking for more products in the market. So now importers are in the position where they are forced to find more supplies overseas and then a lot of them also contact trade agencies like us.
And if you look at, for example, restaurants, which types of product that they are looking for, they will look for red meat, of course, beef and lamb, more selections of wine. They’re also looking for premium [artisan] water, for example, and then they need more of this onions, potatoes, French fries and so on, and then, for example, like cafes, they will need more juices or milk powders or other powdered stuff; bakery – they will need more of our, for example, processed fruit, IQF fruits and then pre-mixed powders and so on so those are just some of the examples that we have in the market.
Now, you have seen the opportunities that Indonesia can offer but it also comes with challenges so we want to prepare you for the challenges because this is a market reality so I’m not going to say you can come and then you can directly get access to our 260 million population. We have the biggest Muslim population in the world. Ninety percent of our population is Muslim so that makes halaal very important in our market. It is not mandatory now to have the halaal certificate but then if you have there is a plus point for you because it opens up also more opportunities for you in the market.
So halaal certificate that you have in New Zealand, it may not necessarily be the one that is approved in Indonesia, so that one you still need to check, and even if it’s approved, for example, in Malaysia, another major Muslim population in East Asia region, it still may not be the same as the one in Indonesia. But, the good news is again food service halaal certificate is still easily, more easier to enter compared to the retail.
Another thing again that poses a lot of challenges for New Zealand companies to enter Indonesian market is the regulations. So depending on the type of product that you have, for example, dairy, because it is so important for our country, it is tightly regulated. You will need a lot of registration before you can finally enter, not just your product that must be registered but also your factory must first be registered with the Ministry of Agriculture so that takes some time before you can finally enter.
Another thing also with regulations would be it is sometimes changing. Just last year we’ve had regulations coming out in November and December that have to be implemented already in January so I'll give two examples of this. The first one is about onions. So onions import, now it is limited to the size of 5 centimetres or more so below that size it can’t be imported because the government wants to protect the shallot, which is actually different from onions but, yeah, that’s the government logic. They just don’t want to have anything below 5 centimeters.
And then another thing that is also regulated just this year is apples, because apples we import a lot. Ninenty percent of our apples are imported so 10 percent is locally produced but they want to limit now the import that it can't be imported during the Indonesia harvest season which is August, September, October.
So this changing regulations how we deal with that; we can’t ask the government to change but sometimes like our MPI colleague in Indonesia also, Ministry of Primary Industry, they still talk with government to try and negotiate the terms. But for us, when we talk with New Zealand companies our advice would be to keep constant communications with your local partners so if you have a local distributor or importer you should always keep constant communication with them because they are the one that usually know the first when there is a change in regulations. Or, if you don’t have any partner yet then you can also talk with New Zealand Trade and Enterprise or Ministry of Primary Industries.
So just to sum up, I have shown you the potential of our market but also the ugly side of Indonesia which is challenging so it is not an easy market; it is a difficult market. We have our sets of challenges and so on but once you get in I can tell you it is a rewarding market because our population is still growing. We have more middle income classes. We are ready to spend and once you get in the market is already there for you.