Bakery Ingredients

According to the Indonesian Bakery Producer Association (APEBI), the average annual growth of the bakery industry is above 10%. With a forecasted revenue generation of USD 49.19 billion in 2023, Indonesia is set to maintain its record of having the largest bread and bakery product sales in the Southeast Asia. 

Therefore, the prospect for this sector is positive, owing to its ongoing growth. According to Statista, the market forecast for bread and bakery products in 2028, in terms of volume, may reach 39.97 billion kg. 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 of Indonesia Manufacturing Industry report by Statistics Indonesia (BPS) in 2021, there are 829 registered bakery and cake product companies in Indonesia, which include both medium (632) and large-scale manufacturers (197). Bakery products 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 has 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 December of 2022, the government signed Government Regulation in Lieu of Law (Perppu) Number 2 of 2022 on Job Creation, which further clarifies Law No. 33 of 2014 on Halal Product Guarantee (UU JPH). This regulation 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 become a challenge for foreign players entering the market and competing with local players. However, overall, the future prospects and trends in the bakery ingredients market sector remains broadly positive for specialized and quality products. 

Quantities and values of goods produced by items (2017 - 2020) 

KBLI Code: 1071 Manufacture of other food products 

Sources: "Manufacturing Industrial Statistics – Production, 2018", "Manufacturing Industrial Statistics – Production, 2019", "Manufacturing Industrial Statistics – Production, 2020", BPS (Statistics Indonesia) 

Basic ingredients for bakery industries in Indonesia are in high demand. In 2018, the production of six bread types amounted to about 21.5 million kg of products. Two years later, it was reported that production went up to 299.3 million kg of products. The reason for the explosive growth in bread production in 2020 in Indonesia is believed to be the growing capacity of Indonesian bakeries to export their goods overseas. 

Indonesia export values of bread goods (2017 – 2022) in USD 

Sources: Compiled by Business Indonesia from Statistics Indonesia 

Based on Manufacturing Statistics Indonesia 2021, there were 829 registered bakery and cake product companies, including both medium (632) and large-scale (197) manufacturers. According to the APEBI, the domestic bread market is dominated by small, home-based producers (68%), followed by mass-produced bread (20%) and artisanal/boutique bakeries (12%). The export of goods from Indonesian bakeries increased in 2020, reaching USD34.29 million, a rise of 26.7% over the previous year. Cakes and biscuits saw a remarkable 27.3% increase in sales that year compared to the year before. 

Bakery Products Consumption in a week per Capita 2015 - 2022 

Sources: Compiled by Business Indonesia from Statistics Indonesia’s Consumption Expenditure of Population of Indonesia reports 

The consumption per capita of bread, sweet bread, and boiled or steam cake, were moving steadily upwards. Bread consumption levels are moving steadily upward. Per-capita consumption per week for the three bread products increased from 246 Ounces as of September 2016 to 2,754 Ounces in September 2022 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 in a week per Capita 2019 – 2022 in Rupiah 

Sources: Compiled by Business Indonesia from Statistics Indonesia’s Consumption Expenditure of Population of Indonesia reports 

The spending per capita on bakery products per week has risen over the last six years. In September 2022, Rp 9,689 per capita on four bakery products were spent in a week as compared to Rp 6,167 in September 2016. 

Bakery and bakery ingredient products need to comply with certain regulations and law that applies in Indonesia, such as SNI (The Indonesian National Standard), the Halal Law Certification, and the corresponding labelling rules. The list of regulations that must be adhered to is the major challenge for importers, 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 can change from time to time. Even the law for halal certification in 2014 has been subjected to changes, deletions, and updates since the introduction of  Perppu Number 2 of 2022 on Job Creation. 

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 retailer to bring the Asian-style sweet bread - opened in 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. 

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 along 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 need 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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