2016 INDONESIA PACKAGING MACHINERY MARKET ASSESSMENT An Analysis of Market Opportunities for Packaging Machinery Manufacturers PRODUCED BY PMMI 11911 Freedom Drive Suite 600 Reston, VA 20190 USA
2016 Idonesia Packaging Machinery Market Assessment An Analysis of Market Opportunities for Packaging Machinery Manufacturers 3 PMMI The Association for Packaging and Processing Technologies 11911 Freedom Drive, Suite 600 Reston, VA 20190 Phone: (571) 612-3200 pmmi.org/research Publication Date: May 2016 Jorge Izquierdo, Vice President, Market Development, PMMI Copyright 2016 PMMI, The Association for Packaging and Processing Technologies, Inc. All rights reserved. The information contained herein shall not be distributed or shared by the recipient. No part of this document may be reproduced without the express written permission of PMMI. 2016 Indonesia Packaging Machinery Market Assessment
CONTENTS 1 EXECUTIVE SUMMARY 5 MARKET OVERVIEW 4 4 4 2nd largest FDI destination in ASEAN 16% total FDI in ASEAN $29.3 billion in 2015 Q1-2016 $7.1 billion 50 / 10 end users suppliers Demand for foreignmade machinery is expected to accelerate as CPG companies seek to incorporate new technology, innovation and design into their packaging gather insights 6 learn developments 2.1 Foreign Direct Investment Activity in Indonesia 2.2 Overview of the Economy and Political Environment in Indonesia 2.2.1 Industry Statistics on Packaging Machinery 2.3 Legal and Regulatory Information in Indonesia 2.3.1 Legal and Regulatory Issues Affecting the Packaging Industry 2.3.2 New or Up-coming Legislations (in the Next Two Years) that will Affect the Packaging Industry 2.3.3 Standards and Certifications Needed When Selling Packaging Machinery 2.3.4 To Specify the Tariffs, Sales Tax and Other Additional Duties and Taxes 2.3.5 To Identify Any Import Restrictions 2.3.6 To State if there are Any Tax Loopholes or Available Incentives 2.3.7 Provide an Example of How the Total Landed Cost (Final Cost of an Imported Product) is Calculated 2.4 Retail Conditions and Consumer Trends in Indonesia 2.5 Competitive Landscape in Indonesia 2.5.1 Leading CPG Packaging Machinery Suppliers in Indonesia 2.6 Outlook of Packaging Machinery in Indonesia 25 RESEARCH FINDINGS, DISCUSSION AND ANALYSIS 3.1 Research Findings, Discussion and Analysis 3.1.1 End Users 3.1.1.1 Profiles 3.1.1.2 Commonly Used Packaging Services and Products, and Recent Developments 3.1.1.3 Wage and Automation 3.1.1.4 Common Sales/Distribution Channels of Foreign Manufacturers of CPG Packaging Machinery 3.1.1.5 Perceptions of Packaging Machinery Supplied by Foreign and Local Manufacturers/Suppliers 3.1.1.6 Strengths, Weaknesses and Market Opportunities for North American Packaging Machinery Manufacturers 3.1.1.7 Plans to Upgrade/Purchase Packaging Machinery 3.1.1.8 Gathering Information before Making Purchasing Decisions 3.1.1.9 Key Factors Influencing Purchasing Habits and Decisions 3.1.1.10 Common Financing Options and Payment Terms 3.1.1.11 Industry Outlook 3.2.1 CPG Packaging Machinery Suppliers 3.2.1.1 Profile 3.2.1.2 Government Support and Regulations/ Standards 3.2.1.3 Import Tariffs and Total Landed Cost 3.2.1.4 Common Distribution Channels 3.2.1.5 Expansion Plans 3.2.1.6 Perception of Respondents on Foreign Packaging Machinery and Their Suppliers (including North Americans) 3.2.1.7 Industry Outlook 47 CONCLUSION 49 APPENDIX 6.1 Research Methodology and Sample Size
SECTION ONE EXECUTIVE SUMMARY NEED-TO-KNOW: In 2015, net FDI inflows into Thailand recovered close to 2006 2008 levels but its sustainability remains in question. >
EXECUTIVE SUMMARY This market research study assesses the market demand for packaging machinery in the food, beverage, pharmaceutical, personal care and industrial sectors in Indonesia, with the ultimate objective to assist in the identification of the market potential for PMMI s members products in the country. This study incorporates the findings obtained through secondary research as well as surveys with Consumer Packaged Goods ( CPG ) companies and CPG packaging machinery manufacturers/ suppliers in Indonesia. 5 CURRENT POPULATION 252.2 Million GROWING MIDDLE CLASS 141M by 2020 PROJECTED ECONOMY 4.5% BY 2015 2nd Largest FDI Destination in ASEAN 2010 12.5% 2014 CAGR 12.5% 13.4% One of the world s largest instant noodlemakers, Indofood, is based in Indonesia Indonesia is home to one of the largest populations in Southeast Asia, and it is largely this demographical advantage that has supported the robust domestic growth in demand for packaged and processed food and beverages. The Food and Beverage ( F&B ) processing industry is one of the most mature industries in Indonesia, with some of the largest food processing companies both domestic and international operating in the country. One of the world s largest instant noodle-makers, Indofood, is based in Indonesia. The rise of disposable incomes, coupled with a growing middle class, has boosted sales of CPG in Indonesia. Between 2010 and 2014, expenditure on prepared F&B recorded a compound annual growth rate ( CAGR ) of 12.5% in urban areas, with a slightly higher CAGR of 13.4% for rural areas within the same period. In 2014, the average Indonesian person in urban and rural regions spent approximately IDR142,784.0 (USD11.42) and IDR64,593.0 (USD5.17), a year, respectively, on F&B that have been conveniently prepared and packaged. While Indonesia is the second biggest foreign direct investment ( FDI ) destination in ASEAN (Association of Southeast Asian Nations), FDI inflow has faced headwinds in recent years, partly due to a sluggish global economy. Despite these challenges, FDI inflows into the country still registered positive growth in 2015. The government, under the leadership of Joko Widodo, has been trying to attract foreign investments by introducing a series of business-friendly measures, including a review of foreign ownership restrictions in key sectors such as e-commerce, retail, power and utilities, F&B services, logistics and pharmaceuticals. While Singapore is the largest source of FDI for Indonesia, it is believed that many foreign companies are investing into Indonesia through Singapore. Despite challenges, foreign direct investment inflows into the country still registered positive growth in 2015. 1 2016 Indonesia Packaging Machinery Market Assessment
EXECUTIVE SUMMARY 2 2016 Indonesia Packaging Machinery Market Assessment Over the last decade, Indonesia has gradually transitioned from a largely export-led economy towards a domestic consumption-driven economy. As such, Indonesia s economy has remained resilient throughout the 2009 global financial crisis. Even as non-oil export growth continued to decline over the past three to four years (2010-2014), real gross domestic product ( GDP ) and consumption per capita recorded steady growth during this period. The country s economy is projected to have grown by 4.5% in 2015. Indonesia s packaging industry, as a whole, is expected to develop positively, with growth estimates of between 6.0% and 10.0% from 2015 to 2018. Survey findings indicate that Indonesia s CPG packaging machinery industry is poised to grow by more than 10.0% in the next three to five years. Growth in this industry will primarily be driven by demand from the F&B manufacturing industry, supported by a growing middle class that is projected to double to 141 million people by 2020. Meanwhile, policy reforms in the pharmaceutical industry will allow more multinational companies to participate in the local market. Indonesia s packaging machinery manufacturers and suppliers are largely positive of the future of the industry, taking cue from increased activities within the CPG industries. Surveys have also indicated that an increasing numbers of multinational CPG companies are establishing, or are expected to enter, into the Indonesian market. There is demand for innovative packaging formats amongst Indonesian CPG food and beverage companies. As the market for F&B CPG becomes more competitive, these companies hope to attract more customers through appealing packaging designs and features. Being one of the most versatile, costeffective and durable materials, plastic packaging constitutes the biggest share of the market, and will continue to do so in the foreseeable future. However, as Indonesian consumers become increasingly aware of the impact of plastic packaging on the environment, more CPG companies are turning to paper-based and biodegradable packaging material. Smaller packaging formats have also caught on, catering to the busy Indonesian consumers who desire not only convenience but also ease of carrying. Current Economic Conditions Projected Economy in 2015 4.5% 5 Gross Domestic Product 5 Consumption per Capita Non-oil Export 62010 2014 Over the last decade, Indonesia has gradually transitioned from a largely export-led economy towards a domestic consumption-driven economy. Indonesia s Packaging Industry Expected Growth 5+10% in the next three to five years Pharmaceutical industry policy reforms will allow more participation in the local market As the market for F&B CPG becomes more competitive, these companies hope to attract more customers through appealing packaging designs and features.
EXECUTIVE SUMMARY North American Manufacturers North American manufacturers are seen to have weak presence in the Indonesian market, with both CPG companies and packaging machinery suppliers indicating that they have not used or know of anyone who is using machinery made in this region. This may be attributed to the low representations for North American CPG packaging machinery manufacturers/suppliers in the country. Despite low awareness, CPG packaging machinery of North American make is perceived to have technological and performance capabilities that are similar to that of Europeanmade machinery. However, the lack of depth in understanding the technology and performance of North American CPG machinery is clearly observed, which implies a need for suppliers of North American CPG packaging machinery to put in additional marketing efforts. Nonetheless, being seen as comparable to European-made machinery presents an opportunity for North American manufacturers, that is to specifically target the high-end, high performance market, by leveraging the branding and perceived value of Western manufacturers. Local manufacturers/suppliers have traditionally enjoyed dominance in the market for CPG packaging machinery, as they offer relatively good performance for their price. However, locally made machinery is still considered to be of inferior technology and build when compared to those that are foreign-made. This is because local manufacturers/suppliers are seen to be lacking in expertise in advanced machining and tooling techniques. Nonetheless, interviews have indicated that local CPG packaging machinery manufacturers are quickly catching up to their other Asian, and perhaps even Western counterparts. Another key strength of local manufacturers is their ability to provide prompt after sales services, which is an important point of consideration for some CPG companies. In addition, many CPG companies emphasize on minimizing upfront costs when deciding their machinery purchases. This has opened up entry opportunities for China and Taiwan manufacturers, especially through direct sales to local clients. However, the performance and technology of machinery from these manufacturers are still not on par with Western-made machinery, hence, putting them in direct competition with local manufacturers. While locally made machinery compete with Asian-made machinery in the value segment, especially for clients amongst the numerous CPG SMEs in the country, Western manufacturers have an upperhand in the market by catering to the larger Indonesian and multinational companies. Existing CPG companies with intentions to expand or upgrade their packaging machinery are largely focusing their purchases on secondary and end-of-line CPG packaging machinery, as they seek to automate the entire packaging line due to costs and quality concerns. Case packing, sealing and cartoning machinery are amongst the types of machinery that are ranked highly on their wish-list. CPG companies are also looking to upgrade or purchase new filling, capping and form/fill/seal machinery that can increase overall productivity. F&B companies are amongst those that have allocated a larger budget for acquiring/upgrading packaging machinery. F&B companies are amongst those that have allocated a larger budget for acquiring/upgrading packaging machinery. 3 2016 Indonesia Packaging Machinery Market Assessment Trade shows and events, as well as supplier meetings are amongst the more popular modes adopted by CPG companies in acquiring information on CPG packaging machinery, and thus, would be effective ways to promote higher awareness. One of the most popular trade exhibitions in Indonesia is Allpack, which is usually held in Jakarta towards the end of the year. For foreign manufacturers, appointing local agents/ distributors is considered a more common strategy than the establishment of local sales offices. Local agents/ distributors usually prefer non-exclusive agreements, as it gives them the flexibility to meet their clients needs. Foreign manufacturers can also capitalize on the agents /distributors network of customers and support offices. In a geographically and culturally vast country like Indonesia, access to such networks may be the key factor in the success of the North American brand in the country. Existing CPG companies with intentions to expand or upgrade their packaging machinery are largely focusing their purchases on secondary and end-of-line CPG packaging machinery...