Bakery Ingredients

According to the Indonesian Bakery Producer Association (APEBI), the average income growth of the bakery industry is above 10% each year. In 2019 this sector’s income reached approximately USD 6 billion.  

Therefore, the prospect of this sector is positive, owing to its ongoing growth. According to Euromonitor, the sales forecast for bread, cakes, and pastries in 2019 may reach up to 688,000 tonnes. There are only few Indonesian big market players in the Indonesian bakery market, but the number of small-scale players is huge.  

Based on data from Statistics Indonesia bakery trend analysis in 2015, there are 639 registered bakery and cake product companies, which include both medium and large-scale manufacturers. Bakery in Indonesia mainly consists of breads, traditional snacks, cookies, wafers, biscuits, and cakes. The Indonesian bakery industry is flourishing, with increases of bakery product sales, as well as increases of imported bakery ingredients. On average, the entire bakery industry in Indonesia uses around 70% imported ingredients and 30% local ingredients.  

Although Indonesians have begun to recognize bakery products as a meal choice, most of them still consume bakery products as snacks. Analysis of the trends and preferences of Indonesian consumers is required by new businesses, as they continue to change from year to year. Each consumer segment in Indonesia have their own preferences towards bakery products; Western bread and pastries appeal to high-end consumers, Japanese and Asian bread and pastries are the preference of upper-middle income consumers, and local sweet breads and white breads are still largely consumed by lower-middle income consumers.  

In September 2014, the Government passed Law No. 33 of 2014 on Halal Product Guarantee (UU JPH), which stipulates that halal certification is mandatory for all food, beverage, drugs and cosmetics, as well as chemical, organic, and genetically modified products sold in Indonesia. All imported products in Indonesia must be registered with BPOM. Importers, distributors or retailers dealing in unregistered products are in breach of the regulations and are subject to penalties that include the confiscation of said products. In some cases, trends, laws, and regulations in certain countries becomes a challenge for foreign players entering the market and competing with local players. However, overall, the future prospects and trends in bakery ingredients market sector remains broadly positive for specialized and quality products. 

HIGHLIGHTS

Quantities and values of goods produced by items (2012 - 2015)

KBLI Code: 10710 Manufactures of Bakery and Cake Products

Sources: "Manufacturing Industrial Statistics 2012" and "Manufacturing Industrial Statistics 2015", BPS - Statistics Indonesia

Basic ingredients for bakery industries in Indonesia are in high demand. In 2015, registered manufacturers of Indonesian ‘Other Bakery Products’ reported about USD 41,600 in sales. Three years later, registered manufacturers reported sales up to USD 134 million for ‘Other Bakery Products. Based on Manufacturing Statistics Indonesia 2015, there were 639 registered bakery and cake product companies, including both medium-and-large-scale manufacturers. According to the Indonesian Bakery Association (APEBI), the domestic bread market is dominated by small, home-based producers (68%), followed by mass-produced bread (20%) and artisanal/boutique bakeries (12%)5. 

Bakery product consumption per annum per capita

Sources: Compiled by EIBN, BPS Indonesia, Consumption Expenditure of Population of Indonesia reports

The consumption per capita of bread, cakes, and pastries jumped almost 60% between 2016-2018 as sometimes consumers get bored eating rice and other regular Indonesian dishes. Purchased baked goods are often easier to eat compared to noodles or steamed rice at home.

Bakery Products Spending per Annum per Capita 2014 - 2018

Sources: Compiled by EIBN, BPS Indonesia, Consumption Expenditure of Population of Indonesia reports

The overall spending per capita for bakery products almost tripled between over the last four years. In 2018, 20 USD per capita on bakery products were spent as compared to 7 USD in 2014 with a 158% increase for bread products, 180% for cookies, and 156% for steam cakes.

CHALLENGES

Bakery and bakery ingredient products need to comply with certain regulations and law that applies inn Indonesia, including the such as SNI (The Indonesian National Standard), the Halal Law Certification, and Labelling. The list of regulation that must be adhered to is the major challenge for the importer, as it translates to a lengthy process and cost to get it issued.  

According to the Vice President of The Indonesian Food & Beverage Association (GAPMMI), food regulations in Indonesia keeps on changing from time to time. Even the law for halal certification in 2014 has not been explained clearly by the Indonesian House of Representatives (DPR-RI).  

Furthermore, to adapt with Indonesian market, foreign and local companies need to understand the trends and behavior of Indonesian consumers. Indonesia has its own specified taste preference for bakery goods and bakery ingredients. For example, most Indonesians – especially the lower-middle income groups - has a preference for chocolate flavors over other variants. Meanwhile, the middle-high income groups prefer a wider variety of toppings and fillings such as fruits, meat, and cheese.

These preferences and trends can change from time to time. For example, when Breadtalk - the first retail to brings the Asian-style sweet bread - opened to Indonesia, most people visited to taste their products, which boast a softer texture and a wider range of flavors than other traditional breads found then. Subsequently, Indonesia has seen a rise in these type of breads shops with Japanese company Bread Life and Tous Les Jours from South Korea, joining in to compete for the Indonesian market.

CONCLUSION

In conclusion, the bakery ingredients sector is a very promising sector for foreign investment as the market has been constantly growing in recent years. As the bakery sector develops with the rising demands of consumers, the bakery ingredients sector is expected to grow as well. Most bakery ingredients used for the bakery industry are imported, which opens up opportunities for foreign companies to enter the market.  

It is noteworthy that the bakery ingredients sector is highly dependent on consumers’ preferences. Consumers’ taste affects which bakery ingredients should be used in bread-making; such as baking emulsifier, filling, topping, and flavoring. Each consumer segment has their own preference of flavors. While the demands for fillings, toppings, and flavorings fluctuate, the demands for yeast, wheat flour, and premix tend to be consistent.

It should be highlighted again that there are several regulations that must be complied with, such as Halal Law Certification, food safety, labelling, and other food-related regulations. Compliance to those rules is necessary to enter Indonesian market. There are some challenges that needs to be addressed in the industry, such as regulation challenges and the local taste preference. These two challenges are the most common to be found in the bread and bread ingredients market.

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