Indonesia: $1 trillion economy and growing fast - Huge Opportunities...
Report from Catherine Beard, Executive Director of ExportNZ and a member of the recent trade mission led by PM John Key and Trade Minister Groser.
The recent business trade mission to Indonesia was very successful and a real eye-opener as to the opportunities for kiwi exporters. The trade mission focussed on the obvious areas of synergy – which are:
- Geothermal – they have the biggest untapped geothermal resource in the world and declining oil output and we have the engineering expertise to help develop it.
- Education – we want more of their students coming here – they are particularly keen on training people to PhD level.
- Tourism – a win with an announcement by Garuda and Auckland Airport that they will fly direct to Auckland from Jakarta.
- Aviation – we have world-class air traffic control training, commercial pilot training, engineering related to aviation skills (baggage handling and logistics management) and they are planning on building 20 new airports in the next 50 years.
- Food & beverage – with around 240 million people, an average of 6% growth per annum, a middle class the size of Australia and population growth the size of New Zealand every year, clearly there are a lot of mouths to feed and there is huge scope for all the high-quality meat, dairy products and fresh fruit and vegetables that New Zealand grows so well. Fonterra announced a new investment in milk processing and packaging facilities while on the trade mission. For an idea of the potential for increased protein consumption per head of population check out this slide of Indonesian consumption per head compared to other countries.
New Zealand is not the only country that has Indonesia on its radar. Indonesia has had a raft of world leaders from developed and developing countries beating a path to its door (this year UK Prime Minister David Cameron has visited amongst others). It seems they host a trade mission every few weeks.
By 2030 it is predicted that Asia will supplant the West as the global engine of growth, and Indonesia is our closest Asian neighbour. Only 22% of their economy depends on exports, so they were relatively sheltered from the global financial crisis by their large domestic demand.
Key points from the Neilson research:
- FMCG trends were 12% growth in 2011.
- 3rd largest middle class in the world (middle class defined as US$1-200 a month and half the population of Jakarta fall into this category).
- Fresh food is number one consumer concern and transport is second (roads are very congested.)
- In the “middle class” there has been over 17% increase in spending on food; 60% growth in ice cream consumption (on the back of lots of new innovative products and promotion), frozen meat and fish is up 18%, biscuits up 4.8%.
- Innovation is king – 88% say they like trying new things and launches of new products drive growth e.g. new brands of instant coffee, powdered milk, ice cream etc.
- Value for money is important, but also 58% say convenience is more important than price.
- They are big users of social media and mobile phones – with 78% mobile phone penetration.
- Key themes were innovation, value for money and convenience.
See the full Neilson report here.
I focussed on the food and beverage sector while in Jakarta. We had a look at the large shopping complexes and the top end supermarkets in a couple of these complexes. These complexes cater to the very rich in Indonesia, and they are very brand focussed with all the big US and European brands in the malls (Yves St Laurent, Gucci, Prada, etc – every top brand you have ever heard of and plenty that I had never heard of...).
In the top end food markets we visited we found:
- Potatoes selling for $US12/kilo
- Cherries selling for US$55/kilo
- Onions bagged up and selling two in a bag
- Apples selling for NZ 60c each
- Australian and US beef appears to be selling at a premium (NZ$7-8/100g) over NZ beef (NZ$3.50/100g)
- Zespri Gold selling for NZ1.89/100g
- Frozen desserts selling for NZ$12-19.00
- NZ olive, avocado, apricot and peanut oil selling for between NZ$10-70.00 a bottle
- NZ Manuka honey – displayed behind a staffed desk due to theft of the product off shelves.
Key contacts and tips
The two upmarket food supermarkets we visited were:
- Sogo Food Hall, Foodhall Plaza, Indonesia – hosted by Novilia Tjandra, Buyer for Fruits and Vegetables. 10 stores.
- 99 Ranch Market – 8 stores.
For introductions to the buyers – contact Hary Kartono, NZTE’s food and beverage business development manager. firstname.lastname@example.org
Our host at the Ranch Market was Kafi Kurnia from the Indonesian Association of Exporters and Importers (ASEIBSSINDO) (I have two email addresses for Kafi: email@example.com and firstname.lastname@example.org).
Kafi Kurnia gave us a very good presentation on the fresh fruit and vegetable import opportunities and a good overview of the Indonesian economy generally – presentation here...
- Top end of the market is not price sensitive – focus on quality.
- His organisation members (fruit and vegetable importers) work to promote their customers' products, working with the Indonesian Master Chef, training supermarket staff about your products (funded by the exporter) in store cooking demo’s etc.
- There are regulatory challenges to navigate and this organisation is doing its best at its end to lobby for easier access for fresh fruit and vegetables. With regard to the closure of the Jakarta Port to fresh horticultural products they are hopeful of a solution soon. The Director for Indonesian Quality in the Ministry of Agriculture, Mrs Banun visited New Zealand from 27-29 April to look at our food safety systems, and it is hoped New Zealand will get country recognition for our SPS practises and we will sign an MOU. This could mean that New Zealand produce will just need a certificate that shows security clearance has been achieved and the Indonesian Association of Exporters and Importers (ASEIBSSINDO) is pressing for a certificate to be able to be kept on file to cut down on paperwork etc.
- The Horticulture Export Authority, PipfruitNZ and ExportNZ think it would be good to get some of the ASEIBSSINDO members to come to NZ for a tour of our fresh produce. Some of them have been to NZ already as guests of Zespri, but it would be good to have an organised tour for them to showcase our produce.
- It was pointed out that the best food supplies should also go to Bali for the food service opportunity.
- They liked the Envy apples – Indonesians like sweet flavours.
- Don’t be shy on price and under-price produce – price equates to value...
- They think lamb is important goat. Indonesians think goat meat has aphrodisiac properties and chefs like to use lamb because it is tender and does not smell, so some restaurants sell lamb as goat.
- Chile is more aggressive in its promotion of Chilean horticulture produce than NZ. Click here to learn more.
Those wanting to do business in Indonesia will have to deal with infrastructure frustrations (logistics are difficult with infrastructure development lagging behind demand). In addition the regulatory style of the government can be a bit random and throw out challenges. Corruption is a business risk as well that has to be navigated. The answer seems to be to find good partners to work with, seek good legal and accounting advice and develop good working relationships.
BECA has been in Indonesia since the 1970’s and have never had a court case (they have avoided any dispute getting this far through carefully managing relationships and solving any problems before they become big problems). They also have four people who work full time in Indonesia on regulatory issues. Having said that, they are running some very large projects.
The ex-pats we met in Jakarta have obviously fallen in love with Indonesia which is why they have stayed there. The opportunities are there; but like any market it takes time and investment to reap the rewards. For advice on good legal and regulatory assistance, contact NZTE staff based in Indonesia. Email Fiona Acheson – NZTE Trade Commissioner Malaysia, Indonesia and Brunei at email@example.com.
Check out some of the New Zealand companies exhibiting at the FoodAsia 2012 expo – view the photos here. Go Kiwi’s!
I have to say that the Barkers stand was attracting lots of admiring people due to the amazing display of cakes they had produced. Beautifully presented.