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Indonesia – consumer preferences offer increased opportunity

aSophisticated middle class consumers in the Asian region generally see consumption of Western-style foods as a mark of affluence, and our immediate northern neighbour is no different.

With economic growth in the archipelago, which has a population of 230 million (including a 35 million strong middle and upper class), running at between 6 and 7%; and additional factors such as geographic proximity, and increasing numbers of students studying in Australia; Indonesia represents a major export opportunity for Australian food and beverage producers.

Australia’s exports to Indonesia have increased from around 2% of Australia’s total food and beverage exports in 1990-91 to 7% of a total market of $23.3 billion in 2006-07. Much of this increase has been driven by a sustained shift away from traditional ‘wet’ markets to supermarkets and convenience stores. The demand for Australian food and beverages is reflected in the range of products that have become available in chains such as Hero, Carrefour and Matahari over the last few years.

While the Indonesian market is burgeoning with potential, like any export market, it does have its pitfalls and challenges. Austrade’s Jakarta-based trade commissioner, Patrick Kearins, said one of the main issues facing the market is that all food products – retail and bulk – need to be registered with the Indonesian Government, and at times there can be delays.

“While this can be a disincentive for distributors, it’s simply a case of proving that a product is fit for human consumption,” he explained.

The good news is that most producers have the information at their fingertips because of the high levels of HACCP and ISO certification that exist in Australia. “Although the documentation can look very daunting on face value, most companies have all the information and it just needs to be reorganised,” said the Sanitarium Health Food Company export business manager for Asia, Romeo Kekic.

Beyond the basic level of registration required for any food product there is also halal accreditation. “Halal accreditation is very important to have,” said Kekic. “It’s essential if you’re targeting the mass market, and even if it is not required, it is a very useful certification to have.”

Like many emerging Asian markets, the cold chain distribution network in Indonesia is not as sophisticated as in countries such as Singapore, but a bigger issue is the need to be on guard against corruption.

“On Transparency International’s worldwide corruption index, Indonesia is still ranked quite badly (standing at 126 of 180),” admitted Kearins. “But the President has said it’s an issue, and they are focusing on it. Also, food and beverage is a really clean channel and corruption can be ignored.”

A major factor with doing business in Indonesia is that it’s vital to pick the right partner and take the time to build the business relationship. “Having a good local partner and distributor is vital,” said Kekic. “For example, if you don’t have a good local partner you’ll only get distribution in Jakarta instead of having reach into other markets such as Surabaya and Jogjakarta.”

“It’s a cliché, but the relationship aspect of doing business is vital,” agreed Kearins, “Investing time in relationships is critical because people really want to know you. The great successes we’ve been party to are because companies haven’t rushed the process, and taken the time to find the right person.”

The conflict between Western business values of directness and traditional Asian concerns about ‘loss of face’ also exist in Indonesia, but to a large extent these depend on the person with whom the relationship is built.

“There are strong hierarchical relationships in Indonesia so if you’re dealing with someone who is at the correct level, there isn’t a problem. You do have very open conversations, but if you miss the right point in the company, or the right company, it can be an issue,” warned Kearins.

On the positive side, there is no need to re-label products, as the labelling requirements of Australia stand up in Indonesia. Stickers which show that the product has been registered can be applied by the local distributor.

According to Kearins, when it comes to pack size, it depends on the market being targeted. “People in the mass market shop daily, or even just for a meal, so smaller pack sizes may be required. Generally, however, that’s not the market that Australia serves.

The middle class and upper class consumers do buy more frequently than they would in Australia, but in that market the pack sizes are fine.”

Reformulation tends not to be an issue either. “There’s a preference for sweetness, but that generally comes at a product choice level,” said Kearins. “Like in Australia, there’s a drive for organic, gluten and pesticide free products, and movement away from traditional sweetness.”

The exception to this is the wine market. “The politics behind wine are interesting,” explained Kearins. “With 85% of the population being Muslim, there are challenges as to how wine is sold, displayed and marketed, but there is a strong market among expatriates and ethnic Chinese.” Indonesia therefore has a great breadth of high end wines targeted at a small but informed group of wine consumers.

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