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Indonesia: Strategic Stepping Stone for U.S. Dairy Products

October 9, 2013
Jakarta
More than 10 million people live in Jakarta, the capital of Indonesia.  
 
 

No. 4 both for U.S. dairy exports and in world population, Indonesia steals the spotlight, but the whole of Southeast Asia remains the larger prize.

Source: U.S. Dairy Export Council

U.S. shipments of cheese, ice cream and dairy ingredients to Indonesia for the first six months of 2013 jumped 41% to nearly 58,000 tons compared to the first half of 2012. That performance propelled Indonesia from the No. 7 U.S. dairy export destination to No. 4, as January- June sales topped $162 million. Only powerhouse buyers Mexico, Canada and China purchased more.

Strong underlying fundamentals suggest bigger numbers await, not just on the 240-million-person archipelago but throughout Southeast Asia.

Indonesia is the fourth most populous nation in the world, enjoying the solid economic growth that often follows political stability. Demographics are positive: a large, expanding population, around 60% of which is under age 35; a well-educated, growing middle class that has exhibited a willingness to spend; steadily rising use of dairy within the Indonesian diet; and plenty of room for per capita dairy development.

Indonesia ranked at the top of Nielsen’s most recent Global Consumer Confidence Survey based on job prospects, personal finances and capacity to spend.

"The major multi-nationals are already in Indonesia. A number have reported over 20% annual growth for the last three years, and have yet to see a slowdown," says Dan FitzGerald, Southeast Asia representative for the U.S. Dairy Export Council (USDEC).

Key to the most recent U.S. gains was a marked shift in U.S. suppliers’ approach to the market, hastened, ironi¬cally, by Indonesia’s tightening of import regulations.

"The regulations require Indonesian buyers to apply to import a specified volume of a specified ingredient from a specified plant during a specified time window," says Fitzgerald. "Their unintended effect was to change Indonesia from a ‘spot market’ to one that required forward sales planning. U.S. dairy exports stepped up to cap¬ture the vacuum that was the previous ‘spot market.’"

And as Indonesia replaced the Philippines as the largest dairy market in Southeast Asia, it became increasingly attractive to U.S. dairy exporters.

"U.S. suppliers are doing well. However, it is critical to keep in mind that Indonesia is only one country in the Associa¬tion of Southeast Asian Nations (ASEAN)," says FitzGerald.

In that same Nielsen Global Consumer Confidence Survey, the Philippines and Thailand ranked three and four, respectively, and Malaysia and Vietnam were coming on strong.

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