Salty savory snacks in particularly experienced an increase of 11% in 2017 with nuts and seeds being the most sought-after items followed by potato chips. About 69% of urban consumers in the country snack at least once a day. Overall, the product category is expected to continue its surge at a compound annual growth (CAGR) rate of 11.3% by 2021.
Thus, this segment offers interesting opportunities for new products. Indonesian consumers appreciate product innovations, new flavors and healthier snack options, e.g. low caloric or non-fat products is likely more appealing for the market. Also strong demand prevails for sauces, dressings and condiments. The emergence of a strong middle class, rapid urbanization as well as a raising appetite for foreign food items are among the key drivers for the demand of the above product categories.
Import values in savory salted snack products comprehensively show an ascending pattern with Asian countries (Malaysia, Thailand, China and Philippines) and the US being the most important supplying countries. Sauces and other mixed condiments (including soya sauce, tomato ketchup, sauces as well as mustard and mayonnaise) showed the same pattern with a total import value of USD 82.3 million, a 28 % increase from 2016. Asian countries namely Malaysia, China, Thailand and Singapore control over 75 % of the total import value (approx. USD 69.5 million). While European countries contributed only 5.5% from the total value.
Market shares in the Indonesian market
With a market share of 11% in 2017, GarudaFood Group is the leader in Indonesian savory snacks segment. The company dominates the market with its wide range of snack products such as chips, crisp, crackers, popcorn as well as coated and roasted nuts. Another strong player is the joint venture Indofood-PepsiCo. Innovation of products and intense promotion activities through television and digital media platforms are the primary strategies of those players in this fragmented market. In the sauce, dressing and condiment segment Unilever Indonesia has a strong position due to its soy sauce brand Bango, the Heinz ABC chilli sauce range and the Ajinomoto (Mayumi) mayonnaise products. In the mustard category most of the available products in the market are imports, i.e. French’s (USA), Kuehne (Germany), Edmond Fallot (France), Colman’s (UK) and Remia (Netherland).
Diverse distribution channels for snacks
As a whole, traditional retailers (e.g. street stalls/mom-and-pop stores) controlling over 80% of grocery market yet modern retailers such as hypermarkets and supermarkets continuously to expand in the country. As of 2017, Transmart Carrefour (110 outlets), Giant (166 outlets), Hypermart (113 outlets) and Lotte Mart (46 outlets) are among the biggest player in hypermarket segment. While, Super Indo (157outlets), Foodmart (40 outlets), Hero Supermarket (32 outlets), FoodHall (26 outlets) and Ranch Market (14 outlets) lead in supermarket section. Wide range of products (local and import), quality levels as well as the convenience atmosphere offered leads the consumers shifting from traditional to those modern channels. Furthermore, hotel chains and high end restaurants become another key channel for imported products as these places intensely serve variety of international cuisines.
Regulatory framework: Food in Indonesia
Prior to the distribution of food products into the market, the foreign principal shall appoint an appropriate local distributor that will perform the importation, registration and distribution activities. All food products in retail packaging should be registered at the Indonesian National Agency for Drug and Food Control (BPOM). The registration can be processed online by submitting administration and technical documents such as import license, letter of appointment as a distributor, Certificate of Free Sale (CFS), Good Manufacturing Practice (GMP) certificate, Certificate of analysis, ingredients and labelling information. Upon complete provision of all documents and payment of the registration fee (range in USD 14-21/item) an evaluator from the agency will assess those documents. Overall, the registration process can take up to 1.5 months depending on the level risk of the products. However, a faster online registration process (10 workings days) is now available for distributors who fulfill certain requirements (e.g. no disapproval record of the 5 latest registration applications). Furthermore, the distributor shall apply for an import permit (SKI) to BPOM each time an importation activity is scheduled. For the above food categories, the government of Indonesia imposes import duties ranging between 5 – 20%, 10 % value-added tax and a newly 7.5% import tax. For mustard and mayonnaise the lower rate of 2.5% import tax is still applied. In anticipation of the expected implementation of the halal law in October 2019, it is advisable for principal to aware with this new requirement. Non-halal-certified food products are expected to be labelled as such.