Indonesia's Food & Beverage Industry Threatened by Sugar Shortage
Several companies in Indonesia's food and beverage industry may need to cease production altogether as there is a shortage of sugar ahead of the Idul Fitri celebrations (which mark the end of the Ramadan month). Adhi Lukman, Chairman of the Indonesian Food and Beverage Association (Gapmmi), said there are at least ten companies that are in direct need of new sugar supplies for their production process. Without new sugar supplies, the factories will simply need to be shut down temporarily.
The current shortage of sugar in Indonesia is basically caused by government policy. The Indonesian government set a quota for crude sugar imports (domestic production of sugar is not enough to meet domestic demand). However, ahead of the Idul Fitri festivities (a period when food consumption rises amid many food parties) the government ordered the industry to increase production of white crystal sugar for Indonesian consumers.
The shortage of sugar for industrial usage causes inflationary pressures and disturbs the production process of Indonesia's food and beverage companies, Gapmmi Chairman Lukman said. Domestic sugar capacity in Indonesia is around 460,000 tons per month, while industries have been ordered to process 300,000 tons per month into white crystal sugar, implying there only remain 160,000 tons of crude sugar for the nation's food and beverage industries. However, ahead of - and during - Idul Fitri demand for all sorts of food and beverage items, such as cookies and syrup, rises and therefore this period can become a missed opportunity for Indonesia's food and beverage industry. Usually, these industries increase production by 30 percent in the Ramadan and Idul Fitri period compared to a 'normal' month.
Read more: Indonesia Expected to See Sugar Deficit in 2016
Lukman said demand for processed food and beverage products in Indonesia has been rising since May and is expected to remain strong until July when demand is expected to wane after the Idul Fitri celebrations (4-8 July) have finished. Turnover in Indonesia's food and beverage industries could reach up to IDR 140 trillion (approx. USD $10.5 billion) during the Idul Fitri period this year, up from about IDR 130 trillion worth of turnover during last year's Idul Fitri.
In the first quarter of 2016, turnover in Indonesia's food and beverage industry reached IDR 400 trillion (approx. USD $30 billion), up 7.55 percent from the same period one year earlier.
Read more: Turnover in Indonesia's Food & Beverage Industry Up 7.55% in Q1-2016