The food and beverage industry remains one of the pillar industries of Indonesia. As manufacturing picks up and the market steadily recovers from the hurdles of the past months, the outlook for this year can only be optimistic.
Although economic growth is not expected to return to prepandemic levels just yet, industry players are positive it will be better than 2020 and 2021, especially with both domestic and export markets stabilising, if not rising. Industry growth for 2021 was forecast at 5% to 7%, and the momentum is hoped to continue throughout this year.
“The effects of the recession resulting from the global health crisis still overshadow businesses and the entire economy. But we remain positive the economy will remain on the recovery path. Consumption will return to the normal mode, with consumers’ purchasing power improving to further drive the economy,” said Adhi Lukman, chairman of the Indonesian Food and Beverage Industry Association (GAPPMI), during a conference conducted by Ringier Events titled ASEAN Food and Beverage Ingredients Summit on 12 November 2021.
GAPPMI, which advances the food business in Indonesia, continues to work with the government and the private sector and business community in addressing concerns resulting from the pandemic and helping companies prepare for post-pandemic normalcy. To enable companies to continue operations and meet requirements, GAPPMI assisted in facilitating the import of raw materials by asking the government to remove permits. The association, along with others, also proposed a reduction in gas prices as an additional support to manufacturers and businesses.
Knowing the critical role of the food and beverage industry in Indonesia’s economy, Lukman said GAPPMI supports the government’s Making Indonesia 4.0 roadmap.
Adhi Lukman, chairman of the Indonesian Food and Beverage Industry Association (GAPMMI)
Indonesia 4.0 and the F&B industry
Indonesia launched in April 2018 the Making Indonesia 4.0, a roadmap to reinvigorate the country’s declining manufacturing industry and through new technologies such as automation and Internet of Things prepare it for Industrial Revolution 4.0. With continued innovation and digitalisation across all sectors, the initiative hopes to propel Indonesia into a powerhouse economy and put the country amongst the top 10 global economies by 2030.
The pandemic might have slowed down some of the Indonesia 4.0 initiatives, but the government and private sector remain confident, especially with economy slowly recovering. The food industry alone has been posting steady growth the past quarters at 2.45 percent, 2.95 percent and 3.49 percent growth for Q1, Q2, and Q3 2021, respectively, according to data from the National Statistics Agency (BPS). Being one of the largest countries in the world, food expenditure per capita in Indonesia is quite high: 49.22 percent for foods in general and 16.87 percent for processed foods as of March 2020. Household consumption, which accounts for 57.66 percent of GDP, rose from 2.23 percent early last year to 5.93 percent by the second quarter.
“Confidence in the food and beverage industry is high and continues to grow. This is very important because the industry has a critical role in the Indonesia 4.0 vision,” Lukman shared.
The F&B industry is one of Indonesia 4.0’s five pillar sectors, with the others being textiles and clothing, automotive, electronics and chemicals. Two other sectors were added – pharmaceuticals and medical devices. To boost the country’s overall competitiveness, growth in both domestic and export fields across these industries is being pushed.
To create a resilient and competitive value chain in the food and even the agro industry, Lukman said the ecosystem must have sustainable raw materials, conducive policies and regulations, sustained innovations, competent and skilled human capital, and the right infrastructure and logistics system. For raw materials, local and overseas sources remain viable, but the development of a closed loop mechanism will increase sustainability for the long term and benefit stakeholders.
Consistent synchronisation in terms of policies and regulations and collaboration across downstream and upstream players are vital as well. Lukman noted how the Omnibus Law, passed November 2020, can help boost foreign investment and enable businesses to operate much more efficiently and productively. The law, which amends many of the country’s existing laws, relaxes restrictions in capital investment, business licensing, labour laws, corporate tax and land acquisition, amongst other key areas of operations.
“But all these must be matched by constant innovation on the manufacturers’ side. As consumer needs, preferences and even buying patterns change, so must companies develop new products and ways to market these products, new ways to meet users’ demands,” said Lukman.
Meeting consumer needs
The pandemic further altered the constantly evolving food and beverage industry not just in Indonesia but globally as well.
The trend for a healthier lifestyle, which has been gaining traction in recent years, grew its following. Besides health and fitness through more nutritious meals and regular exercise, consumers are looking for immunity-boosting foods and ingredients. Many are emphasising holistic health with foods and drinks that promote physical, emotional and mental health.
Even with outdoor dining already allowed in most areas, out-of-home consumption remains slower compared to previous years, especially as more people prefer home cooking to ensure healthier meals. Plant-based foods and drinks are gaining popularity as well.
“In Indonesia, the trends for healthier diets and food safety were heightened by the pandemic. Demand or preference for healthier foods and drinks and concerns about food safety are stronger amongst the upper middle class, but the lower middle class are trying to keep up, albeit facing roadblocks related to income and availability of products,” Lukman said.
Besides being more health-conscious, consumers in Indonesia, according to Lukman, are now more price-sensitive, seeking affordable, locally sourced products. “They are more digital because of the strong e-commerce trend but are also more eco-friendly and discerning of the products that they buy,” he added.
“Add to this the fact that 53.81 percent of Indonesia’s population comprises millennials and Gen Zs, who have changing product or service preferences and want and crave a new experience each time,” Lukman added.
But while these evolving consumer needs and concerns create new challenges for manufacturers, they also present an opportunity, he admitted. To optimise this opportunity, GAPMMI cannot overemphasise the role of innovation and how it will enable manufacturers to improve not just processes and efficiencies but also products and even the entire value chain.
“For one, consumers want more functional foods and drinks, and not only that, they want for these products to be healthy and delicious at the same time,” Lukman said. Product differentiation will take care of millennials and Gen Zs’ preference for unique taste and new product experience, he added. All these require innovativeness from new product development through manufacturing and distribution.
“We add value to our products through modernisation and innovations, leveraging scientific data in developing delicious yet functional foods, differentiating these products, delivering the desired experience, and even constantly reminding the target market through clear and captivating designs to capture their loyalty and increase product accessibility to them,” shared Lukman.
Collaborative ecosystem vital
GAPMMI through Lukman notes that close cooperation amongst industry players, manufacturers, the government and associations is indispensable in helping the industry navigate the changes brought about by the pandemic and move it forward.
Manufacturing activities are picking up speed as the COVID-19 situation in the country continues to improve and restrictions relax. The manufacturing index hit a record peak of 57.2 in October 2021, showing steady growth from 52.2 in September and auguring well for the months ahead.
“Even as individual companies adjust in their own way to new approaches in doing things, we also work together and partner with the government. The government has launched several programs to aid economic recovery and assist the private sector. GAPPMI supports the government and we encourage our members to do more economic activity,” Lukman said.
More companies are innovating with new and fortified ingredients, vitamins and minerals to offer products that boost the immunity. Many are also increasing production of items for home cooking such as spices. “All these reflect how companies continue to adjust, thus the importance of sustained innovation and creativity to match the demands of the consumer,” he added.
Lukman further said that with the food and beverage industry being in constant flux and changes accelerating in recent years and becoming even more predictable to harder to predict, stakeholders must prepare for VUCA or volatility, uncertainty, complexity and ambiguity. In such environment, knowledge and technology, agility, competence and adaptation are keys to survival.
“All countries the world over are facing crises and changes. But I believe market trends here in Indonesia are on a positive track. Our situation pandemic-wise is much better, and we hope we can keep it this way throughout this year to revitalise the industry and economy in general. For the food industry, we are looking at 7 percent growth so we need much effort from all stakeholders, from government to the private sector. With collaboration, we can accelerate economic recovery,” Lukman closed.
Copyright (c) Ringier Trade.com. Copyright (c) Ringier Trade Media Ltd. (c) 2021.
All rights reserved. Reproduction in whole or part in any form or medium without express written permission is not allowed.
Ringier Trade .com (c) Ringier Trade Media Ltd., accept no responsibility or liability for any information provided by any third party on this website.