Required Report - Public distribution

**Date:** 3/4/2007

**GAIN Report Number:** ID7008

ID7008

**Indonesia**

**Food Processing Ingredients Sector**

**Food Processing Update**

**2007**

**Approved by:**

![](media/image1.wmf)Fred Kessel

U.S. Embassy, Jakarta

**Prepared by:**

Fahwani Y. Rangkuti and Elisa Wagner

**Report Highlights:**

Significant growth potential exists for U.S. food ingredients with the
growth in the Indonesian food-processing sector. The increase in
consumption of processed foods can be attributed to an economy that is
developing and a population that is becoming more urban, the
introduction of new food products, aggressive promotional activities,
growth of modern retail outlets, and growing health consciousness. Due
to the large number of Indonesians with exposure to developed country
diets and healthy food interest, there are a growing number of more
sophisticated consumers demanding food fortified with vitamins and
minerals.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Jakarta \[ID1\]

\[ID\]

# SECTION I. MARKET SUMMARY

Indonesian's population of 222 million is relatively young, with half of
the population between 15-44 years old. Approximately 20 percent of the
Indonesian population is still living below the poverty line and the
majority of the population is low income. In 2005, over half of
consumer's incomes were devoted to food expenditures. The majority of
people still prefer fresh foodstuffs, which are readily available in
their neighborhood at affordable prices. Consumption of processed food
in Indonesia is relatively low, with Indonesians spending 11 percent of
their income on processed food and beverages in 2005. However because of
the large population size, the total value of sales is \$8.7 billion.
Trends in snacking and health awareness along with producers who are
responsive to the demands of the market place, suggest the food
processing industry will continue to grow.

In 2005, the output of the Indonesian food processing industry was
\$23.9 billion, up 13 percent from 2004. It is comprised of about 4,700
large and medium-scale industries ranging from family businesses to
multinational companies, 77,200 small-scale businesses, and 834,000
home-based producers. Large and medium-scale industries, which include
family owned businesses to large multinational companies, account for 85
percent of the food industry output and about one fourth of the 3
million employees in the industry.

The continued expansion of modern retail outlets, especially
hypermarkets and mini markets, provides consumers with better access to
a wide range of packaged food products at affordable prices. In 2005,
packaged food retail sales showed increases ranging from 3 to 20 percent
in volume terms compared with 2004 and growth is expected to continue,
ranging from 0.5 to 18 percent each year until 2010. The result is a
growing food processing industry.

In 2005, \$2.2 billion of food and beverage ingredients were imported.
Of that amount 62 percent were major inputs, such as wheat, sugar,
dairy, and soybeans. The United States supplied 16 percent of the total
agricultural, fish, and seafood product imports. Australia is the
largest supplier, accounting for 20 percent. Other suppliers do not
account for more than 10 percent of imports individually.

Wheat is imported by four mills that produce wheat flour to be consumed
domestically. In 2005, the consumption of wheat flour in Indonesia was
4.6 million tons, with over 90 percent being from domestic mills. That
same year, 400,000 MT of specialty and lower-quality flours were
imported. The local flour mills produce primarily three quality grades
of flour to supply the bakery and noodle industry. Noodle manufacturers,
which produce wet, dry, and instant noodles, represent the largest user
for wheat flour at 60 percent, while the bakery and snack food industry
use 30 percent and households use about 10 percent. Larger processors
consume 30 percent of the wheat flour in Indonesia.

Food and beverage producers use imported and domestic sugar, consuming
1.1 million MT each year. Raw sugar must be imported by refineries and
the finished product must be used by food and beverage producers. The
Indonesian government requires importers of processed, or white, sugar
to be registered for import and the sugar is used for domestic
consumption. Refined sugar can only be imported by food and beverage
manufacturers who will be using the sugar in their formulations. Of the
total 3.9 million MT of sugar consumed in Indonesia, 45 percent is
imported. The food and beverage industry reports a 120 percent increase
in the use of other sweeteners including lactose, maltose, glucose, and
fructose as a substitute for more expensive refined sugar. In 2005,
imports of these substitute sweeteners totaled 67,000 tons.

Use of dairy products as an ingredient is becoming increasingly common,
particularly milk powder. Use of whey protein concentrate is also
increasing. Lately whey is very popular as a source for mineral and
vitamin fortification in cookies and confectionary and bakery products
because whey decreases the fat content and increases protein content.

Soybean-based products, such as tofu, tempe, and soy milk as a
multi-functional health drink packed in a transparent plastic bags are
produced in homes and sold in the small-scale neighborhood retailers, by
street vendors, or door-to-door. Beef heart is also popular among these
sectors for use in making meatballs.

The challenges Indonesian manufacturers continue to face are high
electricity and fuel prices, increasing labor costs, lack of
infrastructure, and cheaper finished products from neighboring ASEAN
countries and China.

Figure 1. Package and Branded Processed Food Retail Sales (IDR billion)
in 2005

![](media/image2.wmf)

Euromonitor

Figure 2. Non-Alcoholic Beverages Sales in Traditional Channel (IDR
billion) in 2005

![](media/image3.wmf)

Euromonitor

The following table summarizes the advantages and challenges for U.S.
products in the Indonesian food-processing sector.

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  Market size - Indonesia has a       Import regulations are often
  population of around 222 million    complex and non-transparent, thus
  people                              requiring a close business
                                      relationship with a local agent.

  The industry is constantly creating Quantities of ingredients for new
  new products based on consumer      product and market trials are
  preference trends. These new        usually not enough to fulfill the
  products often require ingredients  minimum amount required by U.S.
  unavailable domestically            suppliers

  US products are considered high     Competitive products are often less
  quality                             expensive, and are used
                                      equivalently to US products

  Singapore is close, making it       Food ingredients from the region
  easier for importers to ship the    enter Indonesia at lower prices due
  smaller lots required by the        to the ASEAN Free Trade Area, while
  Indonesian market with shipment     food ingredients from the U.S. have
  destined for other ASEAN Free Trade higher shipping cost.
  Area countries.                     

  During 2006 to 2009, applied duties Weak purchasing power of the
  on most food and agricultural       majority of the population. Muslims
  products are 5 percent, with a 10   accounting for 88% of the
  percent applied duty on certain     population require halal-certified
  processed foods                     products
  ----------------------------------- -----------------------------------

**SECTION II: ROAD MAP FOR MARKET ENTRY**

**A. ENTRY STRATEGY**

The best way to overcome the hurdles associated with exporting to
Indonesia is to select an agent. An agent should be chosen based on his
ability to assure the widest distribution of products and the ability to
undertake the marketing efforts necessary to create awareness for
products among consumers. Price and quality are important to Indonesian
agents but personal interaction with potential business partners is also
important. A face-to-face meeting will likely be needed, though younger
importers maybe more comfortable with establishing relationships via
electronic communication.

Market research for product testing, price comparison, and adjusting the
product for local tastes is important. Agents and distributors can help
with market research and their assistance has proved to be an effective
strategy in expanding sales since they understand the regulation system
and can bridge cultural differences.

According to local importers, while U.S. prices may be competitive,
ingredients from European countries are the most popular. European
suppliers are reportedly the most

responsive to inquiries and more willing to tailor ingredients to meet
specific tastes and needs.

Participating in local food shows to introduce your products to a large
audience and to meet with potential importers is strongly suggested.

######## B. MARKET STRUCTURE

Food ingredients can be imported by agents, distributors, or food
manufacturers. The diagram below provide an overview of the common
distribution channels.

Food processors commonly import primary inputs, such as frozen meat or
beef offal, wheat, and skim milk powder. Food processors generally
purchase essential complementary inputs like flavorings or preservatives
from a local agent or distributor because they are used in smaller
quantities and often have limited shelf life.

Food processors who depend on a consistent supply of a product may have
an exclusive sales agreement with a local agent. Some processors may
choose to act as an importer if they find a better-priced alternative,
such as an exporter who uses Singapore as a distribution point.

Many multinational food processors operating in Indonesia must follow
global product specifications. These companies have central purchasing
offices, often in the United States or in Europe.

Larger, modern retail companies usually have an exclusive agreement with
the processors to supply the food product that they need. Processors
will reach an agreement with the

retail company to supply specified quantities at agreed upon intervals
and prices. In return, the retailer agrees to display products
attractively and at agreed upon quantities. On the other hand, smaller
independent retail stores and so-called traditional markets get products
mostly from distributors. These traditional markets include wet markets,
warungs, which are small-scale neighborhood retailers, and street-side
kiosks.

Although cold chain facilities are generally available in urban areas,
many food items are sold without any temperature control in the more
traditional distribution channels. Limited capital, low awareness of the
benefits of refrigeration, and the practice of buying and consuming
meals on the spot are still very common and limit the development of a
cold chain network.

**C. COMPANY PROFILES**

+-----------------+-------------+--------+--------------+-------------+
| **Company**     | **Sales     | **E    | **Production | **          |
|                 | (\$         | nd-Use | Location**   | Procurement |
| **(Product      | Mil/Year)** | Chan   |              | Channels**  |
| Types)**        |             | nels** |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Indofood Sukses | \$1,962.5   | Retail | 29 plants    | Direct;     |
| Tbk, PT(dry     | (2005)      |        | through out  | Importers   |
| goods,          |             |        | Indonesia,   |             |
| condiments,     |             |        | mostly on    |             |
| beverages,      |             |        | Java         |             |
| snack foods,    |             |        |              |             |
| oilseed         |             |        |              |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Heinz ABC       | NA          | Retail | Jakarta      | Direct;     |
| Indonesia, PT   |             |        |              | Importers   |
| (dry goods and  |             |        | (Joint       |             |
| condiments,     |             |        | Venture)     |             |
| beverages, fish |             |        |              |             |
| and seafood     |             |        |              |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Unilever        | \$1,026     | R      | Cikarang,    | Direct;     |
| Indonesia, Tbk  | (2005)      | etail; | West Java;   | Importers   |
| (oil seed       |             | HRI    | Surabaya,    |             |
| products, dry   |             |        | East Java    |             |
| goods,          |             |        |              |             |
| condiments,     |             |        |              |             |
| snack foods,    |             |        |              |             |
| ice cream,      |             |        |              |             |
| beverages)      |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Mayora Indah    | NA          | Retail | Tangerang,   | Importers;  |
| Tbk (beverages, |             |        | West Java    | D           |
| snack foods,    |             |        |              | istributors |
| candy           |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Garudafood      | NA          | Retail | Central      | Importers   |
| group (snack    |             |        | Java;        |             |
| foods,          |             |        | Banten;      |             |
| beverages)      |             |        | Lampung      |             |
+-----------------+-------------+--------+--------------+-------------+
| Jakarana Tama,  | NA          | Retail | Sukabumi,    | Direct;     |
| PT (dry goods,  |             |        | Central      | Importers   |
| condiments,     |             |        | Java,        |             |
| fish and        |             |        |              |             |
| seafood         |             |        |              |             |
| products,       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Siantar Top     | NA          | Retail | Sidoarjo,    | Importers   |
| Tbk, PT (snack  |             |        | East Java    |             |
| foods, candy)   |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Sayap Mas       | NA          | Retail | Sidoarjo,    | Direct;     |
| Utama, PT (dry  |             |        | East Java    | Importers   |
| goods,          |             |        |              |             |
| condiments,     |             |        |              |             |
| beverages)      |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Lassale Food    | NA          | Retail | Bogor, West  | Importers;  |
| Indonesia, PT   |             |        | Java         | D           |
| (meat and       |             |        |              | istributors |
| poultry         |             |        |              |             |
| products,       |             |        |              |             |
| beverages,      |             |        |              |             |
| condiments)     |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Charoen         | NA          | Retail | Banten       | Importers;  |
| Pokphand        |             |        |              | D           |
| Indonesia, PT   |             |        |              | istributors |
| (poultry meat   |             |        |              |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Supra Sumber    | NA          | Retail | Jakarta      | Importers;  |
| Cipta, PT       |             |        |              | D           |
| (poultry meat   |             |        |              | istributors |
| and seafood     |             |        |              |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Belfoods        | NA          | Retail | Jakarta      | Importers;  |
| Indonesia, PT   |             |        |              | D           |
| (poultry meat   |             |        |              | istributors |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Sierad Produce  | NA          | Retail | Bogor, West  | Importers;  |
| Tbk, PT         |             |        | Java         | D           |
| (poultry meat   |             |        |              | istributors |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Frozen Food     | NA          | Retail | Bogor, West  | Importers;  |
| Pahala, PT      |             |        | Java         | D           |
| (poultry meat   |             |        |              | istributors |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Madusari        | NA          | Retail | Beaksi, West | Importers;  |
| Nusaperdana, PT |             |        | Java         | D           |
| (meat and       |             |        |              | istributors |
| poultry         |             |        |              |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Eloda Mitra, PT | NA          | Retail | Sidoarjo,    | Importers;  |
| (meat and       |             |        | East Java    | D           |
| poultry         |             |        |              | istributors |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Maya Muncar, PT | NA          | Retail | Banyuwangi,  | Importers;  |
| (fish and       |             |        | East Java    | D           |
| seafood         |             |        |              | istributors |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Canning Foods   | NA          | Retail | Denpasar,    | Importers;  |
| Indonesia, PT   |             |        | Bali         | D           |
| (fish and       |             |        |              | istributors |
| seafood         |             |        |              |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Surya Jaya      | NA          | Retail | Probolinggo, | Importers;  |
| Abadi Perkasa,  |             |        | East Java    | D           |
| PT (fish and    |             |        |              | istributors |
| seafood         |             |        |              |             |
| products,       |             |        |              |             |
| prepared        |             |        |              |             |
| vegetables)     |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Nestle          | NA          | Retail | Pasuruan,    | Direct      |
| Indonesia, PT   |             |        | East Java    |             |
| (diary          |             |        |              |             |
| products,       |             |        |              |             |
| cookies,        |             |        |              |             |
| breakfast       |             |        |              |             |
| cereals,        |             |        |              |             |
| chocolate,      |             |        |              |             |
| candy)          |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Indomilk, PT    | NA          | Retail | Jakarta;     | Direct;     |
| (diary          |             |        | Sukabumi,    | Importers   |
| products)       |             |        | West Java    |             |
+-----------------+-------------+--------+--------------+-------------+
| Friesche Vlag   | NA          | Retail | Jakarta,     | Direct      |
| Indonesia, PT   |             |        | Pasuruan     |             |
| (diary          |             |        | East Java    |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Sari Husada     | \$127       | Retail | Yogyakarta,  | Direct      |
| Tbk, PT (diary  |             |        | Klaten,      |             |
| products, baby  | \(2005\)    |        | Central Java |             |
| foods)          |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Ultrajaya Milk  | \$86        | Retail | Bandung,     | Direct;     |
| Industry &      |             |        | West Java    | Importers   |
| Trading Co Tbk, | \(2005\)    |        |              |             |
| PT (diary       |             |        |              |             |
| products,       |             |        |              |             |
| beverages)      |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Konimex         | NA          | Retail | Solo,        | Importers;  |
| Pharmaceutical  |             |        | Central Java | D           |
| Laboratories PT |             |        |              | istributors |
| (candy, snack   |             |        |              |             |
| foods)          |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Khong Guan      | NA          | Retail | Bogor, West  | Importers;  |
| Indonesia, PT   |             |        | Java         | D           |
| (cookies)       |             |        |              | istributors |
+-----------------+-------------+--------+--------------+-------------+
| Arnott's        | NA          | Retail | Bekasi, West | Importers;  |
| Indonesia, PT   |             |        | Java         | D           |
| (cookies)       |             |        |              | istributors |
+-----------------+-------------+--------+--------------+-------------+
| Danone Biscuits | NA          | Retail | Bekasi, West | Importers;  |
| Indonesia, PT   |             |        | Java         | D           |
| (cookies).      |             |        |              | istributors |
+-----------------+-------------+--------+--------------+-------------+
| Simba Indosnack | NA          | Retail | Bogor, West  | Importers;  |
| Makmur, PT      |             |        | Java         | D           |
| (breakfast      |             |        |              | istributors |
| cereals)        |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Nippon Indosari | NA          | Retail | Cikarang,    | Importers;  |
| Corp PT (Baked  |             |        | West Java;   | D           |
| goods)          |             |        | Pasuruan,    | istributors |
|                 |             |        | East Java    |             |
|                 |             |        | (2)          |             |
+-----------------+-------------+--------+--------------+-------------+
| Chandrabuana    | NA          | Retail | 118          | Importers;  |
| Surya Semesta   |             |        | franchises,  | D           |
| PT (baked       |             |        | outlets, &   | istributors |
| goods)          |             |        | facilities   |             |
|                 |             |        | in Jakarta,  |             |
|                 |             |        | Semarang,    |             |
|                 |             |        | Surabaya,    |             |
|                 |             |        | and Makassar |             |
+-----------------+-------------+--------+--------------+-------------+
| Perfetti Van    | NA          | Retail | Bogor, West  | Importers;  |
| Melle           |             |        | Java         | D           |
| Indonesia, PT   |             |        |              | istributors |
| (sugar          |             |        |              |             |
| confectionary   |             |        |              |             |
| products)       |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Ceres, PT       | NA          | R      | Bandung,     | Importers;  |
| (chocolate      |             | etail; | West Java    | D           |
| confectionary,  |             | HRI    |              | istributors |
| cookies)        |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Agel Langgeng   | NA          | Retail | Bekasi, West | Importers;  |
| PT (sugar       |             |        | Java         | D           |
| confectionary)  |             |        |              | istributors |
+-----------------+-------------+--------+--------------+-------------+
| Cadburry        | NA          | Retail | Jakarta      | Importers;  |
| Indonesia PT    |             |        |              | D           |
| (chocolate      |             |        |              | istributors |
| confectionary)  |             |        |              |             |
+-----------------+-------------+--------+--------------+-------------+
| Sinar Sosro, PT | NA          | R      | Spreads on   | Importers;  |
| (beverages)     |             | etail; | Sumatera,    | D           |
|                 |             | HRI    | Java, and    | istributors |
|                 |             |        | Bali         |             |
+-----------------+-------------+--------+--------------+-------------+
| Multi Bintang   | \$88        | R      | East Java    | Importers;  |
| Indonesia Tbk,  |             | etail; | and          | D           |
| PT (beer)       |             | HRI    | Tangerang,   | istributors |
|                 |             |        | Banten       |             |
+-----------------+-------------+--------+--------------+-------------+
| Delta Djakarta  | NA          | R      | Bekasi, West | Importers;  |
| Tbk, PT (beer)  |             | etail; | Java         | D           |
|                 |             | HRI    |              | istributors |
+-----------------+-------------+--------+--------------+-------------+

Note: \$1= IDR 9,734 (2005)

NA = Information not available

**D. SECTOR TRENDS**

**Consumption Trends:**

Food manufacturers are continually developing new products to cater to
the tastes of those exposed to western-style products through the media
and living abroad as well as the habit of snacking, which is a part of
Indonesian culture. In addition, more women in urban areas are entering
the workforce and prefer the convenience of processed food products.

A recent trend in retail stores is the presence of products from
Malaysia, Singapore, China, and Thailand sold at competitive prices. In
addition, several domestic producers are outsourcing manufacturing to
China to take advantage of low import tariffs while avoiding high
production costs, such as higher fuel and electricity, as well as raw
material prices particularly for sugar and flour.

**Product Trends:**

[Snack products]{.underline}: Single servings of jelly, non-microwave
popcorn, fruit snacks, filled and chocolate-coated wafers and cookies,
and chocolate with nuts candy bars for younger consumers

[Fruit flavored soft drinks and dairy products as well as coffee and
multi flavored ice cream products]{.underline}: Orange, melon, and mixed
fruit flavored UHT milk; guava, grape fruit, lemon, passion fruit,
orange, and strawberry flavored sports drinks; apple flavored
ready-to-drink tea; honey and orange flavored green tea; dragon fruit,
fruit punch, guava, lychee and sour sop flavored fruit juice; mango and
strawberry flavored bottled water splash; durian, coconut, cappuccino
and tiramisu and chocolate mousse combined flavored ice cream.

[Local flavor]{.underline}: Most instant noodles are popular in
Indonesia and produced with local flavors. In addition, flavorings for
local foods are available, such as sweet soy sauce for fried noodles,
flavorings for chicken soup ("soto"), and flavoring for chicken curry
("kari"). Prepared cooking sauces with local, Chinese, and Thai
flavorings are becoming popular. Flour coatings for chicken, fish,
tempe, and banana are also growing.

[Alternative staple food]{.underline}: Rice is an important staple for
most Indonesians and is present at most meals. A common substitute is
instant noodles. However with growing incomes and the accompanying
changing lifestyles, other carbohydrate sources are becoming popular,
particularly wheat products. Bakery mixes produced by independent
manufacturers are also becoming popular. Distributors may also own a
small manufacturing facility to produce bakery mixes for further
processing by bakeries. Commonly used bakery ingredients purchased
locally are cooking chocolate, emulsifiers, and mixes, whereas nuts,
dried fruit, and canned fruit are imported.

[Health awareness]{.underline}: Nutritious high-protein snacks, products
fortified with vitamins and fiber, and dairy products are becoming more
popular, although skimmed and fat free milk are not as popular as whole
milk because of taste preference and price. Reduced sugar and sugar-free
cookies, confectionary products, and cough drops are being seen.
Bite-sized cookies with low-fat and low-sugar formulations are becoming
preferred over candies because they are more filling and appeal to
health awareness. Sales of sports drinks are increasing since they are
useful in preventing dehydration that can be caused by dengue fever.

[Packaging]{.underline}: Smaller package sizes are preferred due to
convenience and price considerations. Inconsistent and unsteady incomes
force many Indonesian to purchase food in small quantities, in some
cases in daily portions. Milk and fruit juice in 90 and 125-ml packaging
and bite-sized snacks in smaller package sizes for school children with
packages designed to appeal to younger ones were successfully introduced
in the last few years. Vacuum-packed chilled and frozen products are
preferred over canned and preserved processed foods.

**Note:** The government strictly controls alcoholic beverage
production, distribution, selling, consumption, and advertisement in
Indonesia because the majority of Indonesians are Muslim. Alcohol drinks
are subject to high luxury taxes and import and excise duties. Only
three local companies produce beer.

**Foreign Companies Profiles**

A number of multinational companies have food manufacturing plants in
Indonesia, some were acquisitions of existing companies while others are
joint ventures.

### Unilever Indonesia, Tbk, PT and its subsidiaries

Established in Indonesia in 1933, Unilever Group is well known as a
producer of consumer goods. The company is engaged in the manufacturing
of soaps, detergents, Blue Band brand margarine, dairy based foods,
Walls brand ice cream, tea based beverages, soy sauces, Best Foods brand
dressings and condiments, and cosmetic products. In Indonesia, Unilever
has 1 percent share by retail value of snacks, 14 percent of oils and
fats, 11 percent of spread, 44 percent of ice cream, and 17 percent of
sauces, dressing and condiments products.

Walls ice cream competes with local brands of ice cream such as Diamond
and Campina, while Blue Band brand margarine spread has strong
competition from the popular local brand Simas in the retail market.

**[Nestlé Indonesia, PT]{.underline}**

Nestlé Indonesia is one of the leading International food companies in
Indonesia. Their production line includes dairy (Dancow, Nan, Lactogen,
Milkmaid, Carnation, Bear brand), coffee (Nescafé brand), tea (Nestea
brand), other beverages (Milo and Nesquik brands), sauces (Maggi brand),
chocolate and candies (Kit-Kat and Polo brands), and baby foods and
cereals. Nestlé's existence in Indonesia was started in 1971 when Nestlé
built a milk processing plant in East Java.

Nestlé dominates the dairy products and baby food market with sweetened
condensed milk, milk powder, baby formulas, and liquid milk. Seventy
percent out of its production fulfills local demand, while the other 30
percent is exported to the region and Middle Eastern countries. In
Indonesia, Nestlé has 24 percent share by retail value of dairy
products, 4 percent of confectioneries, 20 percent of baby food, and 37
percent of ready- to-drink coffees.

#### Nutricia Indonesia Sejahtera, PT

Nutricia Indonesia Sejahtera specializes in nutritional products for
babies and toddlers. It was established in 1987 as part of the Royal
Numico N.V. group, a Dutch company specializing in baby food and
clinical nutrition. Nutricia products include milk formulas both for
healthy babies and for babies with specific nutritional needs, and food
for children being weaned. Nutricia's brand portfolio consists of
Nutrilon, Bebelac, Nutricia Complete, and Nutricia Meal Time. In 1989,
Nutricia's modern factory located in Jakarta began operations supplying
products to the domestic market and markets in the Asia Pacific region.
Nutricia has 4-percent share by retail value of baby foods.

#### Sari Husada Tbk, PT

Sari Husada Tbk was established in 1954. Sari Husada pioneered the
development and production of baby milks in 1965. In 1998, Sari Husada
allied with Nutricia International BV, as part of the Royal Numico
group, which is the majority shareholder in Sari Husada. Sari Husada
produces various kinds of milk products for babies and children at
affordable prices, from fortified milks to specialty milks for lactose
intolerant infants and babies born with low weight. Sari Husada also
provides milks for pregnant and breast-feeding women. Sari Husada's
brand portfolio includes SGM, Vitalac, Vitaplus, Lactamil, SGM Biscuit,
SGM Cereals, and Vitalac Genio. Sari Husda has a 25-percent share by
retail value of baby foods.

##### Frisian Flag Indonesia, PT

Frisian Flag Indonesia is a subsidiary of Royal Friesland Foods N.V.
Frisian Flag produces baby and infant foods, condensed milk, milk
powder, and long-life milk under the Frisian Flag brand. It operates two
productions facilities in Jakarta. Frisian Flag has 12 percent share by
retail value of dairy products and 7-percent share of baby food.

### Kievit Indonesia, PT

Kievit Indonesia is another subsidiary of Friesland Foods in Indonesia.
Kievit develops, produces, and markets powdered ingredients for use in
the food processing industry, such as coffee creamers, and soup
ingredients. It operates in Salatiga, Central Java as a regional
facility for the ASEAN market.

### Greenfields Indonesia, PT

Greenfields Indonesia was established in 1997 to meet the growing need
for high quality fresh milk. Greenfields processes fresh milk from
Australian imported cattle on its own dairy farm in Gunung Kawi, East
Java. Greenfields produces pasteurized, ESL (Extended Self Life), and
UHT (Ultra High Temperature) milk under the Yahui, Real Good, and
Greenfields, as well as private label brands. Greenfields exports to
Singapore, Malaysia, Hong Kong, and several African countries. In
Indonesia, Greenfields has 0.5 percent share by retail value of dairy
products.

**[Danone Group]{.underline}**

Danone group has 4 companies in Indonesia that produces biscuit, bottled
water, and fermented dairy beverages. Danone group is made of Danone
Biscuits Indonesia, PT which has a 3-percent share by retail value of
cookies; Aqua Golden Mississisppi, Tbk, PT which has a 15-percent share
by retail value of soft drinks; Ades Alfindo Putrasetia, Tbk , PT which
has a 3-percent share by retail value of soft drinks; Tirta Investama,
PT which has 2-percent share by retail value of soft drinks; Ajinomoto
Calpis Beverage Indonesia, PT and Danone Dairy Industry, PT that
produces dairy products.

**[Coca-Cola Bottling Indonesia, PT]{.underline}**

Coca-Cola Amatil from Australia entered Indonesia in 1992, however its
Indonesian partner was already producing and distributing Coca-Cola
products under license from the Coca-Cola Company since 1932. It
operates under the name PT Coca-Cola Bottling Indonesia with a brand
portfolio consisting of Coca-Cola, Diet Coke, Sprite, Fanta, Schweppes,
Frestea, A&W, and Powerade Isotonic. Products made by Coca-Cola
Indonesia are the most popular carbonated drinks, with a 16-percent
share by retail value.

Other multinational companies in Indonesia:

-   [**Amerta Indah Otsuka, PT** (Japan)]{.underline}: manufactures the
    popular sports drink Pocari Sweat, which has with a 21-percent share
    by retail value of sports drinks

-   [**Berrivale Indosari, PT** (Australia)]{.underline}: produces Berri
    fruit juice, which has a 9-percent share by retail value of fruit
    juices

-   **[Charoen Pokphand Indonesia, PT]{.underline} (Thailand):**
    produces frozen poultry products. Has a 32 percent share by retail
    value of frozen processed products

-   **[Heinz ABC Indonesia, PT]{.underline} (United States):** produces
    sauces, dressings, and condiments, beverages, and fish and seafood
    products, which has a 15 percent share of canned & preserved food
    retail sales. Has a 29-percent share of sauces, dressings, and
    condiments, and a 2-percent share of soft drinks

-   Kraft from United States has two companies in Indonesia

**[Kraft Ultraya Indonesia, PT]{.underline}**: produces cheese. Has a
2.5-percent share by retail value of dairy products.

> **[Nabisco, PT]{.underline}**: produces cookies

-   **[Helios Arnott's Indonesia, PT]{.underline}**
    (Australia[)]{.underline}: produces cookies. Has 4-percent share by
    retail value of bakery products

```{=html}
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```
-   **[Pepsi-Cola Indo Beverages, PT]{.underline}** (United States):
    produces Pepsi Cola and Mirinda carbonated drinks

-   **[URC (Universal Robina Corporation) Indonesia, PT]{.underline}**
    (Philippines): Established in 2002, produces snack foods that have a
    0.5-percent share by retail value of sweet and savory snacks

-   **[Indofood Fritol-Lay Corp, PT]{.underline}** (United States):
    produces potato chips and extruded snacks that total to a 10-percent
    share by retail value of sweet and savory snacks

-   **[Nippon Indosari Corp, PT]{.underline}** (Japan): produces bread
    and pastry products that total to 2.5-percent share by retail value
    of bakery products.

-   **[Effem Indonesia, PT]{.underline}** (United States): produces
    chocolate. Has a 2-percent share by retail value of confectionary
    products

-   **[Lotte Indonesia, PT]{.underline}** (Japan): Established in 1993,
    produces gum and candy that have a total 2-percent share by retail
    value of confectionary products.

-   **[Perfetti Van Melle Indonesia, PT]{.underline}** (Italy and
    Netherlands): produces confectioneries. Has a 13-percent share by
    retail value confectionary products.

# III. COMPETITION

+-------------------+---------------+-----------------+---------------+
| **Product         | **Major       | **Strengths of  | **Advantages  |
| Category**        | Supply        | Key Supply      | and           |
|                   | Sources in    | Countries**     | Disadvantages |
|                   | 2005          |                 | of Local      |
|                   | (volume)**    |                 | Suppliers**   |
+-------------------+---------------+-----------------+---------------+
| Wheat (from US:   | Australia     | Australian      | No domestic   |
| soft white        | 55.1%         | wheat price is  | production    |
| winter, hard red  |               | competitive and |               |
| winter, dark      | Canada 20.1%  | consumer prefer |               |
| northern spring;  |               | it's color for  |               |
| from Australia:   | Argentina     | noodle          |               |
| Australian        | 9.7%          | production      |               |
| standard white,   |               |                 |               |
| Australian prime  | Ukraine 8.6%  |                 |               |
| hard, Australian  |               |                 |               |
| hard)             | United States |                 |               |
|                   | 2.7%          |                 |               |
| Net import:       |               |                 |               |
| 4,428.5 thousand  |               |                 |               |
| ton               |               |                 |               |
|                   |               |                 |               |
| \$799.0 million   |               |                 |               |
+-------------------+---------------+-----------------+---------------+
| Sugar and sugar   | Thailand      | Thailand offers | Domestic      |
| derivatives       | 53.7%         | competitive     | production is |
| (lactose,         |               | prices          | not enough to |
| fructose,         | Australia     |                 | supply        |
| glucose)          | 12.3%         |                 | industry      |
|                   |               |                 | needs         |
| Net import:       | South Africa  |                 |               |
| 2,094.2 thousand  | 5.5%          |                 |               |
| ton               |               |                 |               |
|                   | United        |                 |               |
| \$616,4 million   | Kingdom 4.9%  |                 |               |
|                   |               |                 |               |
|                   | Malaysia 2.2% |                 |               |
|                   | Philippines   |                 |               |
|                   | 2.0%          |                 |               |
+-------------------+---------------+-----------------+---------------+
| Skim milk powder  | Australia     | Australia and   | Domestic      |
| and whole milk    | 24.5%         | New Zealand are | production    |
| powder            |               | the largest     | can supply    |
|                   | New Zealand   | suppliers due   | only 25% of   |
| Net import:       | 20.1%         | to competitive  | industry      |
| 159,635 ton       |               | pricing         | needs         |
|                   | United States |                 |               |
| \$386,1 million   | 16.1%         |                 |               |
|                   |               |                 |               |
|                   | Philippines   |                 |               |
|                   | 11.6%         |                 |               |
|                   |               |                 |               |
|                   | Singapore     |                 |               |
|                   | 7.1%          |                 |               |
+-------------------+---------------+-----------------+---------------+
| Whey              | Australia     | Australia,      | No domestic   |
|                   | 28.0%         | Netherlands,    | production    |
| Net import:       |               | and France due  |               |
| 35,916 ton        | Netherlands   | to competitive  |               |
|                   | 26.4%         | pricing         |               |
| \$38.2 million    |               |                 |               |
|                   | France 23.3%  |                 |               |
|                   |               |                 |               |
|                   | United States |                 |               |
|                   | 11.9%         |                 |               |
+-------------------+---------------+-----------------+---------------+
| Cheese            | Australia     | Australia and   | No domestic   |
|                   | 59.3%         | New Zealand     | production    |
| Net import: 9,883 |               | have            |               |
| ton               | New Zealand   | competitive     |               |
|                   | 29.3%         | prices          |               |
| \$28.3 million    |               |                 |               |
|                   | United States |                 |               |
|                   | 4.2%          |                 |               |
+-------------------+---------------+-----------------+---------------+
| Soybean           | United States | U.S. has        | Domestic      |
|                   | 82.7%         | exportable      | production is |
| Net import :      |               | supplies and    | not enough to |
| 1,365 thousand    | Argentina     | good quality    | supply        |
| ton               | 13.3%         |                 | industry      |
|                   |               |                 | needs         |
| \$299.3 million   |               |                 |               |
+-------------------+---------------+-----------------+---------------+
| Wheat flour       | Australia     | Australian      | Loc           |
|                   | 39.2%         | wheat flour     | ally-produced |
| Net import:       |               | price and       | wheat flour   |
| 477,977 ton       | Sri Lanka     | quality         | is priced     |
|                   | 14.9%         |                 | higher than   |
| \$128.0 million   |               |                 | imported      |
|                   | Belgium 13.0% |                 | wheat flour   |
|                   |               |                 |               |
|                   | Turki 9.3%    |                 |               |
|                   |               |                 |               |
|                   | China 9.0%    |                 |               |
+-------------------+---------------+-----------------+---------------+
| Red meats (beef)  | Australia     | Australia and   | Shortage of   |
|                   | 38.5%         | New Zealand     | supply. Most  |
| Net import: 55,   |               | competitive     | are sold      |
| 710 ton           | New Zealand   | pricing and     | fresh to      |
|                   | 34.9%         | there are no    | traditional   |
| \$77,5 million    |               | case of FMD and | markets and   |
|                   | United States | BSE in both     | modern        |
|                   | 25.7 %        | countries       | outlets       |
+-------------------+---------------+-----------------+---------------+
| Food preparation  | Netherlands   | Ingredients     | No domestic   |
| (baby food,       | 23.3%         | from these      | production    |
| medical food, ice |               | countries are   |               |
| cream powder,     | United States | considered to   |               |
| fortification     | 19.0%         | be good         |               |
| premix, other     |               | quality.        |               |
| food mixture with | Denmark 16.8% | European        |               |
| nutrition value)  |               | countries can   |               |
|                   |               | supply tailor   |               |
| Net import: 9,987 |               | made            |               |
| ton               |               | ingredients     |               |
|                   |               |                 |               |
| \$65.5 million    |               |                 |               |
+-------------------+---------------+-----------------+---------------+
| Non-alcoholic     | South Korea   | Taste preferred | Domestic      |
| preparation       | 29.8%         | by Asian        | product is    |
|                   |               | consumers       | limited       |
| Net import:       | Malaysia      |                 |               |
| 34,591 ton        | 28.1%         |                 |               |
|                   |               |                 |               |
| \$59.0 million    | Netherlands   |                 |               |
|                   | 20.8%         |                 |               |
|                   |               |                 |               |
|                   | Thailand      |                 |               |
|                   | 14.5%         |                 |               |
+-------------------+---------------+-----------------+---------------+
| Cocoa beans       | Cote d Ivoire | Industry needs  | Domestic      |
|                   | 54.9%         | variety of      | product is    |
| Net import:       |               | cocoa beans for | abundant      |
| 30,292 ton        | Papua New     | blending to get |               |
|                   | Guinea 28.9%  | desired taste   |               |
| \$ 47.9 million   |               |                 |               |
|                   | Nigeria 7.9%  |                 |               |
|                   |               |                 |               |
|                   | Ghana 7.3%    |                 |               |
+-------------------+---------------+-----------------+---------------+
| Dextrin and other | Thailand      | Thailand has    | Domestic      |
| modified starches | 64.5%         | exportable      | product is    |
|                   |               | supply of the   | limited       |
| Net import:       | United States | kind of starch  |               |
| 93,071 ton        | 7.3%          | needed to       |               |
|                   |               | produce glucose |               |
| \$44.0 million    | Germany 4.8%  |                 |               |
|                   |               |                 |               |
|                   | Australia     |                 |               |
|                   | 3.2%          |                 |               |
|                   |               |                 |               |
|                   | China 2.4%    |                 |               |
|                   |               |                 |               |
|                   | Netherlands   |                 |               |
|                   | 2.3%          |                 |               |
+-------------------+---------------+-----------------+---------------+
| Fish and seafood  | Singapore     | Tuna, mackerel, | Local fish    |
| products          | 18.8%         | and sardines    | and seafood   |
|                   |               | are used as an  | production is |
| Net import:       | Malaysia      | additional      | high          |
| 31,796 ton        | 16.9%         | source for the  |               |
|                   |               | fish canning    |               |
| \$35.4 million    | Japan 13.0%   | industry        |               |
|                   |               |                 |               |
|                   | China 11.2 %  |                 |               |
|                   |               |                 |               |
|                   | Thailand 6.5  |                 |               |
|                   | %             |                 |               |
|                   |               |                 |               |
|                   | Taiwan 4.9%   |                 |               |
|                   |               |                 |               |
|                   | United States |                 |               |
|                   | 4.6 %         |                 |               |
|                   |               |                 |               |
|                   | South Korea   |                 |               |
|                   | 4%            |                 |               |
+-------------------+---------------+-----------------+---------------+
| Peptones and      | United States | U.S. has        | No domestic   |
| derivatives       | 37.7%         | quality         | production    |
|                   |               | products        |               |
| Net import: 4,708 | Brazil 27.5%  |                 |               |
| ton               |               |                 |               |
|                   | China 16.0%   |                 |               |
| \$11.3 million    |               |                 |               |
|                   | Netherlands   |                 |               |
|                   | 6.4%          |                 |               |
|                   |               |                 |               |
|                   | Japan 5.4%    |                 |               |
+-------------------+---------------+-----------------+---------------+
| Protein           | China 38.2%   | China and       | No domestic   |
| concentrates and  |               | Australia offer | production    |
| textured protein  | Australia     | lower prices    |               |
| substances        | 21.0%         | for soybean     |               |
|                   |               | based products  |               |
| Net import: 1,643 | United States |                 |               |
| ton               | 8.7%          |                 |               |
|                   |               |                 |               |
| \$10.5 million    | Netherlands   |                 |               |
|                   | 6.8%          |                 |               |
+-------------------+---------------+-----------------+---------------+
| Dehydrated potato | United States | U.S. has        | No domestic   |
|                   | 68.7%         | exportable      | production    |
| Net import: 4,363 |               | supplies and is |               |
| ton               | Germany 16%   | also            |               |
|                   |               | aggressively    |               |
| \$4.7 million     |               | promoted        |               |
+-------------------+---------------+-----------------+---------------+
| Poultry meat      | Singapore 87  | Singapore       | Local poultry |
|                   | %             | usually is a    | meat          |
| Net import: 3,978 |               | transit port    | production is |
| ton               |               | only for many   | significant   |
|                   |               | kinds of        | in volume and |
| \$3.8 million     |               | exported        | ban of        |
|                   |               | products to     | poultry part  |
|                   |               | Indonesia       | imports has   |
|                   |               |                 | been          |
|                   |               |                 | implemented   |
|                   |               |                 | since 2000    |
+-------------------+---------------+-----------------+---------------+
| Tree nut          | China 33.6%   | Singapore is a  | Local nut     |
|                   |               | transit port;   | production is |
| Net import: 1,644 | United States | Thailand        | limited to    |
| ton               | 19.5%         | processes       | the cashew    |
|                   |               | almond from     | nut           |
| \$3.2 million     | Philippines   | U.S.; China     |               |
|                   | 13.4%         | supplies        |               |
|                   |               | pistachios and  |               |
|                   | Singapore     | chestnuts; U.S. |               |
|                   | 12.8%         | supplies        |               |
|                   |               | walnuts,        |               |
|                   | Thailand 9.2% | almonds and     |               |
|                   |               | pistachios      |               |
+-------------------+---------------+-----------------+---------------+

Global Trade Statistics

**IV. BEST PRODUCT PROSPECTS**

Category A: Products Present in the market Which Have Good Sales
Potential

  --------------- ----------- ---------- ---------- ---------------- ----------------
  **Product       **2005      **5-Yr.    **Import   **Key            **Market
  Category**      Imports     Avg.       Tariff     Constraints Over Attractiveness
                  (Value)**   Annual     Rate**     Market           for USA**
                              Import                Development**    
                              Growth**                               

  Wheat           \$799.0     6.7%       0%         Consumers prefer Demand of high
                  million                           Australian wheat quality flour
                                                    color for        for bakery
                                                    noodles and the  industry
                                                    price is         
                                                    competitive      

  Wheat flour     \$128.0     7%         5%         Lower prices     Wheat-based
                  million                           offered by       noodles and
                                                    competitor       bread are
                                                                     becoming a
                                                                     substitute for
                                                                     rice

  Sugar and sugar \$616,4     -4.4%      Cane, beet Market is        Demand of dairy
  derivatives     million                sugar,     limited to       sugar
  (lactose,                              chemical   cheaper product  derivatives such
  fructose,                              pure       sources and the  as lactose is
  glucose)                               sucrose in food processing  growing
                                         solid      industry lacks   
                                         form: IDR  knowledge of how 
                                         550/kg     to replace sugar 
                                         raw; IDR   with other       
                                         790/kg     substitutes      
                                         refined;   efficiently      
                                         others 5%                   

  Skim milk       \$386,1     8.8%       5%         U.S. prices are  Consumption is
  powder and      million                           relatively       growing rapidly
  whole milk                                        higher than      
  powder                                            competitors      

  Whey            \$38.2      17.0%      5%         Still lack of    No competitor
                  million                           knowledge for    and consumption
                                                    using whey as an is growing
                                                    ingredients in   rapidly
                                                    food and         
                                                    beverages        

  Cheese          \$28.3      12.3%      5%         Limited consumer Consumption is
                  million                           base due to      growing for
                                                    pricing          bakery and snack
                                                                     food products

  Soybean         \$299.2     -2.54%     10%        Lower prices     Popular
                  million                           offered by       traditional dish
                                                    competitor       consumes a lot
                                                                     of soybean

  Food            \$65.5      31.8%      5%         Demand is        Consumption has
  preparations    million                           scattered and    grown rapidly in
  (baby food,                                       required         the last two
  medical food,                                     specifications   years
  ice cream                                         vary widely      
  powder,                                                            
  fortification                                                      
  premix, other                                                      
  food mixture                                                       
  with nutrition                                                     
  value)                                                             

  Non-alcoholic   \$59.0      36.6%      5%         Demand is        Consumption is
  preparation     million                           scattered and    growing
                                                    required         
                                                    specifications   
                                                    vary widely      

  Dextrin and     \$44.0      2.8%       5%         Competitors      Consumption is
  other modified  million                           offer            growing
  starches                                          competitive      
                                                    pricing          

  Peptones and    \$11.3      28.1%      5%         Competitors      Consumption is
  derivatives     million                           offer            growing
                                                    competitive      
                                                    pricing          

  Protein         \$10.5      4.5%       5%         Competitors      Consumption is
  concentrates    million                           offer            growing
  and textured                                      competitive      
  protein                                           pricing          
  substances                                                         

  Dehydrated      \$4.7       53.3%      5%         Most consumers   Consumption is
  potatoes        million                           do not know how  growing
                                                    to use this      
                                                    product          

  Tree nuts       \$3.2       17.7%      5%         Demand is still  Demand from
                  million                           limited to       bakery and
                                                    middle and       confectionary
                                                    high-income      industry is
                                                    consumers        growing
  --------------- ----------- ---------- ---------- ---------------- ----------------

Category C: Products not Present in the Market Because They Face
Significant Barriers

  ------------- ----------- ---------- ---------- --------------- ----------------
  **Product     **2005      **5-Yr.    **Import   **Key           **Market
  Category**    Imports     Avg.       Tariff     Constraints     Attractiveness
                (Value)**   Annual     Rate**     Over Market     for USA**
                            Import                Development**   
                            Growth**                              

  Red meats     \$77,5      0.2%       5%         Ban on US beef  Only one
  (beef)        million                           due to BSE      competitor and
                                                                  meat processing
                                                                  needs more
                                                                  inputs
  ------------- ----------- ---------- ---------- --------------- ----------------

**V. POST CONTACT AND FURTHER INFORMATION**

# The Foreign Agricultural Service (FAS) of the U.S. Embassy Jakarta maintains up-to-date information covering food and agricultural import opportunities in Indonesia and would be pleased to assist in facilitating U.S. exports and entry into the Indonesian market. Questions or comments regarding this report should be directed to FAS Jakarta at one of the following local or U.S. mailing addresses:

######  Foreign Agricultural Service

U.S. Embassy Jakarta

> Jl. Medan Merdeka Selatan \# 3-5
>
> Jakarta 10110 - Indonesia
>
> Tel: +62 21 3435-9161
>
> Fax: +62 21 3435-9920
>
> e-mail:agjakarta@usda.gov
>
> Home page: <http://www.usembassyjakarta.org/fas>

####### Foreign Agricultural Service

> U.S. Embassy-Jakarta
>
> Box 1, Unit 8129

####### FPO AP 96520-0001

Please visit the Foreign Agricultural Service's Home Page at:
[http://www.fas.usda.gov](http://www.fas.usda.gov/) for more information
on exporting U.S. food products to Indonesia and to other countries.

Additional Sector Reports for Indonesia:

The Retail Food Sector (ID4032)
<http://www.fas.usda.gov/gainfiles/200411/146118072.pdf>

The HRI Sector (ID6001)
<http://www.fas.usda.gov/gainfiles/200601/146176609.pdf>

Product Brief-Bakery Ingredients (ID6013)
<http://www.fas.usda.gov/gainfiles/200606/146198046.pdf>