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Trend, opportunity, and challenge
Aysha Mareta Karlina
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35.377 km2
77% agriculture land
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35.377 km2
77% agriculture land
Climate:
Average temperature: 23.5°C
Average humidity: 74%
Precipitation: 184.7 mm3
Food industry facts (BPS, 2014)
Total no. of establishments: 1011
Local: 125
Foreign: 38
Gross added value: 1.3 billion euro
Main agriculture products:
Paddy, maize, cassava
Banana, mango, durian
Tomatoes, cabbage
Ginger
Tea, coconut, palm oil, sugar cane, rubber
23.7 M 23 M
20.6 M $1.4k/cap
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• GDP increment: 9.86%/yr
• Purchasing power increment: 4.33%/yr
46.7 M
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Wheat
Rice
Fish
Soybean
Poultry
6 2012 2050
Growth:
2.4 – 8%/year
14.6 L/cap/yr
3820 ton/yr
Expected to
double!
THA:
33L/cap/
yr
MY:
50.9L/cap/
yr
49
13
13
8
5
5
7
Milk products in Indonesia (%)
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Powdered milk,
non-infant formula
Sweetened
condensed milk
Liquid milk
Infant formula
Ice cream
Yoghurt
Others
Trending among young people:
Creative, trendy milk products,
more bold with flavors
such as strawberry, melon, watermelon,
cappucinno, matcha, flavored bubble milk tea.
Also cheese as snacks.
source: IFC, 201113 ‘Volume’ and ‘market share’ source: FFI, 2007
Company Location Products Volume (million
l/year) Market
share Frisian Flag
Indonesia West Java Liquid milk, sweetened condensed
milk (SCM), milk powder. 123 27.1
Indomilk West Java Liquid milk, SCM, ice cream 68 15.0 Nestle East Java Condensed milk, milk powder 162 35.8 Ultra Jaya West Java Liquid milk, SCM, milk powder 30 6.6
Sari Husada
(Danone) Central Java Liquid milk, yogurt, milk powder 12 2.7
Greenfields East Java Liquid milk Garuda Food West Java Liquid milk Cimory West Java Liquid milk, yogurt Diamond West Java Liquid milk, ice cream
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Cattle cow:
425.820
Dairy cow:
116.400
28.500
L/day
14.000
L/day
8.000
L/day
> 5.000
L/day
1.500
L/day
GKSI (Joint Milk Cooperative Indonesia): determining the production and the distribution of fresh milk
in Indonesia. Mediator between the small scale farmers with the government and the processing
industries.
Traditional grocery stores
Small convenience stores
Supermarket/hypermarkets
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Domestically, small-scale farming practice produced most of the milk; they have not met the nationally demanded quality and quantity. Thus, almost 75% of the milk demand at 2009 was fulfilled by import.
The challenges of domestic milk production is including the low productivity of cattle (1.4 L/cattle). Meanwhile, Dutch cows produce in average 7.3 L/cattle. (FAOstat)
Another challenge in increasing the domestic milk supply is the limited land availability in Java Island where most of the local fresh milk are produced. Abundant land is available outside Java, however the investors are not interested. This is possibly because the lack of infrastructure outside Java.
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NL ID
There is a huge gap between the demand and the supply of milk in Indonesia, thus a large quantity of milk is being imported on a regular basis.
The domestic milk production can only cover 20% of the national milk demand, 5% less than the previous year (GKSI, 2016).
In 2011 alone, 207.403 ton of milk is imported from New Zealand, Australia, USA, Phillipines, and the Netherlands (EU)18. The imported milk is in the form of skim milk powder, anhydrous milk fat, butter milk powder, dry whey, and butter18.
The volume market share of the exporter countries are: EU (32%), New Zealand (23%), USA (21%), others (24%)19.
This poses as an opportunity for the Dutch/European dairy companies to either join the other companies to import milk to Indonesia, or instead building a milk processing company while increasing the domestic milk production.
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•The main dairy products consumed in Indonesia are milk powder and sweetened condensed milk, and one of the reasons is the lack of cold chain. •Infrastructure quality in Indonesia compared to the neighboring countries (LaSalle, 2013):
•Seaport and airport is very important as Indonesia consists of more than 17000 islands. •The infrastructure for transportation between Java and other islands and the development of the roads such as highways in Sumatra and Sulawesi are continuously being built. •The main distributors are: Aidela Jaya Sejahtera, Kalimas Batu, Anugrerah Pharmindo, Astri Distribusindo, and Mega Medika19.
Country Road Railway Seaport Airport
Indonesia Bad Bad Fair Fair
Malaysia Good Good Good Good
Phillipines Fair Bad Bad Bad
Singapore Good Good Good Good
Thailand Good Good Good Good
Vietnam Fair Fair Bad Bad
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The government’s regulation plays a very significant role on the domestic milk supply.
For example, the number of dairy cows continuously dropped from 2011 to 2013 from 697.000 to 460.000 respectively. This caused the domestic milk production to drop from 0.98 MT to 0.78 MT.
The main cause was indicated to be the government ban to import beef cattle, which caused dairy cows to be slaughtered to meet the beef demand.
Regarding labelling of imported products:
Pre-listed as exporters by Indonesia’s ministry of agriculture
Import permit (SPI)
National agency of drugs and food control (BPOM RI) – can take up to 100 days to obtain
Halal labelling from Indonesian Council of Ulama (MUI)
Label in Bahasa Indonesia, easily understood
Nutrition label not mandatory
For milk imports: sanitary certificate from the ministry of agriculture, health certificate from BPOM, and halal certificate from MUI19.
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BUSEP regulation: there is a fixed ratio of milk import to the domestic milk bought by the milk processing companies. For every ton of imported milk used, 0.5 ton of domestic milk should also be used by the milk processing companies. However, this regulation was erased on 1998, which means that the Indonesian dairy supply is now in a free market system.
Import tariff regulation: for the import of processed milk products such as skim milk powder, anhydrous milk fat, butter milk, cheese and lactose, is taxed 5%.
Milk processing industry is included in one of the food industries which are eligible for income tax facilities in investment (Peraturan Presiden RI No. 62 Tahun 2008).
Regulations from the BPOM (Indonesia National Agency of Drug and Food Control), which regulates the food safety in Indonesia, including:
About food categorization: Keputusan Kepala Badan POM RI No. HK.00.05.23.3644 Tahun 2006
About the supervision of functional foods (including labelling): Peraturan Kepala Badan POM RI No. HK 00.05.52.0685 tahun 2005
About the ban of adding vitamin K to products: Peraturan Kepala Badan POM RI Nomor HK.00.06.1.0256 Tahun 2008
About the supervision of infant formula and milk for special medical purposes: Peraturan Kepala Badan POM RI No. HK.00.05.1.52.3930 Tahun 2009
About the categorization of infant formula and elderly formulas: Peraturan Kepala Badan POM RI No.HK.00.05.1.52.0085 Tahun 2010.
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GKSI (Joint Milk Cooperative Indonesia):Office: JL RS Gedebage, No. 128, 40295, Ujung Berung, Indonesia
Phone: +62 22 7801683
Email: [email protected]
Website: http://gksi-jawabarat.co.id/
GAPMMI Association of food and beverage manufacturers Indonesia (http://www.gapmmi.or.id/?pilih=hal&id=21)
ASRIM Association of soft drinks industry (http://asrim-indonesia.org/contact/)
APMB Association of baby food producers
BPOM National Agency for Food and Drug Control (http://www.pom.go.id/new/index.php/home/en)
Research centers:
LIPI (Indonesian institute of sciences) (http://lipi.go.id/kontak)
Universities: Bogor agricultural university, Gajah Mada University, Brawijaya University.
MUI The Indonesian Council of Ulama ([email protected]; +6221‐3841662) (http://mui.or.id/)
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The Indonesian Consumers Association
Phone: +62 21 798 1858/59
Ministry of Agriculture
Directorate General for Food Crops (+62 21 7806810)
The Ministry of Trade Indonesia
Email: [email protected]
Phone: +62 - 021 – 3858171
Dir. of import: diri‐[email protected] (+6221‐3858194)
Indonesia investment
Office: Vaandelstraat 42, Delft
Phone: +31 (0)6 27 05 85 32
Email: [email protected], [email protected]
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Huge opportunity for business due to increasing purchasing power and large number of consumer.
Milk products consumption is a trend, a lifestyle, and will continue to rapidly increase.
Market who are interested in new creative, tasty products and easy to follow trends.
Huge opportunity for milk export or investing in milk farms/production facility since there is large gap between national demand and local supply (mainly only in Java).
Also, with knowledge from the Netherlands, opportunity for knowledge transfer to increase milk production quantity and quality.
There are less regulations which limits import and international milk companies’ milk production—milk supply is now a free market system. Reduction of tax is also facilitated.
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