Alcohol-Free Beer in Indonesia: Strategy to Comply with Rules
When the government of Indonesia banned the sale of alcoholic beverages in minimarkets and kiosks in early 2015 in an effort to “protect the morals and culture of Indonesian society”, it came as a shock to alcoholic beverage producers. Although alcoholic drinks are still allowed to be sold in the larger supermarkets, restaurants, cafes and hotels, sales of beer plunged as the beverage was banned in the (estimated) 70,000 minimarkets that have become a very popular shopping place in the urban areas of Indonesia.
In this new context, local alcoholic beverage producers need to alter their strategy in order to boost sales or, at least, curtail the decline. London-based Diageo plc, a British multinational alcoholic beverages firm, introduced alcohol-free Guinness to Indonesia (and the company is planning to construct a factory on the island of Bali). Although the company stated it had already been planning to introduce its Guinness Zero to the Indonesian market before the mini-market ban had been announced, the new beverage is the main strategy to boost the company's sales in Indonesia after implementation of the ban.
Diageo claims to control about 15 percent of Indonesia's beer market. Up to early 2015 Indonesia was the company's fifth-largest beer market, selling some 400,000 hectoliters (of Guinness) per year. However, after the full implementation of the ban in April 2015, the company's sales in Indonesia fell by a staggering 40 percent (y/y). By offering Guinness Zero to the Indonesian market Diageo hopes to see its products back in the minimarkets and kiosks soon.
As it will take some months before the new factory on Bali is ready for operations, Diageo currently imports Guinness Zero from Ireland (into Indonesia). However, besides the transportation costs the firm also has to pay a ten percent import duty and therefore the new plant on Bali is a more attractive alternative (although the high production costs of the zero-alcohol alternative are a concern).
Guinness Zero is not the first alcohol-free beer (sometimes known as non-alcoholic beer) in Indonesia. Multi Bintang Indonesia - the market leader in Indonesia's alcoholic beverage sector - already introduced its Bintang Zero about a decade ago.
Ban on Sales of Alcoholic Drinks in Minimarkets
Through Trade Regulation No. 06/M-DAG/PER/1/2015 on the Control and Supervision of Procurement, Distribution, and Sale of Alcoholic Beverages Indonesia prohibits the sale of drinks that have an alcohol content ranging between 1 to 5 percent (called "type A alcoholic drinks") in the nation's minimarkets and kiosks. Previously, sales of beverages with an alcohol content higher than five percent had already been banned from minimarkets and kiosks. Since April 2015 these alcoholic beverages can only be bought in the (licensed) supermarkets and hypermarkets. However, the regulation also provides exemptions for the sale of alcoholic beverages for customary uses, tourism, religious rituals, the pharmacy industry, and in places authorized by law. This means that it is still possible to enjoy an alcoholic beverage. However, as the number of larger supermarkets is limited (compared to the number of minimarkets which have mushroomed on the urban streets) it has become much more difficult to purchase alcoholic beverages or - if consumed in restaurants, hotels or cafes - it has become much more expensive.
The government implemented the ban to “protect the morals and culture of Indonesian society” as it had become very easy for schoolchildren or students to buy light-alcoholic beverages (such as beer and breezers) due to the high number of minimarkets and kiosks in Indonesia. Moreover, there exists a negative attitude towards alcohol in Muslim-majority Indonesia as consumption of intoxicants (including alcohol) is generally forbidden (haram). However, as Indonesia contains millions of nominal Muslims (who do not follow Islamic principles strictly), beer consumption had risen in recent years, especially in the urban regions as it had become part of the urban lifestyle.