Global chocolatiers dwarfed in Indonesia as local champions dictate taste
13/09/2016 24:00
* Big four global chocolatiers hold 10 pct market share
* Local makers set benchmark taste in 1950s
* Hurdles include complex distribution, fragmented retail
* Market likely to grow 42 pct to $1.5 bln in three years
-Mintel
By Glenys Kirana and Eveline Danubrata
JAKARTA, Sept 13 (Reuters) - Multinational chocolatiers have
spent almost 20 years trying to crack Indonesia's booming
confectionary market, only to build a share that pales in
comparison with other emerging economies as long-established
local producers fend off foreign incursions.
Nestle SA NESN.S , Cadbury's owner Mondelez International
Inc MDLZ.O , Mars Inc and Ferrero SpA together hold just
one-tenth of a $1 billion market led by homegrown darlings Delfi
Ltd DELF.SI and PT Mayora Indah Tbk MYOR.JK . In neighbouring
Malaysia, the foursome commands almost 60 percent.
"The market leader is very strong because it was the first
to set the taste for chocolate in Indonesia," Nestle Indonesia
confectionary business manager Rully Gumilar told Reuters.
"It's like David fighting Goliath," he said. "It's very big
and has huge power, while we are small even though we are a
multinational."
Such struggle against a local incumbent is not uncommon
among global consumer firms in the world's fourth most-populous
country - a tropical archipelago with complex distribution
channels, run-down infrastructure and a retail sector dominated
by family stores that lack air conditioning to keep goods cool.
But the rewards are potentially huge considering consumption
accounts for more than half of a steadily expanding economy,
while an increasingly affluent middle class promises ample room
for growth.
The chocolate confectionary market is likely to jump 42
percent to 19.5 trillion rupiah ($1.49 billion) in the next
three years, data from researcher Mintel showed. That compared
with 11.7 percent in the United States where, as in other
developed markets, growth has slowed over the past five years.
LOCAL COCOA
Nestle entered Indonesia in 1971 and in the 1990s embarked
on a major push in chocolate products, expanding to three
brands. Mars and Mondelez began selling chocolate in the early
2000s and, with Ferrero, the four's market share reached 10
percent last year - 1.4 percentage point more than a year prior.
But Delfi set the benchmark taste in the 1950s with its
SilverQueen chocolate bars and Ceres chocolate sprinkles, which
still feature in the firm's broad line-up. Last year, its market
share by sales volume reached 52.7 percent from 48.2 percent.
Such local offerings often cost less to make and so are
priced lower. For instance, they tend to contain a greater
proportion of cocoa powder, which can be two to three times
cheaper than cocoa butter, said Ahmad Zaky Amiruddin, secretary
general of the Indonesian Cocoa Industry Association.
Mayora said buying cocoa beans and making chocolate locally
also keep prices competitive. In contrast, production at foreign
rivals may be part of a more complex, multi-market strategy.
Nestle, for instance, imports from its regional halal factory in
Malaysia, which sources ingredients from countries including the
Ivory Coast.
Indonesians are "very price sensitive", preferring to buy
the cheapest of similar products, Amiruddin said.
Delfi's Take-it chocolate fingers, for example, retail at a
Jakarta mini-market for 5,500 rupiah ($0.42), around 8 percent
less than Nestle's KitKat.
Delfi did not respond to requests for comment.
To fight back, Mondelez is strengthening its marketing and
focusing on quality, its Indonesia chocolate brand manager Dini
Anggraeni told Reuters. Mars declined to comment; Ferrero did
not respond to requests for comment.
Nestle's Gumilar said his firm is trying to find a recipe
that balances its global quality standards with local
preferences - "the holy grail of the chocolate category" - as
well as stepping up product launches and marketing.
"We still want to win," he said. "But it'll be step by
step."
($1 = 13,097.0000 rupiah)
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Indonesia's chocolate market http://tmsnrt.rs/2ckT79B
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Glenys Kirana and Eveline Danubrata; Additional
reporting by Cindy Silviana; Editing by Christopher Cushing)
((eveline.danubrata@thomsonreuters.com; +62-21-29927603;
Reuters Messaging:
eveline.danubrata.thomsonreuters.com@reuters.net))
Keywords: INDONESIA CHOCOLATE/