Food & Beverage: Soft Drink Market of Indonesia Contracted in 2017
Triyono Prijosoesilo, Chairman of the Association of Indonesian Soft Drink Producers (Asrim), said the nation's soft drink sales market contracted in 2017 with the sales volume sliding by 1 percent year-on-year (y/y). It was the first time in his period as chairman that Indonesia's soft drink sales declined.
The decline was no surprise considering the signs were on the wall since the first quarter of 2017 when the sales volume in Indonesia's soft drink market contracted by 4 percent (y/y), both in the traditional and modern retail markets.
This result is in stark contrast to the early 2000s when soft drink sales in Indonesia surged by double-digit figures. However, starting from the late 2000s growth began to decline. While in 2009 soft drink sales managed to grow 15.4 percent (y/y), the growth figure fell to around 10 percent (y/y) in the following two years. Then, in the 2012-2016 period, growth fell to the range of 4 - 8 percent (y/y).
Great growth in the 2000s and early 2010s also attracted plenty of investors - both domestic and foreign - into Indonesia's soft drinks industry, resulting in fierce competition. However, according to Prijosoesilo the arrival of new rivals is not related to the contraction in soft drink sales. Instead, he attributes the contraction to bleak purchasing power in Indonesia, especially among the middle to lower class who account for about 40 percent of total demand in Indonesia's soft drinks industry.
Many analysts claim that most Indonesian consumers currently prefer to save their money on bank accounts rather than spending it on consumer goods.
Harry Sanusi, President Director of fast moving consumer goods company Kino Indonesia, also believes bleak purchasing power is behind the company's flat beverage sales. However, Sanusi remains optimistic that the company's beverage sales can grow by double-digit figures in 2018 on the back of local elections. Moreover, rising commodity prices should improve people consumer confidence, hence encourage spending on consumer goods.
Meanwhile, Indonesia's Industry Ministry targets to see the nation's soft drinks market grow by about 2 - 3 percent (y/y) in 2018 due to many gatherings related to the local elections (occasions when people take beverages) as well as the Asian Games. The most popular drinks in Indonesia - consumed outside the house - are mineral water and ice tea.
Regarding the future, Prijosoesilo sees plenty of opportunities in Indonesia's soft drinks industry due to the presence of a huge population. He urges the government to undertake policies that will strengthen people's purchasing power, and not to allow policies that would disturb the soft drinks industry such as an excise tax on carbonated (soda) drinks. In late 2015 the government said it plans to impose an excise tax of between IDR 2,000 and IDR 3,000 (approx. USD $0.18) per liter of soda drinks. It remains unknown whether the government will go-ahead with this plan.
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