The Indonesian Wine Market: Exploring Wine Export Opportunities Beyond China

There is an emerging export opportunity in Indonesia for Australian Premium Wine.

The Australian wine industry was for many years concerned about export markets eroding in the traditional wine markets in Europe and North America, particularly as a combination of rising Australian Dollar, Increased competition from other “New World” wines from South Africa, South America and North America started to compete at the lower price point with which Australian wines had been successfully marketed in the UK and Europe.  This challenge for shelf space, market share and profits was further impacted by the growth in grape output, and consolidation of wine companies in Australia through companies such as Treasury Wines (Formerly Southcorp, and Fosters) and Constellation Wines which standardised the Australian wine industry, and helping to entrench Australian wine industry perception of international export markets as low-end consumers. This industry perception and attitude was a short-sighted and a recipe for disaster. Something had to change, to snap the thinking of the Australian Wine industry.

The Indonesian Wine Market is open for business. Ignore this market to your detriment. The time is ripe for a new investigation of the wine export opportunities in Indonesia

In recent years there has been an explosion of wine sales/exports/ and investments in China. There is undoubtedly a great opportunity in China as the 1.3 billion people start to develop a taste for wine. This is not to say however that wine is saleable to all of the 1.3 billion people, as the favoured alcoholic drinks are still beer and spirits ( rice and barley wine drinks such as MaoTai, Beiju etc). Wine consumption is rising, and taping into the 5% of the population that currently drink wine is a boon for the Australian wine industry, and many successful Australian wineries are now exporting good and profitable volumes into China. There is of course a growing Chinese Wine industry, which is increasing in quality and exposure throughout China. This will likely become a competitive force in the future, for which Australian Wine Companies will need to strategically prepare. So what alternatives are out there in Asia?

There are obvious opportunities throughout South East Asia, in markets such as Vietnam, Thailand, and Singapore. These markets are in the main receptive to wine, and Australian Wine companies should be looking to export into these markets. However there is another market that Australian and other Western Wine companies overlook – Indonesia. There is  broad perception that Indonesia as a predominantly Muslim country holds no opportunities for Australian wine. This is a short-sighted view in my opinion and Wine Companies need to broaden their perspective.

A Wine Store in Jakarta is not uncommon, and increasingly provide premium wine to a rapidly developing domestic wine market.

Indonesia is a challenging place to sell wine, not least because of the Muslim cultural influence. There is however, a large opportunity emerging in Indonesia for wine sales in the right market segment. Opportunities in bulk wine and low-cost wine sales to Indonesia are non-existent. These price points do not work politically for Indonesia. This is not the same for premium wine  sales, for the US$15-50 price point on an Australian wine shelf . In Indonesia these wines would be sold at an added premium of between $40-150. People pay for these wines, and they are consumed by the emergent middle class in cities like Jakarta, and are sought after in restaurants and Hotels across Indonesia. It must be remembered that Indonesia is a moderate Muslim country, and there is no ban on alcohol sales. There is however some restrictions on the number of importers allowed to bring in wine. My main message here is that, Indonesia is a market of opportunity for the Australian wine industry, and it should not be ignored out of hand.

If your company is looking to tap into the increasing demand for wine 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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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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