Market Insights –- Indonesia

Indonesia imports a lot of Australian pears and in the recent past has imported many Australian apples too. Competition from Chinese apples and South African pears remains tough but Australia’s proximity to Indonesia does give us a strategic advantage.

By Wayne Prowse

Indonesia is Australia’s closest Asian neighbour and home to 253 million consumers, the fourth most populous nation on earth. Since the Global Financial Crisis Indonesia has forged ahead economically and outpaced other countries in the region with Gross Domestic Product (GDP) growth of around 5.3 per cent per annum. More than half the population are urbanised and living in cities of which more than a dozen have populations of above one million. Urbanisation is expanding at the rate of 2.45 per cent per year, which is an indicator of increasing per capita GDP, although the GDP is low by international standards and the country struggles with poverty.

The ASEAN Australia New Zealand Free Trade Agreement (AANZFTA) in 2009 eliminated most tariffs for apples and pears destined for Indonesia and facilitated improved trade opportunities. However growth has not come easily because authorities tightened non-tariff barriers by restricting access for fresh produce to only four ports, implemented food safety testing on arrival and are controlling imports of certain fruits and vegetables by a quota. These measures have been a moving feast making it challenging for exporters to the market.

Fruit production

Apples imported by IndonesiaAs a country straddling the equator, fruit production in Indonesia is understandably tropical. In 2012 Indonesia harvested 18 million tonnes of bananas, mangoes, pineapples and other tropical fruits. The country recorded no measurable harvested volumes of apples, pears and other temperate fruit. According to trade data, in 2013 Indonesia exported just 20,000 tonnes of fruit and imported over 500,000 tonnes including 147,000 tonnes of apples and 118,000 tonnes of pears. Indonesia is therefore a large net importer of fresh fruit.

With over 17,000 islands, of which 6,000 are inhabited, distribution is a challenge and most of the fruit grown is sold to consumers in local wet markets across the archipelago. This presents a challenge for imported fruit distributors. The growth in modern retail supermarkets in the major cities, where the increasingly affluent consumers shop, offers more opportunities for imported fruit. Until 2012, Indonesia was the largest importer of apples in the Asian region, mostly from China and United States. Trade plummeted after the imposition of trade restrictions though has started to increase again.

Pears imported by IndonesiaIn 2012, Indonesia did represent the largest single destination for Australian apples accounting for 700 tonnes. This has since dwindled to negligible levels. On the other hand Indonesia is the second largest export destination for Australian pears with the trade restrictions actually delivering Australia an advantage over pears from South Africa and Argentina. South Africa though remains the largest southern supplier with Australia following with 1,400 tonnes.

Apple consumption per person in Indonesia is small by Australian comparison with consumption around 0.6 kg per capita, all of which is imported. Similarly pear consumption is around 0.5 kg per capita. European pears from Australia, South Africa and United States represent only 5 per cent of this. Most of the imported fruit is marketed through the modern retailers based in major cities and servicing around 30 per cent of the population.

Trade

APAL and DEDJTR will support marketing promotions of Australian pears in Indonesia in 2015, following successful promotions in April 2014.

APAL and DEDJTR will support marketing promotions of Australian pears in Indonesia in 2015, following successful promotions in April 2014.

Indonesia is a regulated market with quarantine protocols that must be met by supplying countries to protect the health of Indonesian consumers and agriculture. Virtually all tariffs have been eliminated under the AANZFTA, which includes Indonesia. Australia has recognition status which means that Indonesian authorities recognise Australia’s food safety standards without further mandatory testing on arrival.

Regardless of Australia’s superior access conditions, China remains the key competitor with 71 per cent market share of apples supplied to Indonesia at around half the price that Australia does. The total apples imported to Indonesia increased from 83,000 tonnes in 2002 to 212,000 tonnes by 2011 before falling to 130,000 tonnes under quota restrictions in 2013 and then starting to increase again.

Similarly pear imports have grown from 43,000 tonnes to 118,000 tonnes with China accounting for 94 per cent of these imports, albeit Asian varieties. Australia’s current volume is half what it was a decade ago with South Africa the main seasonal competitor.

Outlook

Indonesia is a key market for Australian pears because of its proximity to Australia and because our pears offer a high quality eating experience.

Indonesia is a key market for Australian pears because of its proximity to Australia and because our pears offer a high quality eating experience.

In theory Indonesia’s proximity to Australia, large population with a developing economy, and complementarity of products that do not compete directly with local tropical fruit should present a strong opportunity for Australian apples and pears. Multi-product exporters who have good relationships with Indonesia’s retail supply chain partners are arguably best positioned to assist the Australian apple and pear industry to develop new programs with Indonesia’s modern retailers serving major population centres.

For Australia to find a premium quality market niche position among the high volume of Chinese imports, growth should come from increasing market size and appetite for imported apples and pears. Pears are showing signs of success and should increase further arguably due to having a point of difference – they are not the same as Asian pears imported from China. Apples though have a significant challenge. Apart from the cold stored Chinese apples available all year, New Zealand is driving market growth in the southern season. Australian apple growers and exporters need to understand the New Zealand position in the market and seek a differentiation offer that creates interest and demand by Indonesian retailers and consumers for Australian apples. A consistent variety, price point and service will be critical.

APAL support

APAL, with the support of Department of Economic Development, Jobs, Transport and Resources Victoria (DEDJTR) worked with a key retailer, Ranch Market and subsequently Foodhall, hypermart, LotteMart and Total Fruit Shop during the months of April and May 2014 to coordinate a targeted promotional campaign for Australian pears. This was the first time in many years that Australian pears were actively promoted in an Asian export market and the Australian Ambassador to Indonesia, Greg Moriarty opened the launch.

The results were pleasing with new connections made with fruit importers, enabling capitalisation on market short-supply timings and, importantly, ongoing sales. According to the retailers, sales of Australian pears were up by 25 to 40 per cent during the promotion, reiterating the importance of promotional activity to gain market position. The pears supplied by Plunketts and GV Independent were reported as being of good quality, crunchy and sweet tasting, appealing to the Indonesian consumers. This is great feedback when Australia is competing on a quality and value basis not price alone.

Indonesia is a key pear market due to trading advantages that make our pears more inviting to this market. Let’s take advantage of this, by delivering a consistent and reliable product every time and deliver what our customers want, be it specific sizes, packaging options and seizing the opportunity to directly engage with and promote the fruit to consumers.

Indonesia, along with the Philippines and Thailand, has been identified as a growth opportunity market. DEDJTR and APAL will be working together across a range of apple and pear promotional activities in leading Indonesia retail stores such as Ranch Market and hypermart. This Government led ‘Now-In-Season’ initiative will include media activities, in-store promotions, consumer sampling, retailer training and networking activities.  This includes ‘Food and Hotel Indonesia’, an international food and hospitality event that will be held in Jakarta from 15 to 18 April, with the Victorian Government showcasing Victoria’s export capability.

If Indonesia is of interest to you as an export market, contact APAL’s Market Development Manager Olivia Tait on otait@apal.og.au or 03 9329 3511. 

About the author

Wayne Prowse is an  Export Consultant at Fresh Intelligence Consulting. For more information contact Wayne at wayne@myfreshintelligence.com.

 

By |March 23rd, 2015|Exporting, Market insights|

About the Author:

Principal and Senior Analyst, Fresh Intelligence Consulting
wayne.prowse@bigpond.com