mla industry insights – Indonesia – April 2016 For further information visit us online at: www.mla.com.au or email us at: marketinfo@mla.com.au

market snapshot INDONESIA

consumer

Aus exports

consumption (urban beef)

average value

Key insights ➡ Indonesia’s key socio-demographic trends, including income and population growth,

rapid urbanisation and shift to modern diets, suggest continuation of the market’s fast growing demand for quality protein products.

➡ Similar to other agricultural products, beef consumption is anticipated to grow much faster than domestic production, and the gap in demand will likely to be met by an increase in imports of both beef and live cattle.

➡ While Indonesia is a member of ASEAN and newly agreed ASEAN Economic Community (AEC), trade with the country will continue to be largely dictated by the government’s policies on beef and live cattle imports.

➡ While its short-term economic outlook may be subdued, long-term consumer demand is projected to be strong and positive, underpinned by a large number of middle or upper class urban consumers who will be seeking convenience, diversity and value in their daily grocery purchase.

20509 times more

than 2009

➡ Indonesia is the fifth largest export market for Australian boxed beef. In 2015, Australia shipped 39,134 tonnes swt of beef to Indonesia (down 26% from 2014), valued A$244 million (down 13% year-on-year).

➡ Beef import regulations were changed by the Indonesian government in December 2014, resulting in limitations on meat cuts that were allowed to be imported into Indonesia. Besides this restriction, subdued consumer demand – stemming from the country’s slowed economic growth and high inflation – negatively contributed to the decline of Australian beef trade with the market in 2015.

BEEF Australian trade overview

5th largestbeef trading

partner (in value)

up 26% YOY to

A$6.10/kg

Australian beef

is known for its quality and taste

➡ Australian beef exports to Indonesia in 2016 are anticipated to decline in volume, largely due to tight supplies. That said, some relaxation in import regulations, improving economic sentiment, and a projected growth in beef consumption, will likely underpin mid- to long-term growth in demand for Australian red meat.

➡ The market is also the largest and most critically important market for Australian live cattle. Number of head sent to the market during 2015 totalled 618,323 (down 15% from 2014), valued at A$548.8 million (down 2%).

Australian beef exports to Indonesia

Source: DAWR, GTA 20

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

150

10

20

30

40

50

60

‘000

tonn

es s

wt

0

100

200

300

400

A$ Millions

Chilled Frozen value

mla industry insights market snapshot – INDONESIA – April 2016

1 World Bank/UN/BMI.2 ‘What Indonesia wants - Analysis of Indonesia’s food demand to 2050, by Research by the Australian Bureau of Agricultural and Resource Economics and Sciences, November 2015.3 BMI Research.4 Coordinating Ministry of Economy, Indonesia.

Indonesia’s average beef

consumption per capita is one of the

lowest in Asia at only

2.5kg 4 while consumption in urban areas is

estimated to be at around

7kg 5

2

Market trends

Consumption of protein in Indonesia

➡ Young population, and will remain so: Indonesia has 258 million people – the fourth largest population in the world behind China, India and the US. The proportion of ‘active population’ (people of working age – between 15 to 64 year old) currently stands at 67%, and is forecast to remain high at 66% by 20501. It is also the world’s largest Muslim country.

➡ Rapid urbanisation: Java Island (administrative region) is home to 145 million people, which represents almost 60% of the Indonesian population. Indonesia’s capital city, Jakarta, located in the western region of Java Island, is steadily growing with a population of over 10 million people. With other cities also growing fast, by 2050, 71% of Indonesia’s population is projected to live in urban areas, compared with 54% in 20152.

➡ Income growth among middle class: Indonesia’s GDP per capita grew almost 200% in a decade to US$3,513 in 2014, and is anticipated to reach US$9,138 by 2025. The increase is largely due to a continuing expansion of middle/upper class urban consumers, with household net incomes between US$10,000 to US$25,000. Those consumers should account for 24.2% of households in 2019, against 9.0% in 20153.

➡ Beef consumption on sharp rise: Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) forecasts that the real value of Indonesian domestic beef production will increase more than 200% by 2050 in comparison with 2009, but beef consumption will rise more than 14 times during the same period. The growth will largely come from urban consumers, whose value of beef consumption is projected to be higher than China’s average, by 2050 (ABARES, per person basis).

Medan2.2 million

JAKARTA10.1 million

Bandung2.6 million Samarang

2.1 million

Bekasi2.5 million

Tangerang2 million

Depok1.9 million Surabaya

2.8 million

Palembang1.6 million

Pekanbaru

Padang

SerangBandar Lampung

Tanjung Pinang

Dampasar

Banjarmasin

Makassar1.4 million

Indonesian major cities and population

Source: FAO-OECD estimates

Fish 74% Poultry 15%Beef & veal 4% Sheepmeat 1%Pork 6%

2015

Source: Ministry of Health, Indonesia, 2014

mla industry insights market snapshot – INDONESIA – April 2016

5 ‘What Indonesia wants - Analysis of Indonesia’s food demand to 2050’ by ABARES.6 IMA Asia Q4 Forecast Book 20157 Per capita terms, ABARES.8 MLA Global Study.

Major modern retailersRETAILER FORMAT BANNER

PT Makro Indonesia

Superstores/supermarkets, hypermarkets,

Convenience & forecourt, health & beauty

Hero, Giant, Starmart, Gurdian

Matahari Hypermarket, superstores/supermarkets, health & beauty

Hypermart, Foodmart, Boston

PT Carrefour Indonesia Superstores/supermarkets Trans Carrefour

Indomaret Convenience and forecourt Indomaret

Alfamart Convenience and forecourt Alfamart, Alfa Express, Lawson, Alfa Midi

Source: IGD

3

Key Sectors ➡ Retail – traditional vs. modern: Traditional outlets, including wet markets and small shops run by individual owners

have dominated, and will continue to dominate, the Indonesian grocery retail market share. That said, modernised retailers – both local and multinational – are rapidly expanding, responding to demand from urban consumers who are willing to pay for convenience, variety and ‘good value for money’.

➡ Foodservice in high demand: There is a high frequency of eating out in Indonesia for both lunch and dinner8, and the market’s foodservice sector caters for various consumer needs. Key trends include:

⇨ High-end dining demand from both local middle/upper class consumers and international visitors – the major outlet for Australian loin cuts

⇨ ‘Destination’ hyper-mart and convenience stores offering eat-in spaces for visiting shoppers, competing against the traditional foodservice outlets (i.e. Cyberpark Kawaraci, Alfa-mart)

⇨ Growth of cafe culture and ‘glocalized’ menu offered by local and multinational operators.

➡ Live cattle from Australia: Beef from Australian cattle lot fed in Indonesia adds considerable volume to beef supply in the market, which flows into both the retail and food service sectors.

Grocery retail market shares

Local beef retail prices at Jakarta wetmarkets

Market trend continued.. ➡ Domestic agriculture in constraint: Food production in Indonesia is

projected to increase at a slower rate than consumption5, with its productivity growth limited by small scale, non- mechanised farming practice and insufficient infrastructure.

➡ Economy could grow faster if… or when: While there is an ongoing optimism for the country’s long-term growth and rising consumer demand, the immediate outlook continues to be influenced by the political power game between President Joko Widodo and opponents, and contracting export demand. IMA forecasts between 5.5% to 6.6% real GDP growth during 2015 to 2020, but also suggests that the country has the potential for 7-8% GDP growth, if or when Jokowi gains political support for the reforms needed to lift growth 6.

➡ Retail price on the rise: Beef retail prices at Jakarta wet markets this year showed strong increases, due to a combination of rising consumption, import restrictions and high inflation. Local beef sold at wet markets includes beef from Australian cattle lot fed in Indonesia. Source: Morelink Asia.

Includes Australian cattle lotfed in Indonesia

2012M J S D M J S D M J S D M J S D M J S D M J S D

20

40

60

80

100

120

140

160

180

200

220

240

'000

IDR

knuckle tenderlointrimmings

20122011 2013 2014 2015

Source: IGD

Alfamart 2.0%

Matahari 0.6%Indomaret 1.6% PT Makro Indonesia 0.5%

PT Carrefour Indonesia 0.8%

other 94.5%

2015

mla industry insights market snapshot – INDONESIA – April 20164

Live cattle trade

Indonesia’s is Australia’s largest destination for live cattle exports.

In 2015, 618,323 head of cattle were shipped to the market, down 15% from the previous

year, largely influenced by import permit numbers issued by the

Indonesian government , as well as the tight supplies and strong

prices from Australia.

Australia is virtually the sole external supplier of cattle (mostly

feeder cattle to be lot fed for several months prior to slaughter) to the market, due to the current

FMD policy.

Competitors ➡ Australia is the major supplier of

imported beef to Indonesia, occupying 80% of the market share in 2015 (up 2% points year-on-year, Jan to Nov period) New Zealand is the second largest supplier with a market share of 16%, followed by the US (4%).

➡ At present, Indonesia imports beef only from countries that have a Foot-and-Mouth Disease (FMD) free status. This rule prevents Brazil and India from supplying their products into the market, although there have been numerous media reports in the market that the government is considering revising the import protocols.

Consumer ➡ Insights from MLA research:

MLA conducted consumer research in Indonesia as a part of MLA Global Research 2015. Primary grocery shoppers aged between 18 to 64 years old have responded to a globally standardised questionnaire concerning their meat preferences, shopping behaviours and reasons for buying or not buying particular proteins. Key results from the Indonesian markets are listed below.

⇨ Consumers think of beef when it comes to meat, but it is chicken that is bought and eaten most due to its affordable price and ease of cooking.

⇨ Beef’s strengths lie in taste, quality and superiority, therefore people are willing to pay more for it.

⇨ Freshness and safety are the most important factors when buying meat, closely followed by nutrition and quality.

⇨ Local beef dominates consumption, and scores well in terms of variety, safety, freshness, halal and being less expensive.

⇨ Over half of respondents feel they should limit consumption of meat. Around 40% to 50% said they should limit consumption of beef or lamb. This is mainly due to high cholesterol and other health reasons.

➡ Beyond Java: In the short-term, the island of Java will continue to be the main area for commercial opportunities, with more than half the population living and earning relatively high incomes, especially in Jakarta and Central Java. However, with the island increasingly saturated by numerous operators, leading retailers and other businesses are likely to expand to other regions.

Australian live cattle exports

Beef imports into Indonesia

Source: GTA. 2015*=Jan to Nov 20

05 

2006

 20

07 

2008

 20

09 

2010  20

11 20

12 20

13 20

14 0

20

40

60

80

100

'000

tonn

es s

wt

0

1

2

3

4

5

6

A$/kilo

AustraliaNZUSother

average value

2015*

 

7

2005

 20

06 20

07 20

08 20

09 20

10 20

11 20

12 20

13 20

14 20

150

200

400

600

800

1000

1200

1400

A$/h

ead

0

200

400

600

800

1000

1200

'000 head

Indonesiaother

average value

Source: GTA.

mla industry insights market snapshot – INDONESIA – April 2016 5

Source: GTA. 2015*=Jan to Nov 20

05 

2006

 20

07 

2008

 20

09 

2010  20

11 20

12 20

13 20

14 0

20

40

60

80

100

'000

tonn

es s

wt

0

1

2

3

4

5

6

A$/kilo

AustraliaNZUSother

average value

2015*

 

7

© Meat & Livestock Australia, 2016. ABN 39 081 678 364. MLA makes no representations as to the accuracy of any information or advice contained in MLA’s Market snapshot and excludes all liability, whether in contract, tort (including negligence or breach of statutory duty) or otherwise as a result of reliance by any person on such information or advice. All use of MLA publications, reports and information is subject to MLA’s Market Report and Information Terms of Use. Please read our terms of use carefully and ensure you are familiar with its content.

Source: DAWR

9 Carcasses and cuts that are not specified in the revised decree are to be imported by SOE/BUMN only, under certain conditions.

Click here for MLA’s Terms of Use

Market access ➡ AANZFTA: With Indonesia being one of ten ASEAN members, trade access between the market and Australia is defined under

ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). Under the AANZFTA, the current tariff of 5% on chilled and frozen bone-less beef will be eliminated in 2020.

➡ Changes to cut restriction: Importation of meat, meat products and edible offal are conducted based on the Indonesian government’s import permit system, as well as the Decree of the Minister of Agriculture that states type of bovine meat cuts for importation. Revisions were made to the decree in December 2015, allowing several more cuts to be imported into the market9.

➡ AEC unites ASEAN: Ten ASEAN members, including Indonesia, proclaimed a Community through a Declaration signed by ASEAN leaders on 22 November 2015. Economic integration via the ASEAN Economic Community (AEC) aims to boost ASEAN’s competitiveness in the global market, with free movements of goods, services, investment, skilled labour and capital.

AUSTRALIAN BEEF EXPORTS 2015 2014 changetonnes swt TOTAL GRASS FED GRAIN FED TOTAL GRASS FED GRAIN FED TOTAL GRASS FED GRAIN FED

INDONESIA TOTAL 39,134 38,372 762 53,140 52,339 800 -26% -27% -5%1 MANUFACTURING 28,974 28,604 370 18,933 18,841 92 53% 52% 301%2 STRIPLOIN 2,663 2,490 172 1,523 1,393 130 75% 79% 32%3 SHORT RIBS 2,488 2,485 3 586 583 3 324% 326% -11%4 OTHER* 2,185 2,185 - 1,946 1,946 - 12% 12% -5 RUMP 730 698 33 1,543 1,527 16 -53% -54% 105%6 TENDERLOIN 570 486 84 633 547 86 -10% -11% -2%7 CUBE ROLL/RIB EYE ROLL 561 466 95 513 431 82 9% 8% 16%8 RIBS 306 306 - 1,163 1,162 2 -74% -74% -99%9 SILVERSIDE/OUTSIDE 101 101 - 3,155 3,130 25 -97% -97% -100%10 BLADE 100 100 - 6,008 5,932 75 -98% -98% -99%

OTHER 456 452 4 17,137 16,848 289 -97% -97% -99%

Top cuts to Indonesia

Bovine meat cut fresh chilled and frozen

Chilled Bone in Short loin, Rump & loin, T-Bone Steak, Short Ribs, OP Ribs/Ribs Prepared

Bone-less Tenderloin slide strap off, Tenderloin/Side strap, Striploin/sirloin, Cube roll/Rib eye, Rump cap, Sirloin Butt/Rostbiff

Bone-less Industrial/Manfaucturing Meat Cuts - Trimmings 65 until 95 - CL Forequarter & Hindquarter

Frozen Bone in Short loin, Rump & loin, T-Bone Steak, Short Ribs, OP Ribs/Ribs Prepared, Brisket/Short plate

Bone-less Tenderloin slide strap off, Tenderloin, Butt Tenderloin, Striploin/sirloin, Tri-Tip/Bottom Sirloin Triangle, Cube roll/Rib eye, Tenderloin Steak, Striploin Steak, Cube roll/Rib Eye Steak, Top sirloin, Sirloin Butt/Rostbiff, Rump cap, Fillet of loin, Chuck loin, Short Ribs

Bone-less Manufacturing meat: Trimmings 65-95 CL, Disnewed minced beef/Finely Textured Meat, Diced/block beef, Topside/Inside, Brisket, Forequarter, Hindquarter

Edible offal from bovine animals

Chilled Bone in Tail pieces

Bone-less Tongue long cut, Tongue, Tongue -short cut, Tongue-short cut special trim, Tongue Swiss cut special trim

Frozen Bone in Tail, Tail pieces

Bone-less Tongue long cut, Tongue, Tongue -short cut, Tongue-short cut special trim, Tongue Swiss cut special trim, Tongue Root/Throat trim, Cheek Meat, Head Meat, Lips, Tendon

Bovine meat and edible offal allowed for importation into Indonesia

Source: DAWR Market Access Advice MAA1581. Additions stated in the revised decree are marked in red