Tapping into Western Beverage Success Stories in Indonesia

I am often asked to describe market opportunities in Indonesia, and when it comes to the food, agricultural and beverage industry there is a general disbelief that there could possibly be any real market opportunity in Indonesia. This assumption made by many western food producers is wrong, and this is clearly demonstrated by the many food and beverage success stories in the Indonesian market. In recent weeks I have described the demand issues in the Indonesian market for Australian food, and how the emerging Indonesian middle class is driving demand for premium food products. I have also described the increasing need for Indonesia to meet the food security demands of the large Indonesian population approaching 250 million people and beyond. Indonesia is a large complex market, with a highly stratified food market, that provides ample opportunity for Australian and other western beverage producers to enter the market and make it a successful venture.

So who are these success stories and what can other companies learn from their success?

Coca Cola Amatil have invested heavily into the Indonesian market, which included an increase of investment in late 2010 of upwards of $100million. Clearly this investment is large and beyond the scope and capacity for many small and medium sized Australian beverage producers, however, the dedication to the Indonesian market is driving profits and company growth, and it is this lesson that other companies can aspire to achieve. A strategic decision has been made with Coca Cola Amatil to ensure that the Indonesian market is captured, which is so far proving to be a success. This success in the non alcohol sector has been replicated by Berri Juice, owned by Lion (formerly Lion Nathan who has a parent company in Japan – Kirin Holdings). Berri Juice is branded as “Australia’s favourite Juice”, and has strong market penetration throughout food service sector in hotels and restaurants and broadly across the hyper, super and mini market distribution chains. The success of these two large Australian branded products demonstrates the potential success for other Australian beverage brands to leverage. Companies such as Bickford’s are one such company that are increasing market penetration following the same distribution channels as Berri. There is an opportunity for other Australian beverage companies to take the leap of faith into this huge Indonesian market.

Indonesia is not the first market that wine producers think of when they seek export markets, however, there is increasing opportunities for Australian Wine producer. Despite the clear disadvantage of penetrating a traditionally non-alcohol consumption population (due to majority Muslim population), there are some emerging examples of Australian wine brands appearing in food service and supermarkets. It would be folly to assume that there are no distribution channels in Indonesia for Wine. Wine is available through supermarkets, Hypermarkets, dedicated wine shops and of course in the large food service industry. I will write of these specific opportunities in the coming weeks, however, I will provide one unique example of “wine” exports to the Indonesian market. In meeting the challenges of wine production in Indonesia, some Indonesian companies have been importing Australian grape crush, and converting to wine in Indonesia. This is not a super cheap method of developing wine, however, it does in the main avoid issues of excise tax, and import duties on alcohol. Additionally this example provides an indication of the market demand for Australian wine. The advice I would provide to Australian Winemakers is that the Indonesian market is a premium and super-premium market, if you seek to provide quality “expensive” wine you are more likely to succeed.

So my advice is for Australian and Western beverage producers to seriously consider the Indonesian market, with 250 million people it is a great market opportunity. Emerging opportunities exist across the beverage industry, and those companies that take advantage of the opportunities in Indonesia will make a great success…..those that don’t may miss the opportunity. Indonesia is an emerging consumer giant, and Australian beverages can help feed the Indonesian population.

If your company is looking to tap into the increasing demand for food in the Indonesian market, please feel free to send me an email (nathan@asiaaustralis.com), and we can have a chat about how AsiaAustralis can assist your company meet the needs of the Indonesian market. Alternatively come along to the Australia Indonesia Business Council Business Forum – “Identifying opportunities for primary industries in the Indonesian market”  in Adelaide on Friday 30th March, to learn more about the opportunities for food exporters in Indonesia.

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Is Australia Ready for a Rich Contemporary Relationship with Indonesia?

The Lowy Institute Report provides a snap shot of Indonesian perceptions and attitudes towards the World. The Good News is Australia is viewed positively and in Australian investment and trade is welcomed.

The Lowy Institute released a report on Indonesian Public opinions and attitudes towards foreign policy on Tuesday 20th March, and alongside this report was an opinion piece in The Australian by Fergus Hanson – Program Director for Polling at the Lowy Institute. The results of the Lowy institute report – Shattering Stereotypes: public opinion and foreign policy reveals an Indonesian public that has in general a positive and forward thinking view of foreign investment, western engagement, and Australia. Fergus Hanson in his opinion piece provides a short overview of the findings before asking at the end of the article:

“These poll findings are a wake-up call, a reminder Indonesia is ready for a rich, contemporary relationship. The question is, are we?”

This is an interesting question and goes to the heart of what has been a fundamental problem with Australia’s relationship with Indonesian over the past decade. A relationship still encumbered by perceptions of chaos, financial collapse, terrorism and perhaps a little colonialism. Australia’s relationship with Indonesia has failed to live up to the opportunity presented over the past 7 years of President Yudhoyono’s Presidency despite strong encouragement from our Indonesian friends. 

 Over the past few months I have described some of the barriers and hurdles that Australia has imposed upon our relationship, particularly in regards to business and trade (such as with our agricultural policies). However, our perception of Indonesia and our engagement policies that go beyond business and move into the AID realm seem to equally be missing the opportunity. Australia is currently the largest AID donor to Indonesia, yet the projects that Australia funds, are not branded successfully as  “Brand Australia”. The Lowy Institute Poll demonstrates this when it details how only 14% of those surveyed could identify Australia as being the largest donor, in comparison to 33% who identified the US as the largest donor, or 24% who identified Japan as the largest donor. This is despite Australia donating nearly 25% more that the US, and 50% more than Japan (US$324 Australia compared to US$263, and $170 Million). Australian government engagement in Indonesia is not hitting the mark.

Australia's Foriegn Policy must evolve to be more supportive, encouraging, and contemporary if Australia is to take advantage and expand upon the opportunities that exist in the Indonesian Market.

 The good news for Australia in this Lowy Institute Poll, is Indonesians are in general supportive of closer ties and relationships with Australia, particularly in relation to trade and investment. The message here is that Indonesia wants Australian investment. Possibly one of the interesting components of this poll is how Indonesians view their role in Asia, in comparison to China.  Indonesians expressed a greater preference for Australia over China in this poll, and additionally viewed themselves as a leader in the ASEAN region. The good news for Australia here is that the Indonesian public have a lot of good will towards the US and Australia, which has been increasing over the past six years since the previous Lowy Poll in Indonesia.

 So what can we possibly do about these findings?

 The Australian government needs to adopt a more progressive and supportive stance towards the Indonesian relationship, and shed some of the colonial attitudes that seem to have clouded our engagements in recent years. Most business leaders I speak to who are invested in the Indonesian market express hope that Australia’s new Foreign Minister Bob Carr will be able to move our relationship to a new level. In addition to this macro – government response, there is a need for Australian business to realise the opportunity that exists in Indonesia. Australia is viewed as a positive presence and partner, and there are opportunities for Australian business to leverage their Australian branding to take advantage of the economic partnership opportunities that are increasingly presented in the Indonesian market.

 So is Australia ready to build a rich contemporary relationship with Indonesia? The answer should be yes……but that is dependent upon Australian government and business awakening to the partnership opportunities emerging in our closest neighbour.

Asia: More than the Sum of its Chinese Parts

There is more to Asia than China - To succeed in the Asian Century it will be important to look beyond the Forbidden City.

Too often in Australia we think and talk of Asia as being China. Government strategies, political rhetoric, journalistic commentaries, and in many cases business strategies look to China as the be all of Asia. This is a simplistic and dangerous view to hold. China undoubtedly is a thriving and impressive market with somewhere around 1.3 billion people, including over 250 million in the middle class. It is the world’s largest country by population and will soon overtake the US as the world’s largest economy. China is a vast country stretching from the pacific coast in the East to Central Asia in the West, Russia and Mongolia to the North and India and the Himalayas to the South. Mega cities are abundant seeking to buy and sell all the worlds fare, while the resource potential is emerging anew with exploration and exploitation of rare earth minerals, and shale oil and gas reserves. China is clearly a behemoth, and it is important for any business and sovereign western government to plot a clear strategy for engagement with China. Asia however is more than just the sum of its Chinese parts.

Unfortunately I hear and see too often “Asia” being used as a proxy descriptor for “China”, which it clearly is not. We must remember that Asia is a vast continent which includes South Asia: Pakistan, India, Bangladesh (1 . 5 billion), Central Asia: Uzbekistan, Kazakhstan, Tajikistan, Kirgizstan, Iran etc (500million), and South East Asia: Indonesia, Vietnam, Thailand, Malaysia etc (600million). The rest of Asia dwarfs the population and labour resource potential of China. Asia makes up around half the world’s population. It is important to place this scale of opportunity into perspective.  The trade opportunities in these other Asian markets are equally impressive. Central Asia and Indonesian have abundant oil and gas resources, while in many countries there are rare earth minerals amongst other mineral resources readily sought on global exchanges. Indonesian for example is now the world’s largest exporter of Coal.

We should remember also that in addition to China, India and Indonesia make up three of the four most populous countries in the world…..and two of these markets are democracies ( India 1 billion, and Indonesia 250 million). The population size of other countries in Asia provides a renewed opportunity for manufacturing in the region from a non-Chinese market. The labour supply in Asian Countries such as Indonesia and India provide an opportunity for international manufacturers to tap into location benefits that can arise from proximity to sales markets and global supply chains.  The market opportunities in Asia are indeed more than just China and many successful companies are developing strategies to tap into these emerging market opportunities. So when you next hear a politician, businessman, journalist or man on the street talk of Asia….ask them which part? If businesses are to truly succeed in the Asian century they will need to actively build a strategy that goes beyond solely a China Strategy, as Asia is a big place, and increasingly likely to be the economic super region of the future.

f you would like to meet with me to discuss how I can help you and your organisation achieve success in the broader Asian markets, or you would like to discuss new opportunities emerging in the near future, please send me an email (nathan@asiaaustralis.com). Alternatively check-out my LinkedIn Profile and the website of my company AsiaAustralis.

Emerging Indonesian Middle Class Creating Opportunities for Australian Food Producers

The Indonesian Middle Class is increasingly demanding premium food choices, this can be a boon for Australian food producers.

In November 2011 my business partners and I travelled to Indonesia to test the market demand for South Australian premium food and agricultural produce. I touched upon this trip in an earlier blog last week, where I talked of the food security needs currently facing Indonesia and its policy makers. As I described last week the demand we received from Indonesian importers, distributors and producers was exceptional. The message was received loud and clear that Indonesia was seeking premium Australian and South Australian food produce.

Our success and the market demand was illustrated by the sheer volume of meetings we had while in Jakarta and Bali. In five days in Jakarta we had 30 meetings, and a further 10 meetings were held in Bali, with importers, distributors and food producers. The main concerned raised in these meetings was not how much would it cost, but more how much can be supplied! The Indonesian premium food market is expanding rapidly, with new supermarkets, mini markets and specialty food grocers catering to the emergent wants of the Indonesian middle class. These food outlets are modelled upon the same format as many high end and premium grocers from the west. The brands and products on the shelves are a good match for similar lines found in supermarkets across Australia, UK and the US. The Indonesian middle class is arriving and they want our food!

The success of this trip in awakening the awareness of Indonesian importers and distributors to the vast food offering in South Australia was demonstrated soon after our return to Australia in late November. An inbound trade delegation from Indonesia was hosted by my AsiaAustralis business partner Todd Shone in Pt Lincoln and the Eyre Peninsula where our Indonesian guests were able to view firsthand the market potential to supply across multiple product lines. These two trade trips, the Outbound to Indonesia and the Inbound to South Australia ultimately has resulted in new export opportunities for a couple of South Australian food producers, while additionally generating new interest for business partnerships across complimentary agricultural industries.

The main message to take from these experiences is that Indonesia with a growing population growing beyond 250 million, and with a middle class of 80-130 million, the Indonesian market provides a substantial market opportunity for Australian food producers. It is time government and business leaders acknowledged this opportunity and put in place strategies to access this market opportunity.

If your company is looking to tap into the increasing demand for food in the Indonesian market, please feel free to send me an email (nathan@asiaaustralis.com), and we can have a chat about how AsiaAustralis can assist your company meet the needs of the Indonesian market. Alternatively come along to the Australia Indonesia Business Council Business Forum – “Identifying opportunities for primary industries in the Indonesian market”  in Adelaide on Friday 30th March, to learn more about the opportunities for food exporters in Indonesia.

The Path to Success in the Asian Century is more than just a China Strategy

Premier Weatherill identified the importance of Asia to South Australia, and identified a number of markets throughout Asia.

On Thursday I attended the Australian British Chamber of Commerce Luncheon: Succeeding in the Asian Century. It was an opportunity to hear from South Australian Premier Mr Jay Weatherill and the British High Commissioner to Australia Mr Paul Madden About their visions of the current and future trading, business and Investment opportunities in Asia. Both speakers were engaging and spoke of both the long held cultural values and business links between South Australia and Britain, and how there were opportunities for collaboration and partnership between British companies and South Australian companies to take advantage of the Asian Century. There was however a striking difference in the outlook of the two speakers.

The South Australian Premier perhaps constrained by domestic political considerations had a conservative outlook with regards to Asia. He spoke of the need to increase the export growth to Asia, and made particular mention of opportunities in China. South Australian export growth had grown by a larger percentage over the past 12 months than the other Australian states. The specific industry sectors that lead the export growth were described as the Wine and agricultural exports, and of course the future mining boom which will undoubtedly lead to further export growth in the decade to come. There was however a limited future vision of Asian expansion and future business engagement. Indeed the British High Commissioner perhaps provided a greater insight into the logical future movements into Asia.

The British High Commissioner spoke of his time as High Commissioner to Singapore, and of the enduring British legacy in the Asian region. But perhaps the surest insight into South Australia, and Australia’s future business outlook was contained in an answer to an audience question. The luncheon was attended by just short of 100 business leaders. One businessman asked of the speakers, why there seemed to be no strategic focus upon Australia’s largest, closest Neighbour – Indonesia. Unfortunately the Premier was unable to discuss a specific trade focus upon this country, other than to remind the audience that Indonesia was an important regional market. The High Commissioner, however spoke of the important business links between Indonesia and the rest of South East Asia, and how British business had entered Indonesia through their exposure to the Singaporean and Malaysian markets. He spoke of the obvious geographic proximity to Australia, and the undoubted market and population size (upwards of 250 million people) which should prove attractive for Australian and indeed South Australian business.

The luncheon provided a good opportunity to hear of the opportunities in Asia, and the success that was already occurring with Australian exporters in the region. The great pity of the luncheon was that it took a British Diplomat whom has a home market the other side of the world to truly identify the opportunities that exist right across the Torres Strait and Timor Sea in Indonesia. Let’s hope the Premier is able to grasp the market opportunity that exists in South East Asia and specifically Indonesia to help South Australian Companies succeed in this Asian Century.

If your company is looking to tap into the increasing demand for food in the Indonesian market, please feel free to send me an email (nathan@asiaaustralis.com), and we can have a chat about how AsiaAustralis can assist your company meet the needs of the Indonesian market. Alternatively come along to the Australia Indonesia Business Council Business Forum – “Identifying opportunities for primary industries in the Indonesian market”  in Adelaide on Friday 30th March, click the link to register and for more information.

Realising an Export Market Opportunity and Helping Meet the Food Security Needs of Indonesia

Gita Wirjawan - Indonesian Trade Minister discussed the importance of Food Security at various events including the Indonesia Australia Business Council Conference

In November 2011, I travelled to Indonesia with my business partners from AsiaAustralis on a multi focal trip. We had been invited to take part in the East Asian Forum as Business Guests, and as part of this trip we attended other business events such as the Indonesia Australia Business Council National Conference and the Australia Business Asia Conference.  The other focus points for AsiaAustralis were to gauge interest and demand for Australian products in the Indonesian market.  Despite the multi focal approach, we were encouraged by the overwhelming interest in Australian food produce. There was clearly substantial demand in the Indonesian market for premium priced Australian food products. The key issue here is to help this clear demand for Australian product translate into business and trade matching with Australian suppliers.

At both the East Asian Summit and the Indonesian Australian Business Council events, government trade ministers such as Dr. Craig Emerson (Australia) and Pak. Gita Wirjawan (Indonesia) discussed the clear and present issues of food security facing Indonesia. Food security in Indonesia is not just a case of maintaining domestic ownership of farming land, but indeed practically feeding the growing Indonesian Population approaching 250 million people.  The food security issue in Indonesia ties in with poverty reduction and economic growth. Indonesia is a country of enormous potential and alleviating poverty amongst the urban and rural poor in Indonesia is critical to Indonesia’s economic, political and security stability.

Australian Wheat Exports can help Indonesia alleviate poverty

This demand for food and meeting the food security challenge in Indonesia creates an opportunity for Australian agricultural companies and food producers to jump into the breach. Food security at the low-end of the Indonesia translates into rice and noodles. Indonesia has in the last couple of years opened their market to imported Rice which has had a positive effect on the price of rice and helped feed 10s of millions of people living in poverty. Indonesia also has a hunger for noodles, and Australian grain and flour are helping feed this same impoverished population. Indonesia is increasingly becoming a country of noodle eaters and Australia is perfectly positioned to help provide the flour needed to produce noodles that Indonesian’s like to eat. Flour for noodles requires different mixes to ensure bonding is successful, and to keep the cost low to help meet the food security and market needs. Australian grain and flour producers have ample scope to increase their involvement in this Indonesian market.

Wheat - Noodles, helping to meet the food security needs of a rapidly growing country.

The emerging middle class in Indonesia which has been identified at representing between 80-130 million people (according to World Bank definition of middle class), has seen increasing demand for more diverse food choices than solely rice and noodles. This is reflected in the growth in high-end restaurants from North America and Europe, not to mention China and Japan. There is also a developing demand for fresh bread and baked products such as bread and pastries. As the middle class in Indonesia expands, so does the demand for premium high quality food. Australia here too is filling the breach, with the often discussed live cattle trade, which helps local farmers participate in the wealth generated from the growing demand in meat. Similarly there is demand for high quality boxed beef and lamb, which is the pre-slaughtered high quality meats Southern Australian Farmers are great at producing.  Restaurants in Jakarta emphasize the ‘Australian Beef’ on their menus as a stamp of quality.

The demand for Australian food products is substantial and we should be jumping at the opportunity. Unfortunately we often only hear of the bad news stories associated with Indonesia. Australian farmers, Australian politicians and Australian government bureaucrats need to reassess the opportunities in the Indonesian market. Our closest northern neighbour has enormous market potential for Australian food producers and there is an opportunity for Australia to help Indonesia meet its food security needs, while at the same time building strong business and community partnerships for the future.

If your company is looking to tap into the increasing demand for food in the Indonesian market, please feel free to send me an email (nathan@asiaaustralis.com), and we can have a chat about how AsiaAustralis can assist your company meet the needs of the Indonesian market. Alternatively come along to the Australia Indonesia Business Council Business Forum – “Identifying opportunities for primary industries in the Indonesian market”  in Adelaide on Friday 30th March, click the link to register and for more information.

Taking Advantage of a Unique Knowledge Base on the Indonesian Business Environment

Nathan H. Gray - has undertaken PhD research into Indonesian Business Behaviour over the past three years, and has developed substantial knowledge on the Indonesian Business Environment

On Tuesday 6th March (Tomorrow morning), I will present a paper to the School of Commerce at the University of South Australia as part of the Centre for Accounting Governance and Sustainability Seminar Series. This paper is nominally titled “Perantara: The Javanese Way of Managing Business Relationships in Indonesia”, and will comprise the principle findings of the PhD research that I have undertaken both in Indonesia and Australia over the past three years.  This presentation will be a culmination of my work over this period where I have actively engaged with government and business, developed strong relationships and learnt a great deal about the conduct of business in an Indonesian environment. As it stands now the PhD is almost complete and when I submit in the coming weeks it will be time for me to move onto a new chapter in my life…..and I intend it to be a successful chapter indeed. 

Over the past three years, I have developed a strong network of business and government contacts in Indonesia and Australia that are principally concerned with investment, trade and business between Australia and Indonesia. The PhD research I have undertaken, required a qualitative approach to data collection, whereby I actively engaged in interviews and discussions with over 55 executives and senior managers in Indonesia and Australia. In addition to these interviews I was able to participate in 49 negotiation events, which endowed me with firsthand experience of the Indonesian negotiation style and how it effects and affects international business negotiations.  In the academic world there is often a debate about the relative merits of qualitative (ie. Interviews, observations, document analysis etc), and quantitative (Statistics and econometric orientated analysis) methods. In the case of my research, I actively decided upon pursuit of a qualitative methodology due to the challenge of gaining trustworthy data in the Indonesian business environment.  As a consequence of this qualitative approach, I have been allowed a unique insight into a multitude of experiences related to Indonesian negotiation and business behaviour.  If I add up the collective years of experience in the Indonesian business environment of the 55 senior executives, then I have built up over 300 years of collective knowledge of the business environment, across agribusiness, banking and finance, engineering, mining and education.

The Indonesian Business Environrment is rapidly developing and there is a need to understand how your business, and government can be part of this changing enviornment.

The knowledge I have attained through the course of this PhD research process has allowed me to achieve a full appreciation of the Indonesian business environment, and identify the true potential that Australian business and government leaders have often failed to grasp in recent years.  Upon starting the PhD research, I discovered a serious lack of research into the Indonesian business environment, and I have attempted to address this lack of academic literature through publication of academic and referred journal articles and conference papers, and contribution to the professional business community through publication of professional orientated articles. As I approach the final stages of my PhD journey I am seeking to re-enter the business community and help Australian and or International organisations make greater inroads into the Indonesian business environment.  I have found the PhD process to be a rewarding process, and I anticipate the next stage of my life will be just as rewarding.  I look forward to utilising this unique knowledge of Asia’s third largest country, and one of the world’s most important emerging economies to further develop business, community and social relationships in Indonesia.

If you would like to meet with me to discuss how I can help you and your organisation achieve success in the Indonesian market, or you would like to discuss new opportunities emerging in the near future, please send me an email (nathan@asiaaustralis.com). Alternatively check-out my LinkedIn Profile and the website of my company AsiaAustralis.

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