Investment in Indonesia's Food & Beverage Industry Grows In Coming Years
Food & Beverages
Indonesia posted a 5.51 percent of industrial growth for major and middle manufacturing groups in the third quarter (Q3) this year, higher than 5.2 percent national economic growth estimated throughout the quarter.
The Q3 industry growth figure was higher than 3.89 percent in the previous quarter and 4.87 percent in the corresponding period last year.Industry Minister Airlangga Hartarto said that food and beverage manufacturing contributed significantly to the growth at 9.24 and 3.4 percent respectively, collectively accounted for 27.13 percent to the growth figure throughout the period.Looking forward to further expanding national industry sector, the minister expected to see more investments in the sector and acceleration of Free Trade Agreement (FTA) negotiation with European countries.
Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (GAPMMI) is optimistic that investment in Indonesia's processed food and beverage industry will soar up as expected for years to come. In fact, Lukman detects a positive development, namely companies are increasingly focused on the construction of factories that produce raw materials. This development would reduce Indonesia's reliance on imports of raw materials for processed food and beverages.
According to information from the Indonesia Investment Coordinating Board (BKPM), two companies from South Korea are interested to build two factories in Indonesia, each requiring an investment estimated at USD $300 million. However, few further details were given about these companies. They are currently still studying the most strategic location. Most likely they will choose to build the facilities in either West or East Java. Java is the most populous island of Indonesia and therefore forms a large market for food and beverage products.
Revenue in the "Food & Beverages" segment amounts to US$208m in 2017.
Revenue is expected to show an annual growth rate (CAGR 2017-2022) of 15.3 % resulting in a market volume of US$423m in 2022.
User penetration is at 4.4 % in 2017 and is expected to hit 7.0 % in 2022.
The average revenue per user (ARPU) currently amounts to US$18.04.
From a global comparison perspective it is shown that most revenue is generated in China (US$15,063m in 2017).
Indonesia, a country that contains over 255 million people, is a lucrative market for food and beverage producers. Due to the huge population there exists a big market. Moreover, given growing per capital GDP and the expanding middle class segment, people are consuming more and more (and becoming more picky about products, seeking higher-quality products). Although Indonesia's purchasing power has weakened in Indonesia over the past couple years amid the country's slowing economic growth trend, the middle and long term pictures remain positive. Generally, investment in Indonesia's food and beverage industry is centered on Java, Indonesia's most populous island (and which has relatively good infrastructure compared to the other Indonesian islands).
Food and beverages industry has been growing in recent years. The rising personal income, as well as increase in spending on food and drink of growing middle class, has been the main contributors to its development. Along with very positive prognosis of the future growth (doubled middle class till 2020), Indonesia expects more companies will enter the food and beverage market in Indonesia.