How big is the potential of the Wheat Industry in Indonesia? What is the strategy to overcome the scarcity of wheat?
Wheat is one of the most produced and consumed cereal grains in the world, leading the market alongside rice and maize in terms of production and sales. According to the data from Statista, the market potential of wheat is expected to grow at a CAGR of 4.5% during the forecast period 2022-2027, as demand for flour, bread, cookies, pasta, noodles, and all beverages and food products is expected to drive the wheat market.
Asia-Pacific is monitored as the largest and fastest growing market with China and India dominating in the region for wheat production and consumption. China is the world’s leading country for wheat consumption with 142 million metric tons in 2020. India was ranked second in the same year which consumed 106.6 million metric tons of wheat. In the same period, US wheat consumption reached nearly 31 million metric tons. In addition to rice, wheat is considered the main staple crop in Asian countries. The consumption is forecasted to grow at significant rates due to the rising population and then followed by food demand.
What is the opportunity for the wheat industry in Indonesia? What to do to anticipate the supply crisis to fulfil the high demand? Read this article to know more!
Wheat Crisis and How Industry in Indonesia Anticipates
In Indonesia, most of the imported wheat will be processed into flour first before being processed as instant noodles, cakes, and bread. There are over 30 brands of instant noodles in Indonesia. Fierce competition should keep the prices of instant noodles from rising. Also, 28 industries use wheat flour in Indonesia.
So even if it increases, it will affect not only instant noodles but also other industries that use flour. In daily life, there is a tendency to replace rice, the staple food, with noodles and bread as the middle class of the economy grows. This will undoubtedly increase the demand for flour derived from imported wheat.
Indonesia’s wheat consumption continues to rise in parallel with the rising consumption of instant noodles, bread, cookies, and biscuits. Nearly 95% of foods made from flour are actually ‘introductory’ foods and not authentic Indonesian cuisine. The Indonesian diet related to wheat seems to have been shaped by a very intensive advertising campaign and the offering of ‘easy-to-eat’ products all over the country.
Based on import data from the Indonesia Central Bureau of Statistics (BPS) from 2004 to 2022, Indonesia imported wheat from 30 countries. This provides industry players with experience in supply risk management. The largest import of Indonesian wheat came from Australia with 1.57 million tonnes which is worth USD 585.6 million in the first five months of the year. Indonesian wheat imports from the Kangaroo State reached 36% of total imports. Indonesia’s imports of wheat and meslin from January to May 2022 reached 4.359 billion tonnes worth USD 1,647 billion.
The second largest supplier is Argentina with 1,409 million tons of volume and worth USD 497.2 million. Followed by Canada with 572.6 thousand tonnes of volume and worth USD 276.13 million. Besides wheat, Indonesia imported 26,900 tons worth of USD 10.83 million worth of wheat flour and meslin from January 2022 to May 2022. Deliveries are made from India, South Korea, Vietnam, Singapore, and Japan.
To anticipate the situation, some strategies that the wheat industry needs to explore are:
1. Strengthen and Expand the Partnership with Other Countries
One of the strategies which can be explored is to strengthen and expand the partnership with exporting countries which not been impacted directly by the Russia-Ukraine conflict. According to the Central Bureau of Statistics (BPS), Indonesia imports wheat from three major countries, Australia, Ukraine, and Canada with a total import value of 11.17 million tons, worth USD 3.45 billion. Any other countries that could be explored to add to the partnerships are China, United States, France, Germany, and Pakistan.
2. Diversification of Resources
Another strategy that can be implemented to anticipate future scarcity to meet domestic demand is diversification of resources, which needed to explore other alternative products such as cassava, sago, and sorghum. Due to the Russia-Ukraine conflict and also India stopped exporting wheat, therefore the industry or government should prepare another product such as sorghum, which belongs to the same family as wheat, as an alternative to wheat.
Big Corporates of Wheat Industry in Indonesia
As the wheat industry is a very potential business in Indonesia, especially with its potential population and demand. There are several corporates internationally and nationally operating in the Indonesian market. There are three famous companies who are fulfilling major wheat needs that are Bunge, Cargill, and Bogasari as explained below:
Founded in the Netherlands in 1818, it now with its headquarters in New York state. Employs 35,000 people in 40 countries, processing oilseeds, wheat, corn, and sugar cane. In 2016, the company received a net profit of USD 375 million. The company is considering joint projects with Every, the operators of oil transshipment.
Both companies plan to combine the storage tank with its 3 km oil overpass. Overpasses include both above-ground and below-ground areas. To implement the project, the company applied to the city of Mykolaiv for a plot of 6,000 km2, but the width of the required plot is 2 m.
The 145-year-old US-based company, employs 142,000 people worldwide. Parent company Cargill invests in food production. The company operates in 68 countries around the world and markets products such as grains, vegetable oils, and sugar. It is also the largest producer of agricultural products.
In 2016, the Ukrainian grain trader exported approximately USD 4 million worth of wheat. Cereals accounted for 25% of the company’s exports. In December 2017, the Chinese company CHEC completed dredging work in the future Cargill terminal’s water area, three months ahead of schedule, and is said to have excavated 4.4 million m3 of soil.
Bogasari produces food by producing various flours. Operating since 1971, the factory houses some of the leading brands that are very well known. In addition to producing high-quality flour, Bogasari also has Italian delicacies such as spaghetti, macaroni, and fettuccini, sold under the La Fonte brand. These products are also exported overseas.
Bogasari claims to control around 51% of the largest flour market share in Indonesia. Bogasari said he imported about 3.5 million to 4 million tonnes of wheat out of Indonesia’s total wheat imports of 7.4 million tonnes in 2015. Bogasari’s growth as a major player in the flour business cannot be separated from its partnership with small and medium enterprises (SMEs).
Enter The Indonesian Wheat Market with BRIGHT Indonesia
Because of the huge impact of the wheat industry in Indonesia, of course, it takes a lot of in-depth research about the wheat industry market in Indonesia. So, to enter the Indonesian market, you need the right local partner to assist you.
BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.
BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:
- Provide assistance for you in expanding and developing your business by identification of potential partners.
- Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arrange business meetings, and act as a liaison.
- Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
- Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.
For more information, email firstname.lastname@example.org