The Indonesian F&B industry is currently valued at close to USD 120 billion, supported by a large and growing domestic market. In addition, the country boasts the region’s largest food delivery market. More and more Indonesians purchase meals via online platforms such as Foodpanda, Gojek, Deliveroo, LineMan, and Now, a trend that pre-existed but has been strongly reinforced by the COVID-19 pandemic.
While staple foods are the largest product category in the market, a growing middle and upper-income consumer segment is driving the demand for more premium products. Meanwhile, a boom of modern retail channels, such as convenience stores, supermarkets, and hypermarkets, is resulting in greater availability of such products.
Indonesia’s emerging middle-class has developed a taste for international cuisine, especially that of Western origin. Notably, local consumers and F&B players associate Western products with higher quality and health benefits. Young middle-class consumers are particularly likely to buy foreign F&B products, thanks to their higher disposable income as well as the influence of social media and television. Expatriates living in Indonesia’s larger urban areas and tourist hotspots, such as Bali, are also often a key target of foreign companies, as these consumers seek to buy food from their home countries.
We regularly reach out to and communicate with market stakeholders, such as Indonesian distributors and retailers to assist foreign F&B companies with market entry into Indonesia through our market research and business matching services. The following are some market insights we have gained over the course of such interactions.
- Companies wishing to enter the Indonesian market should offer products that can be seen as unique. A key strategy is to attract young consumers seeking to experience new tastes that are not traditional or commonly found in the domestic market, for which they are willing to pay a premium price.
- Nevertheless, glocalization is an important factor as local consumers do not stray too far from what they are accustomed to for long. For example, although Pizza Hut Indonesia specializes in pizza, it has started to sell rice-based dishes because Indonesian consumers prefer it over bread. Other chains such as Burger King and McDonalds have developed a similar strategy with dishes to suit the local palate.
- Social media platforms such as Instagram, Facebook, and YouTube are key channels into the local market. Indonesians are among the greatest users of social media networks in the world, spending an average three-and-a-half hours on social media platforms daily. Collaborating with celebrity brand ambassadors in social media promotional campaigns can play a critical role in generating consumer interest in a new brand or product.
- Local importers and distributors stress that it is crucial to ensure that all consumers can understand the product and its messaging by incorporating communications in the local language, Bahasa Indonesia.
- The Indonesian F&B market is highly competitive, with strong local manufacturers and established foreign brands from the US, Europe, South Korea, and Japan. After achieving successful market entry, it is important to keep innovating by launching variants to stay relevant and develop brand loyalty.
- Regulatory requirements in the market can be complex and time-consuming. F&B products have to be registered with the National Agency of Drug and Food Control (BPOM). In addition, a local partner with the appropriate import licenses is required to get the products into the market.
- Indonesia is the country with the largest Muslim population in the world. Local distributors highlight how Ramadan, the Muslim celebration that takes place every year, is a particularly important period in Indonesia when many food and grocery companies push sales and offer promotions.
Halal certification, which guarantees that products meet the requirements of Islamic law, is without question a key success factor for imported F&B products. In October 2021, Indonesia issued a new Halal certification law under Regulation No. 39 of 2021 (unofficial English translation), which states that products that enter, circulate, and are traded in Indonesia must be Halal certified unless originating from materials prohibited under Islam (Haram). Decree No. 748 of 2021 (unofficial English translation) determines the type of products that are obliged to be Halal certified, which includes F&B, pharmaceuticals, cosmetics, biological products, chemical products, genetically modified products, and consumer goods sold in Indonesia. All business processes, including production, storage, packaging, processing, distribution, and marketing, will also be required to comply with this law.
While Indonesia is a potentially huge market for retail F&B products, it is also a market that requires companies to plan and prepare for. It can be a challenging market for inexperienced exporters, but a very rewarding market for companies that put in the time and the effort and are considering a long-term investment.