Opportunities In Soft Drinks
Our Asia Country Risk team expects growth in consumer spending in Indonesia to pick up over the next few years, which is likely to feed into key food and drink sectors such as soft drinks. Although Indonesia is already home to established soft drinks manufacturers such as Sinar Sosro, Coca-Cola Amatil (CCA) and Aqua Golden Mississippi, the market remains fairly immature, implying that there is still considerable scope for growth.
The following factors are expected to be key industry growth drivers over our forecast period to 2018.
Health Awareness: While carbonates will remain the most accessible and popular beverage in terms of volume sales, rising health consciousness is likely to become an even more important factor in the minds of consumers.
Organised Retail Growth: Given the sheer size of the Indonesian soft drinks market and the country's underdeveloped infrastructure, companies with extensive distribution links across the country will very likely find themselves in a strong position to build a dominant market presence. While local soft drinks manufacturers have largely engaged in distribution ties with independent retailers, the spread of organised retail (ie, supermarkets, hypermarkets, convenience and discount stores) is expected to provide more effective routes to market, and more industry players are likely to distribute their products through the organised retail channel. The growing dominance of organised retail in Indonesia will therefore provide greater sales opportunities for domestic soft drinks companies and bolster sector growth.
Continued Sector Investments: Domestic soft drinks manufacturers will continue to engage in product innovation, aggressive branding initiatives and capacity expansion in a bid to consolidate a stronger foothold in the market, imbuing greater dynamism into the sector.
Below, we highlight the specific drivers that we believe will continue to support growth in the soft drinks sub-sectors in Indonesia.
Forecast compound annual average growth (CAGR) in bottled water value sales between 2014 and 2018: 12%. The lack of safe tap water in Indonesia, coupled with high energy costs, will continue to fuel consumer appetite for bottled water. As local bottled water manufacturers develop new variants of their bottled water products such as flavoured bottled water, this will provide greater support to value sales growth. That said, we stress that product innovation is still happening on a relatively small scale in this segment.
Forecast CAGR in fruit juice value sales to 2018: 12.1%. The fruit juice sector will be another major beneficiary of growing health awareness in Indonesia, although we acknowledge that the higher prices of fruit juices will continue to hold back the sector from enjoying much stronger sales growth to 2018.
Forecast CAGR in carbonate value sales to 2018: 8.2%. Although the carbonates segment is relatively mature owing to the dominance of CCA, it is still forecast to expand strongly to 2018 on the back of the aforementioned demand positives.
|Consumer Spending Likely To Underpin Soft Drinks Growth|
|Indonesia - GDP Per Capita & Real Private Consumption Growth|