Indonesian Food & Beverage,

Opportunity & Challenges

Adhi Lukman
Chairman of Indonesia Food and yndustry Association

Ringier Conferences
The 2nd Asia Food and Beverage Summit 2016
Jakarta, 7 8 November 2016
1

Food & Beverage is an attractive industry and has good

prospects in line with global market developments,
population growth, changing lifestyles and economic growth.
In Indonesia, the food industry contribute significantly to the
GDP, ie 33.26% of the GDP of non-oil industry (Q2-2016).
Therefore, the Food Industry is defined as a mainstay industry
by the Ministry of Industry. Nevertheless, the challenge is
enormous, ranging from the increasingly strict regulations
related to food safety, standards, competition as well as the
presence of NTM in global trade. Thus, the Food Industry
must be innovative, creative and always follow the
development. Not only products, but including the
development of regulations, standards, etc.

INDONESIAN ECONOMIC
& DEVELOPMENT OF FOOD INDUSTRY.

Economic growth and dynamic market in the

midst of globalization

Strong & Stable GDP Performance

GDP Growth Based on Expenditure

2016 GDP Growth Prospect (y/y)

5.3%
2016
National
Budget

4.9%

International
Monetary
Fund

5.1%
World Bank

5.2%

Asian
Development
Bank

A solid GDP growth supported by strong household

consumption, investment & gov. expenditure.
Drop in commodity prices affected commodity-based regions
(Sumatra, Kalimantan & Papua), other regions continue to
grow.
Spatial GDP Growth

The Investment Coordinating Board of the Republic of Indonesia

Shifting from Comodity-based Economy

to Manufacturing & Service Sectors

The 4th most populous

Country: +/- 258.705.000
populations
in
2016
(BPS, July 2016).

Top Ten Countries with the

Largest Moslem Population

GDP Contribution in Q2- 2016

& Per Capita (BPS)
Population distribution (BPS, 2015):
Java 56,9%, Sumatera 21,6%,
Sulawesi 7,3, Kalimantan 6,0%,
Bali /Nusa Tenggara 5,5%,
Maluku/Papua 2,7%
Average expenditure for food per capita
is 50.04%,in which 13.37% is contributed
by processed food (BPS, 2015)

YoY: Oct 2016 Inflation is 2.11%. However, Food Material &

Processed Food, Drink, Cigarette accounted the highest contribution

Combined Inflation Rate of 82 Cities (2014 2016)

Total inflation
Food Raw Material
Processed food, drink, cigarette
Housing, water, electricity, gas & fuel
Clothing
Health
Education, recreation, and sport
Transportation, communication & financial service

Source: BPS ( 2016)

Dec-15
3.35
4.93
6.42
3.34
3.43
5.32
3.97
(1.53)

Oct-16
2.11
3.44
4.64
1.55
3.54
3.28
2.66
(1.89)

Comparison Inflation Rate of Some Countries

Source: BPS ( 2016)

a. Industri pengolahan Ikan

dan Hasil Laut

Industry Policy (Ministry of Industry2016)

b. Industri Bahan Penyegar.

c. Industri Pengolahan
Minyak Nabati.
d. Industri Pengolahan
Buah-Buahan dan
Sayuran.
e. Industri Tepung.
f. Industri gula berbasis
tebu.
a.
b.
c.
d.
e.

Industri Oleofood.
Industri Oleokimia.
Industri Kemurgi.
Industri Pakan.
Industri Barang dari
Kayu.
f. Industri Pulp dan
Kertas.

Industri Prioritas berbasis Agro diarahkan pada hilirisasi Industri Hulu Agro, Industri
Pangan dan Industri Furnitur dan Barang Lainnya dari Kayu.

GDP Growth in 2012 2016 (YoY %)

F&B Growth 8.2 % and Contribution 33% to GDP Non Oil Industry Sector

INDICATOR
GDP Growth
GDP Growth Non Oil Industry
F&B Growth base in 2010
Contribution to GDP Non-Oil Industry
Sector

2012
6.03
6,98
10,33

2013
5.56
5,45
4,07

2014
5.02
5,61
9,49

2015**
4.79
5.04
7.54

Q2 2016***
5.18
4.74
8.20

29,52

29,01

29,74

30.86

33.26

**Temporary
*** very
temporary

Number of establishment
2014

Medium Large

Food

5,793

Beverages

344

Total
%

Small
& Micro

Total

1,125,425

1,131,218

43,293

43,637

6,137

1,168,718

1,174,855

0.52

99.48

100.00

Source : BPS , calculated by Kemenperin

A Global Investment Destination

Rising Direct Investments1

Large Investments Relative to Peers within the Region2

The Economist: Top 3 investment destination in Asia

(Jan 2016)3

JBIC: The most preferred place for business

investment after India (Dec 2015)4

The Investment Coordinating Board of the Republic of Indonesia

11

Investment Performance: F&B Investment Realization

INVESTMENT

2012

P
222

I
11,166.70

FDI
(USD million)

347

1,782.90

Total

569

DDI
(Rp. Billions)

2013
434

I
15,080.90

797

2,117.80

1,231

Source: BKPM

2014

P
I
493.0 19,596.39
1,054.0
1,547.0

3,139.60

2015

I
879 24,533.99

2016 (Sept)
P
I
736 24,005.20

886

1,303

1,514

1,521.18

2,039

1,620.88

Trade Balance of Semi processed & Processed Food in 2014-2016

In USD . Source: BPS/ Ministry of Trade

Indonesia World ASEAN - RCEP

Export

2014
6,353,427,439

Country

2015
6,002,001,194

Import

2016 Jul
3,347,172,108

2014

2015

7,304,062,157

2016 Jul

6,278,094,256

Export

Balanced

2014

3,604,893,645

2015

(950,634,718)

Import
2016 Jul

2014

(276,093,062)

2016 Jul
(257,721,537)

Balanced

2014

2015

2015

2016 Jul

2014

2015

MALAYSIA

813,305,570

785,566,583

407,077,452

392,852,447

331,810,997

PHILIPPINE

456,899,018

468,351,572

301,304,466

29,956,751

SINGAPORE

309,196,623

268,166,469

163,996,628

2016 Jul

215,999,551

420,453,123

453,755,586

191,077,901

25,143,725

17,428,742

426,942,267

443,207,847

283,875,724

215,983,590

186,202,973

101,998,853

93,213,033

81,963,496

61,997,775

VIETNAM

223,762,918

231,197,14

144,553,335

24,189,870

49,755,636

23,032,406

199,573,048

181,441,509

121,520,929

CAMBODIA

307,079,757

271,217,783

162,673,888

18,170

22,817

307,061,587

271,194,966

162,673,888

THAILAND
BRUNEI
DARUSSALAM

187,767,449

186,750,794

116,947,080

870,044,570

856,477,952

758,671,493

(682,277,121)

(669,727,158)

(641,724,413)

13,244,236

13,901,646

7,766,226

13,244,236

13,901,646

7,766,226

MYANMAR

10,596,204

14,715,019

12,544,544

2,463,692

3,879,744

1,679,091

8,132,512

10,835,275

10,865,453

123,094

152,381

95,905

50,617,818

741,902

165

(50,494,724)

(589,521)

95,740

LAOS

2,321,974,869

2,240,019,392

1,316,959,524

1,586,126,908

1,454,035,746

1,118,810,301

735,847,961

785,983,646

198,149,223

JAPAN

250,862,770

226,707,352

123,268,664

19,085,240

19,799,056

11,615,941

231,777,530

207,622,112

111,652,723

PR of CHINA

284,715,924

311,181,650

162,143,986

711,277,907

560,982,575

391,658,989

(426,561,983)

(249,800,925)

(229,515,003)

SOUTH KOREA

266,142,310

149,784,454

94,782,635

107,400,680

99,083,843

58,242,168

158,741,630

50,700,611

36,540,467

NEW ZEALAND

191,879,150

130,146,361

52,923,524

79,783,943

64,563,264

31,055,777

112,095,207

65,583,097

21,867,747

AUSTRALIA

156,792,692

171,938,542

78,879,340

534,128,428

511,516,419

238,674,278

(377,335,736)

(339,577,877)

(159,794,938)

INDIA

73,159,685

80,753,824

52,128,253

177,847,853

90,199,505

48,154,688

(104,688,168)

9,445,681

TOTAL

3,545,527,400

3,310,531,575

1,881,085,926

3,215,650,959

2,800,180,408

1,898,212,142

329,876,441

529,956,345

Sub TOTAL

3,973,565

14(17,126,216)

Trade Balance of Semi processed & Processed Food in 2014-2016

In USD . Source: BPS/ Ministry of Trade

Indonesia - TPP
Country

Export
2014

2015

SINGAPORE

309,196,623

268,166,469

BRUNEI
DARUSSALAM

13,244,236

NEW ZEALAND

Import
2014

2015

163,996,628

215,983,590

186,202,973

101,998,853

93,213,033

81,963,496

61,997,775

13,901,646

7,766,226

13,244,236

13,901,646

7,766,226

191,879,150

130,146,361

52,923,524

79,783,943

64,563,264

31,055,777

112,095,207

65,583,097

21,867,747

2,313,870

1,419,837

573,066

5,329,290

5,800,607

8,557,652

(3,015,420)

(4,380,770)

(7,984,586)

UNITED STATES

961,030,320

907,391,537

506,709,371

776,565,675

702,020,950

354,686,525

184,464,645

205,370,587

152,022,846

AUSTRALIA

156,792,692

171,938,542

78,879,340

534,128,428

511,516,419

238,674,278

(377,335,736)

(339,577,877)

(159,794,938)

1,298,884

1,225,880

409,187

40,611,457

16,246,453

9,021,841

(39,312,573)

(15,020,573)

(8,612,654)

VIETNAM

223,762,918

231,197,145

144,553,335

24,189,870

49,755,636

23,032,406

199,573,048

181,441,509

121,520,929

MALAYSIA

813,305,570

785,566,583

407,077,452

392,852,447

331,810,997

215,999,551

420,453,123

453,755,586

191,077,901

MEXICO

22,812,144

43,940,837

17,900,826

3,576,119

1,598,698

1,002,540

19,236,025

42,342,139

16,898,286

CANADA

33,980,315

29,835,003

22,683,636

50,441,403

25,209,561

7,506,009

(16,461,088)

4,625,442

15,177,627

JAPAN

250,862,770

226,707,352

123,268,664

19,085,240

19,799,056

207,622,112

231,777,530

207,622,112

(84,353,448)

TOTAL

2,980,479,492

2,811,437,192

1,526,741,255

2,142,547,462

1,835,882,102

1,199,157,544

837,932,030

897,626,394

327,583,711

CHILE

PERU

2016 Jul

Balanced
2016 Jul

2014

2015

2016 Jul

15

INDONESIA in the World Rank

Ease Of
Doing
Business
Index
2016

The Global
Competitiv
eness Index
2016
2017

# 91 of 190
(109 of 189)
Countries

41 of 138

#6 in
ASEAN

11/11/2016

(37 of 140)
Countries
#4 in
ASEAN

Logistic
Performanc
e Index
2016
63 0f 160
(53 of 160)
Countries
#4 in
ASEAN

Labor
Productivit
y per
worker GDP
2012

Global Food
Security
Index 2016

The Global
Innovation
Index 2015

71 of 113
Countries

97 of 141
Countries

#4 in
ASEAN

#5 in
ASEAN

#5 in
ASEAN
16

Opportunities & Challenges

in the Free Trade Region:
AEC 2015 & Others

POTENSIAL MARKET INTEGRATION?

Global Population

Worlds Largest Markets

European Union (EU)
United States

Population: 322 million

GDP: USD 17.42 trillion

514 million
USD 18.46 trillion

1,368 million
USD 10.35 trillion

Global Inward FDI 2015

[Source: FDI Markets of the Financial Times, 2016]

Africa 9%

4%Mid-East

17% 45%
Europe
Asia-Pacific
25%
America

China

Asia-Pacific

ASEAN
India
China
Others
Total

Inward FDI 2015

USD billion
Share

India

1,252 million
USD 2.05 trillion

107
35%
60
20%
52
17%
82
27%
The Investment
Coordinating
Board of the Republic of Indonesia
302
100%

Southeast Asian (ASEAN)

618 million
USD 2.16 trillion

20

Source: World Bank, CIA World Factbook, 2016.

Indonesia In the Heart of Global Market Concentration

ASEAN*

ASEAN
is GREATER
INDONESIA
Indonesia

Population (million)

618

255 (41%)

Labor force (million)

285

124 (44%)

GDP (Nominal, USD billion)

2,158

896 (42%)

GDP per capita (Nominal, USD)

3,911

3,416

Middle-income class (million)

190

64 (34%)

FDI inflow 2015 (USD billion)

107

37 (34%)

Jakarta

Southeast Asia

(10 ASEAN countries)

Global Market Concentration

Half of worlds population are in this area

*) Associaton of Southeast Asian Nations. Source: OECD, BCG & FT, ASEAN, IMF 2015.
Indonesia Investment Coordinating Board

Opportunity in AEC Era

The ASEAN Economic Community

(AEC) will open trade within the
region and provide growing export
opportunities
Indonesia is an attractive investment
base from which to supply to local
customers and neighboring countries
Despite fast growth in recent years,
the market's potential is far from
exhausted

ASEAN Middle Class 2012 2020

(AC Nielsen)

Competitiveness in Manufacture
(MacKinsey, 2014)

Accenture Strategy (2015): 100 million New Consumers to

win & a $ 770 billion reason to move now

Growth of the ASEAN Consumers Goods Market (billions US)

ASEANs Challenges: Fragmentation, Rapid Evolution and

Stiff Competition (Accenture, 2015)

Analysing The 2016 Asia Pacific Food And Beverage Industry

http://www.apfoodonline.com/index.php/bf/item/793-analysing-the-2016-asia-pacific-food-industry

The Asia Pacific F&B industry is expected to achieve a turnover of US$3.23 trillion in 2016 after
growing to almost the same level as the rest of the world combined.
Projected y-on-y growth of 11% in 2016, the industry will outpace the second and third largest
regionsWestern Europe and North Americawhich will see relatively modest expansion rates of 2%
& 4% respectively.
China, Japan, and Indonesia are set to rank as the leading F&B producers in Asia Pacific in 2016,
together accounting for just over three quarters of total turnover.
Although the countries in Asia Pacific are highly diverse in terms of income levels, demographics, and
dietary preferences, the industry is nevertheless shaped by several common trends.

Analysing The 2016 Asia Pacific Food And Beverage Industry

http://www.apfoodonline.com/index.php/bf/item/793-analysing-the-2016-asia-pacific-food-industry

Asia Pacific beverage turnover will account for 11 % of the joint F&B industry in 2016 after
reaching US$365 billion. In value terms, alcoholic and non-alcoholic drinks will account for
nearly equal shares of the industry.

2015 Change Readiness Index by KPMG International

2015 Change Readiness Index by KPMG International

Overall
Index
1
24
33
34

43

50
97
98
115

Country
Singapore
Malaysia
Philippines
Thailand

Enterprise
Capability
1
12
30
25

Cambodia
Myanmar
Vietnam
Lao PDR

37
34
83
89
110

Indonesia

High Income
Upper Middle Income
Lower Middle Income
Low Income

Government
People & Civil
Capability
Society Capability
1
11
25
34
24
39
38
43
55
51
97
107
112

45
69
100
95
112

Stimulate Digital Literacy

Digital in Indonesia

Growth

Active internet users

88.1

+15%

Active Socmed users

79.1

+10%

Mobile connections

326.3

+2%

5.9

+28%

18,000

+40%

Online shoppers
Online sales (USD million)
Source: wearesocial.com, January 2016

Source : intersticia.com.au

(in Million)

Online Shopping

The Challenges:
Regulation
Control and Monitoring
Consumer Protection

Consumer value driven

Focus on Food Safety 2016

Source : Institute of Food Technologist,
Food Technology Magazine

Researchers, food manufacturers, regulatory agencies, and suppliers will continue to focus
attention on pathogens,

developing new and improved methods of

analysis, instruments, detection supplies, and specific applications. Efforts will also continue

on improving traceability of ingredients and products and harmonizing standards internationally.

Food companies will be very involved in meeting the requirements of the Food and Drug
Administration's final regulations implementing the Food Safety Modernization Act.

The New International Trade Order

Trade is no longer dominated by products, but in tasks and components.

According to UNCTAD, 60% of global trade is in intermediate goods and services.

Share of Foreign Value-Added in global exports is 28% (22% for food products)

Why are Global Value Chains (GVC) important?

Industrial organisation (and economic opportunities for participation) is
increasingly shaped by the actor practices of globally coordinated lead firms
There is a positive correlation between participation in GVCs and growth
rates of GDP per capita. GVCs have a direct economic impact on value
added, jobs and income.
They can also be an important avenue for developing countries to build
productive capacity, including through technology dissemination and skill
building, thus opening up opportunities for longer-term industrial
upgrading.

(UNCTAD 2013 World Investment Report on Global Value Chains)

What is Indonesias involvement in GVCs?

GVC Participation Rate of the Top
25 Developing Economy Exporters
, 2010

Indonesia is not currently well

integrated into GVCs compare to
other ASEAN Countries

Source: UNCTAD-EORA GVC Database

Raw Material:

Availability, continuity and

sustainability
Quality, Time Delivery,
Price competitiveness
Planning upstream
downstream
Regulations and
government policies must
support sustainable raw
materials and business
friendly
Innovation is a must

Added Value Products:

Market more open &

difficult to stop Global
Sourcing
Competition is tougher
Food Products must be
innovative with new
products to meet
consumers needs and
lifestyle
Anticipation of rapid
changes in the global
market

Indonesia needs to connect

CSIRO Indonesia | Archie Slamet

CSIRO Indonesia | Archie Slamet

Innovation is a Must for Sustainable Development

Deregulation Policy
What Government Support

Economic Package I

Government Economic Policy Package Progress

: Deregulating 134 regulation to improve national industry competitiveness

Economic Package II

: 3 Hours Investment License Service, Investment License as a Construction Permit, and Faster Process on Issuance
of Tax Allowance and Tax Holiday

Economic Package III

: Price Reduction of Fuel, Gas, and Electricity, Simplification on Land Acquisition Licensing for Investment, and More
Open Criteria for Recipient of Business Credit (KUR)

Economic Package IV

: Minimum Wage Adjustment

Economic Package V

: Income Tax Tariff (PPh) Reduction and Double-tax removal for Infrastructure & Real Estate Investment Trust
(REITs)

Economic Package VI

: Incentives for Investment in Indonesia's Special Economic Zones

Economic Package VII

: Tax Allowance for Labor-Intensive Industries, Income Tax Reduction for Employees in Labor-Intensive Industries,
Leasehold Certificates to Street Vendors Operating in 34 State-Owned Designated Areas

Economic Package VIII

: Scrapping of Import Taxes on 21 Categories of Airplane Spare Parts, Fiscal and Non-fiscal Incentives for the
Development of Oil Refineries, and Streamline and Harmonize Land-Acquisition for Infrastructure Development
Across the Country Through the New "One-Map Policy"

Economic Package IX

: Accelerating Power Plant Infrastructure Development, Meat Price Stabilization and Improvement of Logistics Cost

Economic Package X

: Greater Opportunity for Foreign Investors to Invest in Indonesia Through a Revision of the Negative Investment
List

Economic Package XI

: Lower tax rate on property purchased by local real estate investment trusts, the harmonization of customs checks
across the nation's ports, government subsidies for loans taken up Indonesia's export-oriented small and medium
enterprises, and the drawing of a roadmap for the nation's pharmaceutical industry

Economic Package XII

: Enhancing the ease of doing business for the small and mid-sized companies in Indonesia in a bid to attract more
investment through cutting a number of procedures and permits, as well as costs, required for the development
of a business

Economic Package XIII

: Reduction of bureaucracy to boost the construction of low-cost housing for the poorer segments of Indonesian
society

Logistic Efficiency

Pusat Logistik Berikat

1.
2.

PMK 272/PMK.04/2015 : PLB

Inpres 13/2015 : Kebijakan Fasilitas Perdagangan Bebas di Dalam Negeri (Inland Free
Trade Arrangement)

UU 11/2016 : Tax Amnesty

What is the impact to F&B Industry?

Exchange rate
Economic growth job creation - buying power

Our Concern related Food Industry

1. UU Jaminan Produk Halal 33/2014
2. PPN for agriculture product
3. PP EPR (Extended Producer Responsibility) for plastic packaging
4. Planning of excise duty for plastic packaging
5. BMAD PET
6. Ensuring the supply of raw material (Cocoa, Coconut, Sugar, Salt, etc);
7. RIPH, Country recognition and Lab registered
8. Others regulation related Standard (SNI) , Food Safety that getting more stringent
9. Tariff and Tariff discrimination in the Country destination
10.NTM in the Country destination (MRA?)
11.Negative campaign (Palm oil, environment, etc)
12.Government policies and regulation should support the national interest for the
competitiveness and the interests of consumers (food safety, availability, etc.)

Competitiveness

Challenges
Standard
&
Food
Safety
Resources
&
Innovation

Regulation
Govt Policy
Competitiveness

Ethnic &
Habits

Marketing
effort blended
in distribution

What industry need? Creating a Competitive Product

Natural
Technology
Innovation
Consumers
preference
Marketing
purpose

Resource
s

ADDED
VALUE
PRODUCT,
SAFE , Halal

Gov.
Policy &
other
supportin
g

COMPETITIVE

CONSUMERS
11/11/2016

51

Collaboration A-B-G + C

A
A = ACADEMIC
B = BUSINESS
G = GOVERNMENT
C = Smart CONSUMERS

KADIN
ASOSIASI
11/11/2016

COMPETITIVENESS

G
C

52

Key Success Factor to Strengthen F&B Industry

Synchronize government policy, regulation and coordination, both in central and local
government to improve competitiveness in the global market
Improve infrastructure and logistic (supply chain). East West
Strengthening downstream industry and added value product, improve
competitiveness (industrialization)
Fiscal policy to support industrial development (interest rate, access, etc)
Build a smart consumers and culture to love Indonesian product
Encourage food safety responsibilities, especially for imported products. By regulation
if needed
Law enforcement to fight illegal product
Support SMEs

Thank you

11/11/2016

54