Indonesian economy growth an opportunity for food and drinks manufacturers
Wage growth in Indonesia in the past few years, and the translation of economic growth into higher employment will present opportunities for well-placed consumer focused food and beverage companies in the years to come, according to market research organisation Business Monitor.
According to Business Monitor’s findings, published in a report called ‘Indonesia Food and Drink Report’, food consumption in local currency is expected to grow 7.9 per cent in 2013, with a five year forecast to 2017 of 9.3 per cent growth.
Alcoholic drinks volume sales are expected to grow 6 per cent in 2013 and 6.4 per cent in the five years to 2017; soft drinks 6 per cent in 2013 and 6.5 per cent in the five years to 2017. Mass grocery retail sales are expected to grow 13.2 per cent in 2013 and 13.7 per cent in five years to 13.7 per cent.
“The consumer story in Indonesia continues to be one of the brightest in the world from a long-term perspective,” Business Monitor said.
Livestock self-sufficiency to “remain precarious”
According to Business Monitor, Indonesia’s goal to maintain its “quasi self-sufficiency” in poultry and to reach it in beef “will prove to be quite delicate in the coming years, as livestock production will struggle to keep up with consumption growth”.
The Indonesian government also recently acknowledged that its beef self-sufficiency program would require supplementation by investment in an Indonesian-owned and operated beef farming operation in Australia. Indonesia plans to buy one million hectares of Australian farmland, which is likely to be in the Northern Territory, Queensland or Western Australia. The land will be used to breed cattle for export to Indonesian feedlots.
Business Monitor said it believed that Indonesia should be able to maintain a slightly positive but “precarious” poultry production balance.
“However, Indonesia will have little other choice but to ease its restriction on beef imports, as it records widening production deficits,” said the Company.
Case studies: beer and retail
Business Monitor said its Indonesian report also includes two case studies of food and beverage businesses Heineken and Carrefour, and their recent moves in the Indonesian market.
In October 2012, multinational beer manufacturer Heineken secured full control of Asia Pacific Breweries after shareholders Fraser and Neave voted in favour of Heineken’s SGD5.6 billion (US$4.5 billion) bid.
Heineken has had to pay a hefty premium for the business, at 17 times earnings before interest tax and amortisation. However, Heineken has stated that the transaction was “worth every dollar” because it will allow the Company “tremendous exposure” to some of Asia’s most promising beer markets.
Meanwhile, Business Monitor said that French-owned multination food retailer Carrefour is likely to maintain its position in the top three retailers in Asia, as a result of its position as market leader in Indonesia. In August 2012, Carrefour announced plans to exit Singapore, closing its two existing hypermarket outlets.
Business Monitor said the move came after Carrefour failed to sell the business in Singapore, and that it continued the Company’s process of removing itself from Asian markets in which it was unlikely to become one of the top three retailers.
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