""

Required Report - public distribution

**Date:** 10/8/2003

**GAIN Report Number:** ID3022

ID3022

**Indonesia**

**Food Processing Ingredients Sector**

**Report**

**2003**

**Approved by:**

![](media/image1.wmf)Chris Rittgers

US ATO

**Prepared by:**

Paulina Gandakusuma

**Report Highlights:**

Indonesia, the world's fourth most populous nation, offers significant
market potential for U.S. suppliers of food and agricultural ingredients
into the local food processing sector. Processed food sales in 2002 grew
approximately 15% reaching IDR. 61,000 billion (US\$ 6.67 billion). The
food-processing sector is expected to grow positively over the next five
years, on the assumption that external factors and economic conditions
continue to improve. Growth is expected to be about 8% per year. Best
market prospects include wheat, food-use soybeans, beef, dairy products,
flavorings, and processed potato products, fruit concentrates.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Jakarta ATO \[ID2\]

\[ID\]

# I. INDONESIA IN PROFILE

Indonesia, the world\'s fourth most populous nation, offers significant
market potential for U.S. suppliers of food and agricultural ingredients
the local food processing sector. AN estimated 10 million Indonesians
earn at least US\$ 5,000 a year; thus, Indonesia still ranks as one of
the world's most promising emerging markets.

In 2002, Indonesia was still struggling to implement major ongoing
economic reforms after it was hit hard by the Asian financial crisis of
1997/1998. However, GDP per capita in 2002 was estimated at US\$ 818.4,
up from US\$ 609.4 in 2001. Economic growth was about 3.5 %, supporting
a positive average food processing industry growth rate of 5%. Indonesia
has about a 100 million labor force working in the following sectors:
agriculture (45%), industry (15%), and services (40%), which build an
economic structure of agriculture (20%), industry (40%), services (40%).

# II. MARKET SUMMARY

## II.1. Indonesia's food processing sector in overview

Indonesian's food and beverage processing industry is worth over US\$ 10
billion, and is comprised of 4,681 businesses, ranging from family owned
business to multinational companies, and over 900,000 traditional home
industries. Processed food sales in 2002 grew approximately 15%,
reaching sales of over IDR. 61,000 billion (US\$ 6.67 billion).
Unfortunately inflation played a significant role in driving up current
value growth. Thus in constant value terms, food processing sector was
estimated to grow by only 5% in average last year. For example, the
modern snack industry has tripled sales compare to the pre-crisis level
in value. However, in terms of volume, it is just at the pre-crisis
level. Price increases for electricity, telephones, rice, and other
basic necessity items in 2002 drove up end product prices.

Other factors such political and security uncertainties are continuing
to inhibit the economic growth. Nonetheless, consumer sophistication,
growing health consciousness, the introduction of new food products, and
growth of modern retail outlets should lead to a positive growth in the
food-processing sector over the next five years. Growth is expected to
range from 4-11% in volume terms and increase by close to 8% in value
terms.

  --------------------------------------------- ----------- ----------- ----------- ------------
  **Food & Beverage Industries 1998-2001**                                          

                                                1998        1999        2000        2001

  Total Industry                                4,573       4,666       4,661       4,681

  Total Labor                                   600,390     571,230     597,373     593,880

  Gross Value (Rp. Billion)                     67,503.00   72,852.00   92,399.00   104,067.00

  Input (Rp. Billion)                           47,450.00   49,444.00   65,409.00   72,458.00

  Value Added (Rp. Billion)                     20,053.00   23,408.00   26,990.00   31,629.00

  Gross Value (USD Billion)                     6.74        9.27        9.68        10.14

  Input (USD Billion)                           4.74        6.29        6.47        7.06

  Value Added (USD Billion)                     2.00        2.98        3.21        3.08

  Exchange rate                                 10,013.00   7,855.00    8,421.00    10,260.00

  Source: Central Bureau of Statistic, industry                                      
  interviews, trade sources                                                         
  --------------------------------------------- ----------- ----------- ----------- ------------

Total Indonesian food product imports for 2002 were US\$ 3.3 billion, up
from US\$ 2.9 billion in 2001. Almost 30% of those products were
imported as Processed Food and Beverages, while the rest was consumed
directly by end consumers or by food processing as ingredients.

Consumption of imported processed food and beverages has risen to close
to pre-crisis level. Furthermore export of processed food and beverage
have surpassed pre-crisis level at over one billion US\$.

The establishment of the AFTA trade zone in 2003 should also expand
opportunities in the ASEAN region for processed food products from
Indonesia. Under AFTA, most products manufactured in the Association of
Southeast Asian Nations' 10 member states can be shipped to any other at
a 5% duty or less.

Despite the reputation for risk, Indonesia is still considered an
attractive location for multinationals operating in the processed food
sector. Companies such as Unilever, Nestlé, Kraft, Danone, Cadbury,
Heinz, Campbells, and Nabisco all maintain active operations in
Indonesia.

## II.2. Advantages and challenges for US exporters

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

+-------------------------------+--------------------------------------+
| **ADVANTAGES AND CHALLENGES   |                                      |
| FACING**                      |                                      |
|                               |                                      |
| **U.S. FOOD INGREDIENTS IN    |                                      |
| INDONESIA**                   |                                      |
+-------------------------------+--------------------------------------+
| **Advantages**                | **Challenges**                       |
+-------------------------------+--------------------------------------+
| Indonesian's economy has      | The Indonesian political and         |
| slowly improved towards       | economic uncertainties create a      |
| pre-crisis levels             | degree of risk.                      |
+-------------------------------+--------------------------------------+
| Market scale - over two       | Weak purchasing power of the         |
| hundred million people in the | majority of the population           |
| population                    |                                      |
+-------------------------------+--------------------------------------+
| Operations by multi-nationals | Global purchasing organizations buy  |
| requiring world standard      | from the cheapest acceptable source  |
| ingredients                   |                                      |
+-------------------------------+--------------------------------------+
| Trends & consumer preferences | Ingredients for new product and      |
| create demand and stimulate   | market trial doesn't fulfill the     |
| product innovation using new  | minimum amount required by US        |
| ingredients                   | Supplier while there is no regional  |
|                               | depot to facilitate first time and   |
|                               | smaller quantity buyer               |
+-------------------------------+--------------------------------------+
| Lesser developed food         | Cumbersome import documentation      |
| processing sector presents    | requirements such as: Certificate of |
| great potential for importing | Halal, GMO, radiation, import        |
| new technology and            | registration, expiration date, etc.  |
| ingredients                   |                                      |
+-------------------------------+--------------------------------------+
| Local ingredients unavailable | Competitor's products from the       |
| or insufficient, while of US  | region and other developed countries |
| products is considered high   | considered equivalent to US products |
| quality                       | and/or have better pricing           |
+-------------------------------+--------------------------------------+
| AFTA creates opportunities    | AFTA also allows food ingredients    |
| for regional export           | from the region to enter Indonesia   |
| strategies that may favor     | at lower price, while food           |
| Indonesia.                    | ingredients from U.S. have higher &  |
|                               | longer shipping cost and time. Plus, |
|                               | location & cultural differences      |
|                               | present difficulties in negotiations |
+-------------------------------+--------------------------------------+
| The US Government offers      | US exporters are reluctant to offer  |
| export credit guarantees.     | extended terms of credit.            |
+-------------------------------+--------------------------------------+
|                               |                                      |
+-------------------------------+--------------------------------------+

# III. ROAD MAP FOR MARKET ENTRY

## III.1. Market structure

Inputs for food processing can be categorized as follows:

-   Primary materials such as frozen boned beef, wheat or skimmed milk
    powder.

-   Essential complementary ingredients such as flavoring, or
    preservatives.

Primary materials are most commonly imported directly by the food
processor. Complementary ingredients are usually bought from a local
importing agent because they are used in smaller quantities and often
have limited shelf life.

Some "local suppliers" are agents in Singapore, some producers find
useful as a regional distribution point. Food processors buy from local
agents in some cases because the agent has exclusive sales agreement.
Some companies would import directly if an alternative source were
located.

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

## III.2. Consumer & Product Trends

Customer profile of Indonesia, 2003

-   over 220 million population

-   18.110 islands

-   65% rural, 35% urban

-   87% Moslem

-   55% \< 25 years old

-   300 ethnic groups

-   58% live in Java, 21% in Sumatra

-   More than 30 types of food cuisine

-   Rice as staple food

  ---------------------------------------- ------------ ------------ ---------
  **Indonesian Expenditure Profile**       Annual                    
                                           Perkapita                 
                                           value, IDR                

                                           2001         2002         \% change

  Total food & beverage expenditure (BPS)  1,123,308    1,448,400    29%

  Total non food & beverage expenditure    626,340      1,028,220    64%
  (BPS)                                                              

  Total expenditure (BPS)                  1,749,648    2,476,620    42%

  Total processed food & beverage consumed 280,827      362,100      29%
  (GAPMI)                                                            

  Total processed food consumed            n/a          282,293       
  (Euromonitor)                                                      

  Total imported processed food & bev      32,450.23    21,258.71    -34%
  consumed (GAPMI)                                                   

  Total imported food & beverages items    138,892.44   141,132.03   2%
  (BPS)                                                              

  GAPMI (Indonesian Food & Beverage                                  
  Association), BPS (Central Bureau of                               
  Statistic), Euromonitor data                                       

  Population estimated                     215 million  220 million   

  Echange rate, 1 US\$                     10,260 IDR   9,311 IDR     
  ---------------------------------------- ------------ ------------ ---------

Overall, consumption of processed food in Indonesia is still low.
Approximately 20% of the Indonesian population is still living below the
poverty line and the remaining population is largely low income. The
majority of people still prefer fresh foodstuffs, which are readily
available in their neighborhood at affordable prices. With rice as the
staple food, processed food mainly consumed as "lauk" (topping or side
dish) or snack.

Food is generally a priority in Indonesian expenditure as Indonesian
people spent about 60% of its total expenditure on food. Out of that
60%, only 25% was spend for processed food & beverage or about U\$ 8.55
billion annually, in which US\$ 6.67 was for processed food only.

![](media/image2.wmf)

Convenience processed food products are affordable only for higher
income groups. The urban middle class, comprising 20 percent of the
population, are the main consumers of processed food. Yet, post crisis,
processed food industries are facing changing consumer profiles. There
are a growing number of more sophisticated, critical and educated
consumers. Consumers are increasingly familiar with fortified food, ie
products with added vitamins and minerals in milk, biscuits and ice
cream. These sophisticated consumers gained knowledge not only from
living, studying, and working abroad but also from the media, which
plays an important role in educating the consumers. However, the
majority of consumers remain price-conscious. When product offerings are
similar, price is the determining factor.

To address price concern smaller pack sizes and no frill products and
cost are being reduce to lead to more affordable products.

In contrast, relatively new categories, such as ready meals, meal
replacement drinks, and snack bars will have limited potential. Many
consumers are unaware of these products and since the price is
expensive, the penetration rate remains low. Ready meals will not be a
necessity since affordable ready-to-eat or cooked food is available at
eating outlets of all sizes throughout Indonesia.

### Wheat flour based food products as the alternate of Indonesian staple food

Wheat flour is the primary ingredient of the second and third most
important staple foods in Indonesia, which are noodles and baked goods.
Wheat flour industry still has huge growth potential as Indonesian flour
consumption per capita is still among the lowest in the world at 14 kg
per year. Now flour sales IDR 6 trillion in 2002 were estimated.

About half the total flour produced and imported is used for noodle
production. Noodles have become the second staple food after the crisis
as they are affordable, adaptable and convenient meal for many of the
lower income consumers. Competition among instant noodle manufacturers
is fierce; thus, each manufacturer tries to gain market share by
offering more value added such as various flavors and more net weight
content. Noodle sales in 2002 grew about 10%, and accounted for 13% of
processed food\'s value

Bakeries use 30% of total flour produced and imported. Baked goods, have
also emerged as another major food staple for Indonesians. In terms of
per capita consumption, bakery products was estimated at only 3.1kg in
2002, one of the lowest in Asia-Pacific, which indicates the huge
potential for further market development. Influence of Taiwanese and
Japanese bakery style has become the major trend since 2002. This
Oriental influence is indicated by the growth of oriental modern bakery
outlets such as Eaton, Bread Talk, Q&A, and Vanilla. Most of these
bakeries are Singapore franchise based.

On the other hand, Continental bakeries continue to dominate hotels and
food service, with pastries, cakes, and European breads catering to
middle to upper income groups and expatriates communities.

Acceptance of baked goods as a substitute for rice and/or noodles has
also increased bread consumption in middle to lower income groups. This
demand increase was generated when major lay-offs during the crisis
pushed ex-employees of the bakery industry to start their own bakeshops
at home. Currently, more than 30,000 bakeshops provide low cost baked
goods in both urban and rural areas. Convenience stores also often have
their own in-house bakeries, which are a popular addition to the main
store; those outlets are another major distribution channel for bakery
products.

### Snacking as part of Indonesian Culture

The increasing habit of snacking as part of Indonesian culture has
resulted in continuous growth of total snacks sales. Traditional snack
industry has been growing as the middle-income group, which previously
consumed modern snack, has to cut cost and looked for cheaper
alternatives.

Chocolate confectionery sales are also growing, and is expected to grow
20% over the next five years. A product, which is still in the growing
stage, chocolate confectionary has benefited from packaging innovation
such as sachets and the \'mini\' formats, which has allowed chocolate
confectionery to penetrate the lower-middle class segment and raised
awareness of chocolate. Most Indonesians have a sweet tooth and love
snacking, which translates into ready demand for chocolate
confectionery.

### Positive growth of dairy product sales

Indonesian milk consumption is relatively low at 6 to 7 liters, compare
to Thailand (22), Philippines (25), or India (75) liters per capita per
year. Dairy consumption increased 10% in 2002 at 193,000 MT, compared to
178,000 MT in 2001, and is forecasted to grow 15% with further targeted
product segmentation such as baby to toddler formula, pregnant &
lactating woman formula, elder formula, high calcium, low-fat milk and
introduction of multi flavor milk such chocolate, honey, banana,
strawberry, melon, and orange. Since local fresh milk production only
fulfills 30% of industry needs, in 2003, Indonesia is expected to import
125,000 MT of skim milk and 35,000 MT of whole milk powder.

### Chicken nuggets gain wide acceptance

In general, Indonesian people's protein sources are mainly fish, tahu &
tempe (soybean based food). Consumption of meat and poultry are very low
and limited to middle to upper income group. Poultry processing
companies have established a cold chain infrastructure to market their
processed poultry products. Chicken nuggets have gained a wide
acceptance and become very popular as they have a wide and
close-to-customer distribution system. Currently, other frozen products
such as meatballs & fish stick are marketed the same way.

## III.3. Distribution channels

![](media/image3.wmf)

Sales of food products to a majority of Indonesian consumers remain
dominated by the traditional or village-level wet markets. However,
convenience and retail stores are becoming increasingly important in the
Indonesian distribution channels. Hypermarkets, supermarkets, and
minimarts, which offer very wide range of products in very competitive
prices, have gained popularity among middle to upper income groups.
Leading hypermarkets and supermarkets include: Carrefour, Hero & Giant,
Alfa, Matahari, Lyion Super Indo, Makro. Indomaret dominates minimarket
with its 700 outlets, followed by 304 outlets of Alfa minimarket.
Supermarkets and hypermarkets accounted for 29% of packaged food value
sales in 2002.

The rise of large retailers has hurt smaller businesses, such as warung
(kiosk) and toko kelontongan (a local name for independent food stores
or provision stores). Although still small compared with other channels,
convenience stores will likely slowly replace the traditional
distribution channel in urban areas. However, warung and toko
kelontongan remain the backbone of processed food distribution channel
for the middle to lower income group consumers, especially in rural
areas, servicing 65% of total population.

There are over 900,000 home industries producing mostly unbranded and
often unpackaged food products. Although small in individual size, this
segment is extremely important in the Indonesian food-processing sector.
A key example is savoury snacks. Unbranded savoury snacks produced by
small-scale home industries reached 80% market share. While unbranded
nuts sales amounted to over IDR700 billion or approximately 32% of
entire nuts sales in 2001. These unbranded items compete strongly
against small registered businesses and large-scale manufacturers
producing branded food items.

Although cold chain facilities are generally available in urban areas
(especially with the presence of the hyper, super, and mini market);
many food items are sold without any temperature control in the
traditional distribution channels. Limited capital, low awareness of the
benefit of cold chain, plus the practice of buy-sell-consume food items
daily are still very common and tend to limit development if a cold
chain network.

### Retail Sales of Packaged Food by Sector: Value 1998-2002

IDR billion

1998 1999 2000 2001 2002

Confectionery 2,887.5 2,838.6 3,395.3 4,399.7 5,285.8

Bakery products 5,936.4 6,207.0 6,776.1 7,993.4 9,615.3

Ice cream 672.9 681.2 761.3 928.6 1,107.6

Dairy products 4,589.4 4,815.7 5,523.1 6,401.3 7,793.6

Savoury snacks 2,340.6 2,408.1 2,768.6 3,605.4 4,398.2

Snack bars -- -- -- -- --

Meal replacement drinks 15.6 19.8 26.4 35.0 45.2

Ready meals 175.8 173.7 190.6 211.3 240.6

Soup 7.8 7.9 8.3 9.3 10.4

Pasta 56.6 60.0 64.8 71.6 78.8

Noodles 6,156.8 6,199.6 6,629.4 7,448.8 8,078.4

Canned food 1,946.4 1,923.8 2,100.0 2,319.8 2,634.0

Frozen food 588.9 567.7 594.8 638.6 701.9

Dried food 18,115.4 15,938.3 16,228.6 17,551.1 18,900.1

Chilled food 245.1 232.9 238.8 257.9 281.2

Oils and fats 3,353.6 3,405.2 3,465.5 3,695.8 4,050.6

Sauces, dressings and

condiments 2,323.1 2,494.5 2,681.5 2,959.3 3,229.3

Baby food 1,446.7 1,740.7 1,902.6 2,262.7 2,750.4

Spreads 197.4 232.6 252.3 283.4 328.0

Packaged food 44,661.3 43,508.6 46,717.6 53,334.8 61,124.2

Source: Official statistics (Ministry of Industry and Trade), trade
associations (The Indonesian Food & Beverages Association), trade press
(Reuters, Kompas, Indonesian Business Magazine, SWA), company research,
store checks, trade interviews, Euromonitor estimates

Notes: Sum of sectors does not equal total packaged food because of
double counting (for example canned soup is included in soups and canned
food)

Volumes can not be consolidated due to different unit measurements (eg
confectionery in tonnes and ice cream in litres)

2002 provisional data

### Retail Sales of Packaged Food by Sector: Volume 1998-2002

1998 1999 2000 2001 2002

Confectionery (\'000

tonnes) 92.39 96.26 106.13 116.84 124.70

Bakery products (\'000

tonnes) 509.25 545.11 578.40 624.84 671.64

Ice cream (million litres) 44.52 46.17 49.71 52.67 54.64

Dairy products (Not

calculable) -- -- -- -- --

Savoury snacks (\'000

tonnes) 138.81 145.44 162.63 182.65 197.35

Snack bars (\'000 tonnes) -- -- -- -- --

Meal replacement

drinks (\'000 tonnes) 0.24 0.27 0.31 0.36 0.42

Ready meals (\'000 tonnes) 5.62 5.78 6.29 6.88 7.57

Soup (\'000 tonnes) 0.20 0.20 0.22 0.23 0.25

Pasta (\'000 tonnes) 3.12 3.20 3.41 3.60 3.78

Noodles (\'000 tonnes) 633.57 675.24 738.42 809.75 880.48

Canned food (\'000 tonnes) 65.06 66.92 72.36 78.74 86.45

Frozen food (\'000 tonnes) 22.01 23.40 25.70 28.60 31.04

Dried food (\'000 tonnes) 3,103.91 3,202.91 3,330.36 3,469.20 3,625.12

Chilled food (\'000

tonnes) 5.14 5.41 5.71 6.08 6.45

Oils and fats (\'000

tonnes) 292.96 308.89 335.81 368.52 405.55

Sauces, dressings and

condiments (\'000 tonnes) 162.09 170.15 183.39 195.26 207.64

Baby food (\'000 tonnes) 30.39 34.16 36.61 40.37 45.04

Spreads (\'000 tonnes) 7.37 7.02 7.30 7.76 8.26

Packaged food (Not

calculable) -- -- -- -- --

Source: Official statistics (Ministry of Industry and Trade), trade
associations (The Indonesian Food & Beverages Association), trade press
(Reuters, Kompas, Indonesian Business Magazine, SWA), company research,
store checks, trade interviews, Euromonitor estimates

Notes: Sum of sectors does not equal total packaged food because of
double counting (for example canned soup is included in soups and canned
food)

Volumes can not be consolidated due to different unit measurements (eg
confectionery in tonnes and ice cream in litres) 2002 provisional data

## III.4 Entry strategy

U.S. Commercial Service, Department of Commerce, wrote a chapter on
"Marketing U.S. Products and Services" in their 2003-2004 American
Businesses in Indonesia. Below are several key points for marketing U.S.
products in Indonesian market.

### Distribution Channels

Foreign firms are allowed to operate retail outlets in major urban
areas, although some restrictions remain in provinces. Many foreign
firms use franchising, licensing and technical service agreements to
distribute their goods. While foreign companies may distribute local &
imported goods at wholesale level and conduct retail operation.

### Representatives and agents

Foreign firms may open local representative office with the permission
of Department of Industry and Trade. The representative(s) may be an
Indonesian company, individual, or foreign national. Trade
representatives may not engage in direct sales nor conclude deals, but
they may assist in sales promotion, marketing, market research, and
provide technical advice.

While for private sector, the appointment of sole Indonesian agent is
not required by law. However, the assistance of Indonesian agent or
distributor has been proved to be an effective strategy in expanding
sales as they could bridge the cultural differences and understand the
regulation system, which could be very ambiguous.

Patience and presence are the other key success in entering Indonesian
market. Companies that have made a commitment by having a representative
in the region or in the country will have higher chance of penetrating
Indonesian market. The regional presence will also ensure more customer
support and after-sales service, which are very important for the
importers.

Indonesian customers are very price conscious, and currency and interest
rates fluctuations create uncertainty. Therefore, importers will tend to
make purchases based primarily on pricing and financing terms.

Nevertheless, brand loyalty and name recognition is highly valued by
Indonesian customers, therefore buying missions, participation in
regional shows, and advertising in local media are great ways to expose
new products and gain consumer acceptance.

## III.5. Policy and Regulation

Deregulation of the market in the recent past has removed most import
barriers.

-   The majority of ingredients for food processing may be readily
    imported after satisfying Health Department regulations.

-   An important requirement for food imports is certification
    acceptable to the Muslim association of Indonesia (MUI) that the
    product is *Halal*.

-   Import documentation must be complete and in accordance with
    Government regulations to avoid costly delay.

-   Import duties on most food impediments, with the exception of sugar
    and rice, are five percent.

-   Some ingredients may require certain documentations for import
    product registration at the Indonesian Food and Drug Administration
    (Badan Pengawas Obat-obatan dan Makanan / BPPOM), and in some cases
    to the Indonesian Department of Agriculture.

## III.6. Profiles of Major Food Processing Companies

There are at least 4,681 modern food-processing companies and over
900,000 traditional home industries in Indonesia, but less than ten
major groups dominate the market. The great majority of traditional home
industry is small-scale family owned businesses. Major groups are
typically vertically integrated, owning primary production, processing
and distribution facilities.

### Packaged Food Company Shares: 2000-2001

\% retail value rsp

Company 2000 2001

Indofood Sukses Makmur Tbk PT 15.6 14.8

Nestlé SA 4.1 4.2

Unilever Group 3.0 3.2

Friesland Coberco Dairy Foods Holding NV

(Zuivelcoöperatie de Zeven Provincien UA) 2.7 3.0

Australian Indonesian Milk Industries PT 3.0 2.8

Heinz Co, HJ 2.3 2.3

Garudafood Group 1.4 1.5

PepsiCo Inc 1.1 1.5

Royal Numico NV 1.3 1.4

SMART Corp PT -- Sinar Mas Agro Resources &

Technology 1.4 1.2

Philip Morris Cos Inc 1.1 1.2

Ultrajaya Milk Industry & Trading Co PT 1.1 1.1

Mayora Indah PT 1.1 1.1

Canning Foods Indonesia PT 1.1 1.0

Surya Jaya Abadi Perkasa PT 1.0 1.0

Wicaksana Overseas International PT 0.5 1.0

Khong Guan Holdings Malaysia Sdn Bhd 1.0 0.9

Fonterra Co-operative Group -- 0.9

Konimex PT 0.8 0.9

Kapal Api Group 0.7 0.7

Cadbury Schweppes Plc 0.5 0.7

Adijaya Guna Satwatama PT 0.6 0.7

Campbell Soup Co 0.5 0.7

Danone, Groupe 0.5 0.6

Monde Denmark Nissin Biscuit Corp 0.8 0.6

Perfetti Van Melle Group -- 0.6

Dwi Kelinci PT 0.4 0.6

Simplot Co, J R 0.2 0.6

Bina Karya Prima PT 0.5 0.6

Orang Tua Group 0.4 0.5

Nippon Indosari Corp PT 0.4 0.5

Ceres Indonesia PT 0.3 0.5

Diamond Cold Storage PT 0.4 0.4

Bristol-Myers Squibb Co 0.3 0.4

San Miguel Corp -- 0.3

Campina Melkunie BV, Zuivelcoöperatie 0.3 0.3

ABC President Enterprises PT 0.3 0.3

Nissin Food Products Co Ltd 0.3 0.3

Eloda Mitra PT 0.4 0.3

Van Houten & Zoon Holding AG, CJ 0.3 0.3

Sekar Group 0.3 0.3

Insan Makmur Sejati PT 0.1 0.3

Siantar Top Industry PT 0.2 0.3

Kemang Food Industries PT 0.3 0.3

Manna Dunia Boga PT 0.3 0.3

Kuala Pangan PT 0.2 0.2

Mitrasatrya Perkasautama PT 0.2 0.2

Delfi Chocolate Manufacturing SA 0.2 0.2

Marizarasa PT 0.2 0.2

Meiji Dairies Corp -- 0.2

Yupi Indo Jelly Gum PT 0.2 0.2

Mamee-Double Decker (M) Bhd 0.1 0.2

Mars Inc 0.2 0.2

Maya Muncar PT 0.2 0.2

Wijaya Abadi PT 0.2 0.2

Delifood Sentosa Corp PT 0.2 0.2

United Waru Biscuit Manufactory PT 0.2 0.2

Pabrik Minyak Goreng Barco PT 0.2 0.2

Abbott Laboratories Inc 0.1 0.2

Lotte Group 0.1 0.2

Chupa Chups (Grupo) SA 0.2 0.2

Gabungan Koperasi Susu Indonesia GKSI 0.1 0.2

Ajinomoto Co Inc 0.2 0.2

Madusari 0.1 0.1

American Home Products Corp 0.2 0.1

Morinaga Milk Industry Co Ltd 0.1 0.1

Cereal Partners Worldwide 0.1 0.1

Rasa Murni Utama PT 0.2 0.1

Sasa Inti PT

Miwon Indonesia Tbk PT 0.1 0.1

PSP Group -- Putra Surya Perkasa PT 0.1 0.1

Goodman Fielder Ltd 0.1 0.1

New Zealand Dairy Board 0.8 --

Van Melle NV, Koninklijke 0.6 --

Sara Lee Corp 0.4 --

Ayala Corp 0.4 --

Meiji Milk Products Co Ltd 0.3 --

Sakura Citra Anekafood PT 0.1 --

Artisanal 3.9 4.3

Private Label 1.2 1.3

Others 35.1 33.0

TOTAL 100.0 100.0

Source: Trade associations (The Indonesian Food & Beverages
Association), trade press (Reuters, Kompas, Indonesian Business
Magazine, SWA), company research, store checks, trade interviews,
Euromonitor estimates

#### PT. Indofood Sukses Makmur Tbk. (PT. ISM)

Indofood is the biggest group in the industry. The present company was
founded in 1990. With 34 manufacturing plants, including 139 instant
noodles production lines, Indofood is the largest processed food
manufacturer in Indonesia, and also the largest instant noodles producer
and flour miller in the world. Indofood has a 17.3% value share. Its
operations are vertically integrated, including primary production,
initial processing, final processing and distribution. Its products are
distributed mainly through its subsidiaries, including Indomarco,
independent distributors, and some cooperatives.

Its brands include household names such as Indomie and Bimoli. Other
well known brands include Supermi, Sarimi and Sakura instant noodles,
Bimoli and Sunrise cooking oil, Royal Palmia and Simas margarine, Chiki,
Chitato and Jet-Z svaoury snacks, Promina and Sun baby food products,
and the Indofood and Piring Lombok food seasonings.

![](media/image4.wmf)

#### PT Nestlé Indonesia 

PT 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 (Nescafe), tea
(Nestea), other beverages (Milo, Nesquik), sauces (Maggi), chocolate and
candies (Kit-kat & Polo), Baby food and cereals. Nestle's existence in
Indonesia was started in 1971 when Nestle built a milk processing plant
in East Java. Currently, Nestle has three milk processing plants in Java
and employs about 2,000 workers. Nestle expecting 15% growth in 2003.

Production capacity, including a recent processing plant opened in June
2, 2003,is reached 200,000 MT sweet condensed milk and 100,000 MT milk
powder. 70% out of these volume is to fullfil local demand, while the
other 30% is exported to the region as well as middle eastern countries.
Nestle dominates the dairy products market where they secured the
leading position with over 25% of value sales in 2001 (includes
sweetened condensed milk, milk powder, baby formula, and liquid milk).
Nestlé also came in second in baby food with 12% value share.

#### PT Unilever Indonesia, Tbk 

Unilever Group is a well-known as consumer goods producer in Indonesia.
Food product line include oils and fats (Blue Band), ice cream (Walls),
sauces, dressings and condiments (Best foods). The products very popular
among Indonesian consumers.

Walls ice cream, which dominate the market with over 40% market share,
compete with local brand ice cream such as Diamond and Campina. While
the margarine spread, Blue band, has strong competition from local brand
Simas in the retail market.

#### PT. Sari Husada Tbk.

-   Manufacturer of nutritious food and drinks for babies, children, and
    adults.

-   Has 30 percent market share for infant formula

-   Operates in two factories in Central Java with capacity of 35,000
    tons of end product

#### PT. Arnott's Indonesia

-   The second largest biscuit manufacturer with 13% market share for
    biscuit products.

-   Total sales for 2002 were US\$ 225 million with 5-10% growth per
    year.

-   Campbells soup bought majority company share in 1997.

-   Thirty percent of production for export to ASEAN region, Australia,
    Europe and United States

-   Thirthy percent of the input to production is from local origin.

#### PT. Sierad Produce Tbk.

-   PT. Sierad Product Tbk., a locally owned business, is a major
    poultry producing company.

-   Sierad produce has developed and expanded the breadth and depth of
    its businesses to include all aspects in integrated poultry
    production of day old chicken, poultry feeds, final stock growing,
    and the production of dressed chicken, value added poultry products
    and poultry equipments.

-   Sierad produce also holds the franchise for Wendy's Restaurants and
    Hartz Chicken.

# IV. Competition

Comments from the industry regarding U.S. exporters as compared to
exporters from other nations included:

-   Prices are higher in many cases.

-   Contract terms and conditions are often more limiting or demanding.

-   Minimum order quantities are frequently higher needed.

-   Response to requests is sometimes slow, or in some cases no response
    is received.

-   Communications are difficult due to the 12 to 15 hour time zone
    difference.

-   Special requirements, such as the Halal certificate, sometimes cause
    difficulty.

-   No representative office in the region

![](media/image5.wmf){width="7.233333333333333in"
height="3.928472222222222in"}

![](media/image6.wmf)

# V. Best product prospects

A. Products Present in The Market Which Have Good Sales Potential

-   Wheat, Wheat Flour.

-   Beef (meat and offal) - tough competition among lower grade
    Australian beef.

-   Poultry (whole, cuts, and processed) - poultry ban from GOI.

-   Dairy products (whey, skim & whole milk powder) - local production
    cannot meet demand or lack the processing knowledge and technology.

-   Fruit - temperate climate fruit cannot be grown successfully in
    Indonesia.

-   Flavorings & coloring - \"modern\" flavors & coloring meet
    international standards for industry.

-   Soybean & soybean products (ISP, Soy Flakes, Soy Flour).

-   Food additives (enzyme, fortification, emulsifier) and
    preservatives.

-   Potato (chilled, frozen, processed) - locally grown potato is not
    suited to processing

-   Tomato for tomato sauce processing.

-   Fruit concentrates.

-   Peas, lentils, edible nut.

-   Bakery ingredients (dry fruits & nuts, yeast, bread improver,
    chocolate)**.**

B. Products Not Present in Significant Quantities but Which Have Sales
Potential

-   Turkey - MDM might replace other meats for processing.

-   Non-alcoholic wine - the majority of consumers do not use alcohol.

C. Products Not Present because They Face Significant Barriers

Ham and pork may be eaten by only 13% of the population. Their presence
in a food processing plant would result in loss of pure food
certification. There is a niche market for expatriate and non-Muslim
consumers.

# VI. Post contact and further information

The U.S. Agricultural Trade Office in 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 to the Indonesia market. Questions or comments regarding this
report should be directed to the U.S. ATO in Jakarta at the following
address:

U.S. Commercial Center

Wisma Metropolitan II, 3rd Floor

Jalan Jenderal Sudirman Kav.29-31

Jakarta 12920 - Indonesia

Tel: +62215262850, Fax: +62215711251

e-mail:atojkt@cbn.net.id

Homepage:http://www.usembassyjakarta.org/fas

Please contact our home page for more information on exporting U.S. food
products to Indonesia, including "Hotel and Restaurant Industry: Bali",
"Market Brief: Imports of U.S. Fresh Fruit: Indonesia", Market Brief: \"
Indonesian Meat Processing Industry\", \"Market Brief - Indonesian
Bakery Industry\", Market Brief - Indonesian Beverage Industry\",
\"Market Brief - Beef Liver & Chicken Leg Quarter in Indonesia\", and
\"Market Brief-Furniture Industry in Indonesia\". As of January 2003,
the following updated reports are available; \"The Retail Sector Report:
Indonesia\", \"The HRI Food Service Sector Report: Indonesia\" and
specific commodity reports.

For more information on exporting U.S. agricultural products to other
countries, please visit the Foreign Agricultural Service's Home Page:
http://www.fas.usda.gov