Do you see the business opportunities in the future? Those who get Indonesia get Southeast Asia.

 

Indonesia Market Overview

The largest economy in Southeast Asia.According to the World Bank, Indonesia's GDP will reach $1,289.5 billion billion in 2022, up 5.31 percent year-on-year. Indonesia's economic growth rate has been maintained at around 5% for many years, ranking among the world's major economies. PricewaterhouseCoopers predicted in the "World in 2050" report,In 2050, Indonesia is expected to become the fourth largest economy after China, India and the United States.

Figure 1: Change in Indonesia's GDP, 2012-2022

 

Source: World Bank

Southeast Asia is the most populous country, with rapid population growth, young population structure and obvious demographic dividend.According to Indonesia's National Bureau of Statistics, its population will exceed 0.272 billion in 2021 and will continue to grow in 2022. According to United Nations data, the median age of Indonesia's population in 2020 is only 29.7 years old, and 50% of the population is under 30 years old.

Figure 2: Population change in Indonesia, 2012-2022

Source: Indonesian National Bureau of Statistics

Per capita income continues to grow rapidly, and the middle class continues to expand.According to the Indonesian National Bureau of Statistics, Indonesia's per capita GDP in 2022 is about US $4,676. According to the Boston Consulting Group, the number of middle-class people earning more than $3600 in 2022 will be about 88 million, accounting for 35% of Indonesia's total population. According to McKinsey, Indonesia's middle class will grow to 0.135 billion by 2030.

Characteristics of Consumption in Indonesia

In Muslim-majority countries, overseas consumer companies need to consider the influence of religious culture in product marketing, brand design, packaging and employee management. The population structure is young, and the acceptance of overseas culture and new consumer brands is high. At the same time, e-commerce in Indonesia is growing rapidly, with e-commerce sales accounting for 28.5 percent of total local retail sales in 2022 and expected to reach 36.5 percent by 2026, according to eMarketer.

 

China's Consumer Enterprises Layout Indonesia Huge Opportunities

1. Layout of Indonesia's Opportunity: Chinese Catering

In 2023, the size of the Indonesian catering market will be 26 billion US dollars. The compound growth rate of the catering market from 2023 to 2028 can reach 6.5. It is expected that by 2028, the size of the Indonesian catering market will reach 35.5 billion US dollars.

Figure 4: Total size and growth rate of Indonesian catering market

Data source: Statistics Indonesia

The characteristics of Indonesia's catering market are as follows: Java Island is the main catering market, medium and high-end restaurants are doing well, and the market is scattered and composed of a variety of catering. The taste is influenced by Muslim culture, with chicken as the main ingredient, and a variety of dishes are popular. Chinese catering occupies an important position in Indonesia, providing opportunities for Chinese food and snack enterprises. In recent years, Chinese catering enterprises to enter Indonesia, the price is higher than the domestic. Haidilao already has 8 stores in Indonesia, considering localization and integrating local characteristics.

 

2. Layout of Indonesia's Opportunity: Coffee

 

Indonesia is the largest coffee market in Southeast Asia, with rapid growth. Coffee retail sales in Indonesia will increase to $3 billion billion in 2022, accounting for nearly 50% of total coffee retail sales in Southeast Asia. The current coffee market in Indonesia has a size of US $1.6 billion, and the number of stores has huge growth potential. Although Starbucks is the largest modern boutique coffee and tea company in Indonesia, the existing coffee market in Indonesia has not yet formed a monopoly pattern, and Chinese chain coffee brands can take advantage of the rise of boutique coffee culture or high-end products to enter. In addition, with the Indonesian middle class's pursuit of taste and process quality, local coffee brands are also facing great opportunities.

Figure 5 Market share of modern boutique coffee shops in 2022 (by sales)

 

Data source: Euromonitor International

3. Layout of Indonesia's Opportunity: Tea

AccordingMomentum WorksData, Southeast Asia milk tea market size reached $3.66 billion in 2021. Among them, Indonesia is the largest milk tea market in Southeast Asia, with a market size of more than 1.6 billion US dollars.

Figure 6: Southeast Asian milk tea market size in 2021 (US $billion)

 

Data source: Momentum Works

The Chinese market has shifted to fresh fruit tea, but Indonesians prefer high-sugar drinks and the milk tea industry is lagging behind. In recent years, the rise of local fruit tea brands, cost performance is the key to market competition. The Haus chain has expanded to 230 stores in Indonesia within 4 years with pro-citizen pricing and a rich product line. Chinese milk tea brand such as honey snow ice city has achieved success in Indonesia and is expected to reach 3000 by the end of 2023. Chinese milk tea brands enter Indonesia, competition is intensified but the market potential is huge. Indonesia has a large young population and a strong ability to accept new things. Milk tea meets the needs of local desserts and has a cultural foundation for drinking tea.

 

4. Layout of Indonesia's Opportunity: Planting Agriculture

In 2022, the output value of Indonesian agricultural products will be 137.479 billion US dollars, of which the output value of planting industry will be 114.591 billion US dollars, accounting for 83.4 percent. The main products are food crops such as rice, corn, soybean and cassava, as well as cash crops such as palm oil and coconut.

Indonesia is the world's largest producer and exporter of palm oil, with an annual output of more than 45 million tons. The oil palm plantation area is 12 million hectares, mainly concentrated in Sumatra (70%) and Kalimantan (30%).

Figure 8: Major global palm oil producers in 2022/2023 (in thousands of tons)

Data source: Statistics Indonesia

Indonesia is the world's largest coconut producer, producing 16.825 million tons of coconut in 2021, accounting for 27.5 percent of the world's total. Mainly planted in Sumatra Island, Java Island, Kalimantan Island and other places. Indonesia's coconut processing industry mainly produces coconut primary processed products with relatively low added value, and the production capacity of deep-processed foods is relatively weak. At the same time, the utilization rate of production materials such as coconut shell activated carbon and coconut fiber is low.

Figure 9: Global coconut production by major countries, 2021 (million tonnes)

Data source: Statistics Indonesia

Indonesia's planting agriculture has the problems of low yield and extensive management; more than 90% of the farms are small family farms, with insufficient infrastructure, and it is difficult to develop agricultural mechanization; agricultural management technology is backward and there is an urgent need for science and technology to promote agriculture, which provides opportunities for domestic agricultural enterprises to purchase in the supply chain, go to sea with agricultural technology and equipment, and invest in Indonesia's agriculture.

 

5. Layout of Indonesia's Opportunity: Aquatic Products

As one of the world's largest producers of aquatic products, Indonesia's fishery sector covers marine and inland capture fisheries and aquaculture, with an annual fishery production of more than 21 million tons and a total fishery output value of nearly US $30 billion. Indonesia's tuna production accounts for 15% of the world, and the bonito production ranks first in the world. Indonesia is also the world's fourth largest shrimp producer, with an annual shrimp production of 2 million tons planned for 2024. Although the Indonesian aquatic market is huge and developing rapidly, it faces many challenges, such as low market concentration, lack of large-scale leading enterprises, financing difficulties for small fishermen, low product value, limited infrastructure and technology, etc.

Figure 10: Indonesia Marine Capture Fisheries Production-Tuna (Tuna)/Ton

Source: Indonesian National Bureau of Statistics

Summary

Indonesia, which is located inSoutheast Asian archipelago countries, with a large young population and middle-class consumer market, vitality and potential coexist. There are great opportunities in the catering, coffee and tea industries, but issues such as agriculture and aquaculture also pose challenges. Consumer market segmentation industry started, business opportunities and risks coexist. In addition, it is also a wise choice to find suitable partners to explore the market with local enterprises! Under the initiative of "Belt and Road Initiative", by giving full play to the advantages of Chinese brands' own products and brands, and making full use of Indonesia's high-quality supply chain and market, we can realize the leap from Chinese brands to world brands.