Food & Beverage Overview

The F&B sector plays an important role in the Indonesian economy. In the primary sector, production of raw material for the F&B industry by agriculture, plantation and fisheries accounted for around 13% of Indonesia’s GDP in 2019. In the secondary sector, manufacturing of F&B beverages accounted for 6.4% of GDP and 29% of all manufacturing output. Overall, F&B related services contributed around 2% to GDP.

Most companies in the F&B manufacturing industry are micro (less than 4 employees) and small enterprises (5-20 employees); in total, respectively, they had 2.92 million (micro) and 737,596 (small) employees in 2015. However, large companies such as Nestlé, Indofood or DANONE strongly influence and shape the market. As for retail outlets, traditional grocery stores still dominate the market, but have lost sales shares mostly to convenience stores and supermarkets in recent years. Backed by continuing economic development, rising incomes and population growth, sales of F&B are still growing. While the sales volume was USD 89.55 billion in 2015, estimates for 2017 foresee the number increasing to USD 104 billion.  


Indonesia’s position in the global F&B market is ambiguous. On the one hand, Indonesia is one of the largest producers of, for example, palm oil, fish, cocoa and coffee, exporting its production surpluses abroad. On the other hand, Indonesia relies on imports of products that cannot be produced (either at all or in sufficient quantity) locally, such as wheat, dairy or processed food products. However, in an attempt to transform the Indonesian economy, the government is pursuing policies both to reduce the country’s reliance on imports and to strengthen the manufacturing sector, which also benefit the F&B sector.  


While trade in F&B mostly focusses on other Asian countries, some EU member states such as the Netherlands, Italy and Germany are nevertheless among the top trading partners for Indonesian exports and imports of F&B. In terms of export value, the top commodities exported to the EU include palm oil, fish products, vegetable oils and unroasted coffee, while the top commodities sourced from the EU are dairy products, prepared food, vegetable oils and chocolate and cocoa products. For some commodities, trade with the EU accounts for more than 20% of total imports (e.g. wine and beer, dairy products, vegetable oils), and of exports (e.g. fruit juices, processed fruits, chocolate and cocoa products, unroasted coffee) of Indonesia.


Future prospects and trends regarding the Food and Beverage sector remain broadly positive for a number of reasons. Upward demand (coupled with a young, growing Indonesian population) results in positive growth. To the latter, the growing confidence of Indonesian consumers and increased urbanization can be added as developments that should support industry growth. Moreover, other trends, such as a growing awareness of healthy lifestyle products, concerns about food security and the shift of consumers towards modern retail stores cannot be overlooked.  




Source: Hendriadi, 2016


Agricultural land in Indonesia increased in the last decade. In 2006, 28.42% of the 1.811.570sqkm of Indonesian land was agricultural, whereas by 2014 the share had increased to 31.5%. In 2014, furthermore, 13% of total land in Indonesia was arable, suitable for growing crops. The share of crop land (2014: 12.4% of all Indonesian land) proves that land suitable for growing crops is almost completely in use. The increase in land used for agriculture is reflected in increases in production of agricultural commodities.


In terms of number of outlets, full-service restaurants (100,170 outlets), particularly those offering Asian cuisine (97,689 outlets), and traditional food sellers (92,256) dominated the food service market in 2015. In terms of sales value, again full-service restaurants, including those belonging to chains as well as independent ones, took the lead with sales of USD 2.8 billion. Within the category of full-service restaurants, those offering Asian cuisine again dominated with a total sales value of USD 2.6 billion.


High consumer confidence and its underlying drivers, such as economic growth and rising incomes, positively affect expenditures by the population. Between 2014 and 2015, monthly average expenditures per capita increased by 11% to USD64.36 with expenditures for food increasing by 6% to USD 30.55 and non-food expenditures increasing by almost 18% to USD33.80. In 2015, the largest part of average food expenditures per capita involved prepared food and beverages (27%), followed by cereals (16%) and cigarettes (13%).


McKinsey predicts that by 2030 the consuming class will include an additional 90 million Indonesians, which means they will have an annual income of more than 3,600 USD or above. consumer spending for food and beverages will increase by more than 5% annually until 2030. By 2030, projected spending on food and beverages will reach 194 billion USD.





Notwithstanding the positive developments of the past years and positive forecasts for the future, there are still challenges remaining in the F&B sector. The legal landscape of the F&B sector can be confusing, particularly for non-Indonesian companies. Beyond that, there are challenges with regards, for example, to infrastructure. When doing business in Indonesia, it is important to keep in mind that some infrastructures related to food transport and food conservation might be poorly developed, especially outside the main island of Java. In fact, few cold storage or air-conditioned facilities or even delivery vehicles exist in comparison to the size of Indonesia’s economy. Nevertheless, the Indonesian government as well as other organizations such as the Indonesian Cold Chain Association Development Project, is working to improve Indonesia’s cold chain by building an effective network and recognizing the major role that it plays in the food security of the country.  


In order to address this lack of local infrastructures, shelf-stable products are a good solution. Conversely, frozen and chilled products will face greater challenges due to the lack of access to refrigeration facilities for the Indonesian population.  


Another challenge when selling food on the Indonesian market is appealing to Indonesian customers’ tastes and habits. Indeed, it is important to adapt the product, if necessary, to local tastes. For instance, Indonesian consumers tend to prefer products that are sweeter and that are available in smaller packaging. In addition to this, brand awareness also seems to be an important element when doing business in Indonesia, as it can be a driver for sales. Therefore, marketing efforts are necessary to ensure local product awareness.  


Though the country shows good future prospects for the F&B market, this report would not be complete without mentioning the general local challenges to doing business in Indonesia. Corruption and bureaucracy remain an obstacle to doing business in the Indonesian market. Therefore companies should be patient and ready to face those challenges, which are a part of the business environment. In addition to this, particular regulations regarding F&B products might also be challenging for foreign companies, such as Indonesian language labeling and the notification of genetically modified ingredients. 




Considering the changing and evolving globalized market and current economic conjuncture, the F&B sector in Indonesia is one worthy of consideration.  


First of all, it is undeniable that F&B is an important industry for the Indonesian economy. With the fourth largest population in the world, Indonesia has an important demand to fulfil. However, in spite of strong local food and beverage production outputs, a large percentage remains imported to meet local demand. Self-sufficiency policies are being put in place, but wheat imports will remain high, as Indonesia does not have the appropriate climate to produce it locally. Furthermore, this study also highlights the fact that packaged food consumption has also been growing in Indonesia, illustrative of a growing concern for food safety, changing lifestyles and urbanization.  


The beverage market also represents a major industry in Indonesia. The non-alcoholic drinks market, particularly of ready-to-drink tea and increasingly of isotonic drinks, shows solid sales volumes and growth. The alcoholic drinks market, however, has been increasingly restricted, as alcohol is still frowned upon by large parts of the Muslim majority population. Yet a total ban of alcohol is unlikely to happen.


The F&B industry is expected to keep growing in the future, mainly driven by a growing population and an increasing demand from local consumers. Changing food consumption patterns will also characterize future trends, as a young and urbanized population tends to have a greater concern for healthy and time-saving food and beverages.  


Finally, it is important to bear in mind that, despite local opportunities, challenges remain when doing business on the Indonesian market. First and foremost, the legal requirements and bureaucratic procedures remain burdensome. Cooperation with a local importer/distributor is advised, in order to navigate the complex market and fulfil the many legal requirements. In addition, the lack of available infrastructure, such as cold-chain storage systems, harbors and maritime transportation, are also challenges that may persist in the medium-term.  


In conclusion, it is undeniable that F&B sector is and will continue to be an important sector and market in country. However, local specificities and patterns, as well as domestic regulations and legislation, will have to be faced in a creative and dynamic fashion by companies willing to enter the Indonesian market.



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