The increase in consumer purchasing power, value-added health benefits, as well as a variety of unique flavors are likely to boost sales. The rising health consciousness especially among urban Indonesian consumers has been pushing the demand for healthier and thus pricier products.
Market overview for instant drinks
Overall, Indonesian imports of instant drinks doubled from USD 46.1 million in 2016 to USD 108 million in 2017. Among the products imported from abroad were packed juices with a value of USD 24.3 million. The primary exporting countries were Brazil (47.4 %), China (11.7 %), US (11.2 %), Austria (7.5 %) and India (3.2 %). Imported mineral and aerated beverages under the HS code 220210 category were worth USD 29 million in 2017. Products in this category were mainly supplied by Malaysia, Thailand, Austria, Singapore and China. For other beverage categories such as energy drinks and coffee-based drinks, Malaysia and Thailand were the primary market players representing 62.8 % and 22.2 % of the total imports of USD 54.7 million.
Key players within the industry
The key players in the instant drinks market can be divided by the following product categories: RTD tea, RTD juice, health/energy drinks and carbonated drinks. In 2017, the RTD tea market was led by Sinar Sosro with its well-known brand Tehbotol Sosro (50 % of share). International manufactures Nestlé and Coca-Cola ranked second with their joint brand Frestea. Other competitors were Mayora Indah (Teh Pucuk Harum), ABC President Indonesia (Nü Green Tea) and Ultrajaya (Teh Kotak). Competition in this segment is rather high with several other international companies having joined hands with local F&B companies. Among them are the joint ventures Asahi Japan and Indofood (Ichi Ocha), Suntory Japan and Garudafood (Mytea) as well as ITO EN Japan and Ultrajaya (Kiyora). In the RTD juice category, Coca-Cola Indonesia dominated the scene through its Minute Maid brand.
While in the energy drink segment, the market has been dominated by Asia Health Energi Beverages (65 % market share) with its Krating Daeng (Red Bull) brand. The company continuously expands its market share through the sponsorship of sports events. The carbonate drink segment is controlled by Coca-Cola Indonesia with its brands Coca-Cola, Sprite and Fanta. The well-known brand and the wide distribution network are among the key factors of the successful market penetration of Coca-Cola in Indonesia.
Distribution channels: retailer, grocery markets, outlets & hotels
In 2017 the grocery retail market sales in Indonesia grew by 10 % compared to 2016 reaching USD 109.17 billion. Traditional retailers such as kiosks and street hawkers remain the stronghold with a share of 83 % in this segment. However, middle to high-class consumers tend to purchase products in modern trade outlets such as supermarkets, hypermarkets and convenience stores due to their modern appearance and the variety of products and quality levels. Furthermore, convenience stores have a strong position in regards to distributing grocery products into less tapped regions of the country. Hotel chains and high-end restaurants are other important channels for Western food and beverage items since their customers are more internationally orientated. AccorHotels, Archipelago International, Santika Hotels & Resorts, Marriott International and Tauzia Hotel Management Indonesia are among the largest hotel chains operating in Indonesia. While Mahadya Group, Ismaya Group, Sriboga Group, Kawan Lama Group and CT Corp lead the restaurant franchise business.
How to enter the instant and energy drinks market?
To enter the aforementioned channels, foreign exporters shall appoint reliable local partners that will take over the importation, registration and distribution of the products. All beverage products should be registered at the Indonesian National Agency for Drug and Food Control (BPOM). The registration can be conducted online by uploading all administrative as well as technical documents of the products. Some of the required documents are: Letter of Appointment as a distributor, Certificate of Free Sale, GMP Certificate, Certificate of Analysis, ingredient information, production flow chart and labelling information. Upon the completion of documents, BPOM will do a product evaluation. In case there is no additional clarification needed, the registration number (ML code for the imported product) will be issued. This registration process takes approximately 1.5 – 6 months at a cost of USD 20.5/item. A distributor who fulfils certain requirements (e.g. no disapproval record of the 5 latest registration applications) has access to a priority online registration process (license issued in 10 working days).
Import permits, taxes & requirements
Furthermore, the distributor also has to apply for an import permit (SKI) to release products from the customs office. For instant beverages (non-alcohol) the Indonesian government applies import duties of up to 5 %. Furthermore, 10 % value-added tax and 7.5 % import tax (except for juice drinks, 2.5 %) are imposed. In anticipation of the expected implementation of the halal law in 2019, exporters are advised to familiarize themselves with the requirements. Non-halal-certified food products are expected to be labelled as such.