Indonesia: disappointing the optimists and disappointing the pessimists….

Australian Ambassador to Indonesia – Greg Moriarty Addressed the Australian Indonesian Business Council in Sydney to describe the opportunities on offer to Australian Business….a message that was not yet clearly understood.

On Tuesday I had the good fortune to be in Sydney for the Australia Indonesia Business Council (www.aibc.com.au) business luncheon with Australian Ambassador to Indonesia His Excellency Greg Moriarty.  The event was another great example of the ability of the AIBC to bring high profile business and government leaders to the Australian business community to detail the latest information, opportunities and challenges that confront Australian business when they look to Indonesia. I have been a member of the AIBC for the past four years, and a National Director and Chairman in South Australia for the past two years, and over this period of time I have seen the business, investment and trade situation in Indonesia transform. This was exactly the message that Ambassador Moriarty was here to tell the Australian Business Community in Sydney. The Event was attended close to 100 of Sydney’s elite business community attended this luncheon to hear the good news story Ambassador Moriarty had to tell about Indonesia. The question and answer session after the speech was an indication of the increasing interest in Indonesia as a trade and investment destination for Australian business, however it was a joke that Ambassador Moriarty relayed about Indonesia in the early stages of the speech which tells the real story about the opportunities in Indonesia.

Coca Cola Amatil have succeeded in Indonesia where many corporates have failed to tread.

Ambassador Moriarty started his keynote address with a joke about Indonesia being both a disappointment to optimists and a disappointment to pessimists. He put this down to the solid improvement and advancements that have been made in the Indonesia, that have exceeded many expectations and failed to meet the best case scenario. Anyone who has done business in Indonesia, will attest to this challenge. Indonesia is indeed a great opportunity, but it has its challenges. The message however from Ambassador Moriarty was that Indonesia was a great opportunity for Australian business, and that there were indeed many businesses that were succeeding in a large way. The point was made that Australian businesses should be broadcasting their involvement in Indonesia, and specifically the Corporate Social Responsibility programs that many companies are engaged in as part of their Indonesian Investment. This particularly point was picked up later in the presentation by a representative of Coca-Cola Amatil (CCA), who described how their investment in Indonesia over the past couple of decades had been effectively ignored by Australian investors until very recently. Coca-Cola Amatil have of course in recent years made large investments in excess of $100 million into Indonesia and have attributed these investments as a key driver of corporate profitability. The representative at this event lamented the ignorance of the stock market, and hoped that the message to the Australian investor community was indeed to open their eyes to the Indonesian potential.

Indonesia is Australia’s closest neighbour, and the business opportunities are immense. The time is right to take the opportunity at hand and be ready for the Indonesian Century.

Indonesia is indeed widely misunderstood by Australian business, and indeed by many western business and the Ambassador described the strength of the economy, and the rapidly emerging middle class, which was actively engaged in social media, consumerism and business. The often mentioned Indonesian social media numbers were once again raised as an illustration of the advanced state of the Indonesian market, third largest facebook population amongst others. The overall message was that Indonesia is here, and Australia has a direct interest in the future of Indonesia. Australian business needs to increase its awareness of the Indonesian market, and change its outdated perspective of Indonesia as a backward and third world economy. As many of the people in the room would have known, the challenges of establishing, and running a business in Indonesia can be substantial. However, the emergence of Indonesia as a market of opportunity for Australian business means that if corporate Australia does not realise the opportunities presented, they will miss one of the best opportunities to emerge from the Asian Century. Failure to change our perception of Indonesia, will be a failure of our politics, our business and our perceptions. As Ambassador Moriarty reinforced during the AIBC event in Sydney, the time is right for corporate Australia to make the most of the Indonesian opportunity and grasp it with both hands. It is up to Australian business to re-asses Indonesia as an investment, trade and business destination to ensure that in the future the disappointments are not that we let the greatest opportunity of our generation slip through our fingers. The Indonesian Century is indeed upon us.

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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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