Challenges For Foreign F&D Players In Indonesia
BMI view: We believe the Indonesian food and drink market is a challenging one to gain an advantage in because of its complicated geography and underdeveloped infrastructure. Also, consumers tend to be much less brand savvy than in other Asian markets, such as China. As a result, we believe foreign producers that have managed to establish a strong presence will have to continue investing resources to maintain their market share, especially against the proliferation of local competitors.
Even if we see tremendous growth potential for food and drink consumption in Indonesia, we believe companies involved in the market will continue to face challenges as they push to maintain their market share. We forecast strong growth in consumer spending over our forecast period to 2018, and expect strong GDP per capita growth over the coming years. Also, the Westernization of consumers' eating habits will boost growth in categories that were underrepresented in the market previously such as dairy, confectionary and skin care.
Still, we believe the Indonesian market is challenging for foreign producers to maintain an advantage in due to its complicated geography and underdeveloped infrastructure. In fact, Indonesians live on about 6,000 of more than 17,000 islands that span 5,000km from east to west. Even if 60% of the population lives on the island of Java, it is difficult to reach shoppers spread across the archipelago, especially as only 11 cities have more than one million residents. Moreover, the country's road density is only two thirds that of China's, and less than half of Malaysia's, while 40% of roads are unpaved. Congestion is very common and, for example in Jakarta, the average work commute takes more than two hours. Added to this, the country's retail landscape is dominated by small traditional shops where competition for shelf space and limited air conditioning determine choices, according to a study conducted by Kantar Worldpanel and Bain.
|Consumer Spending Growth Ahead|
|Indonesia - GDP Per Capita & Real Private Consumption Growth|