THE FOOD AND BEVERAGE INDUSTRY KEEPS GROWING AND HAS BECOME A

MAINSTAYS OF ECONOMIC GROWTH IN THE MIDDLE OF A PANDEMIC

During the pandemic, the food and beverage industry (mamin) continued to show growth despite
fluctuations. As of Q3/2021, the food and beverage industry sector grew 3.49% (y-o-y), higher than
the previous quarter, which was 2.95%. In addition, this industry is also one of the leading sectors
because it contributes 38.42% to GDP in 2021 and is the largest contributor to the non-oil and gas
processing industry sector. This value increased from the contribution in 2020, which was 38.29%.
This growth is inseparable from the digital transformation in the food and beverage industry.
Industrial technology 4.0 is used to spur productivity more efficiently and with quality so as to
increase competitiveness.

In addition, the food and beverage industry recorded a significant investment realization. From
January to September 2021, based on records from the Ministry of Investment/Coordination and
Investment Agency (BKPM), foreign investment (PMA) in the food and beverage sector was USD2.08
billion or IDR 659.4 trillion, which grew 75.93% compared to the same period in 2020 of USD 1.14
billion. In detail, the portion of PMA realization is bigger than PMDN. Total foreign investment or FDI
in the January-September 2021 period was IDR 331.7 trillion or grew 9.9% (YoY) from the
achievement in the same period in 2020. On the other hand, the total domestic investment or PMDN
in January-September 2021 was recorded at IDR 327.7 trillion or grew 5.8% (YoY) from the same
period in 2020.
In terms of exports, during January-September 2021, the total export value of the food and beverage
industry reached USD 32.51 billion, an increase of 52% compared to the same period in 2020. The
trade balance of the food and beverage industry during these nine months was a surplus of USD
22.38 billion.

In terms of consumption, based on data from Statistics Indonesia, until Q3/2021, Household
Consumption Expenditure for food and beverages grew 1.03% (y-o-y). Meanwhile, rural and urban
communities have different patterns based on product type and area of residence.

Graphic 1. Share of Expenditure by Area of Residence, 2019-2021 (%)

Urban 45.81% 54.19%

2021

Rural 56.20% 43.80%

Urban 46.05% 53.95%

2020

Rural 55.49% 44.51%

Urban 45.90% 54.10%

2019

Rural 55.59% 44.41%

0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00%

Food Non Food

Source: BPS, data processed by VISI
Based on the graph above, residents in rural areas spend more money on food consumption, while
in urban areas, it is on non-food products such as clothing, housing and household equipment,
transportation, communication, and so on. This indicates poor food security in rural areas because it
reflects lower purchasing power or access to food and a decreasing level of welfare.

In Q1/2022, PT. Visi Gobalindo Data Utama (VISI) predicts the food and beverage industry sector will
grow 2.79% (y-o-y). Despite the decrease, its performance still grew positively. This is certainly
inseparable from the role of food and drinks itself as a basic need that must be met so that the
demand and supply of goods in this sector are still going well. In addition, based on the Making
Indonesia 4.0 roadmap, the food and beverage industry is one of the sectors that get priority
development in the industrial era 4.0. The decrease that occurred was due to the increase in cases of
Covid-19, the omicron variant, which increased from the end of 2021 until the beginning of 2022. So
restrictions on public activities were again imposed, which resulted in a decrease in public
consumption. Therefore, the government and industry players must still be prepared to anticipate
and overcome various challenges that will arise.

Apart from the prediction from PT VISI, an economist in Indonesia predicts that the development of
the national food and beverage industry in 2022 will be parallel with Indonesia's economic growth.
The growth of the food and beverage industry in 2022 will also reach the same figure in 2021 at
around 10% but on a higher basis, or even higher if the trade balance remains in surplus due to
stronger exports. The year 2022 is also expected to rebound faster, because the people are eager to
return to their normal life, after being hampered for two years during the pandemic.

In terms of the market aspect, Indonesian people spend almost 50% of their income on food and
beverages, and around 35% on processed food. This means large market potential. By the year 2045,
Indonesia's Gross Domestic Product (GDP) is predicted to reach USD 23,199 with a total population
of around 319 million people. The food and beverage industry also has great potential because of its
large output contribution to GDP.

Sources: www.vibizmedia.com & www. visiglobal.co.id/cantingqind/ (processed)