Indonesia's dairy hints at growth

DAIRY products are not part of a traditional Indonesian diet. Apart from a natural intolerance to lactose shared by many Asians, Indonesians view the price of dairy as rather prohibitive. But market research also shows a rise in consumption of yoghurt and milk as today's consumers become more conscious about their health.

In 2013, local sales amounted to $2.7 billion, said Euromonitor. Indonesia’s changing demographic has shown more interest in a diet with dairy in recent years. An expanding middle-class is spurring demand for cheese, yoghurt, and fresh and powdered milk, while flavoured milk drinks are targeted at the growing number of young consumers.

A wide range of dairy products is available, most of which are produced in big factories. But close to 70% of the final dairy products are still imported from Australia and New Zealand, long-standing trading partners of Indonesia. The Indonesian government however is determined to reduce the country’s imports of dairy, aimed to account for 50% of local consumption by 2025.

There are major challenges, however. The country’s supply of dairy remains low and product quality has yet to meet certain standards. Owing to these setbacks, locally produced milk is used as a supplementary supply source in the production process. Only 25% of the raw materials are produced locally, and the bulk comes from foreign dairy producers.

Companies are not only investing in production. Raising consumer awareness and marketing dairy products have become significant investments, given the scope for growth which is at over 4.8% annually to 2014, according to International Finance Corporation.

Despite the said growth, Indonesia remains one of the lowest consumers in the region, particularly in Southeast Asia. The International Finance Corporation notes that in 2012, Indonesia’s milk consumption per capita was estimated at 11.7 litres per annum, compared to 22 litres per capita in the Philippines, 31 litres per capita in Thailand, and 51 litres per capita in Singapore and Malaysia. This can be viewed as a significant opportunity for dairy expansion in the country.

(Photo © Johanna Goodyear | Dreamstime Stock Photos)