Opportunities in Meat

Intermediate Industry"

HANIWAR
EXCUTIVE DIRECTOR NAMPA
BRISBANE, 22 23 AUGUST 2013
 Introduction

o Nowadays, Beef consumption in Indonesia is still low, its only about 2

to 2.2 kg per capita.

o Total national beef consumption is about 500 ,000 tons in 2012. Only
about 8% or 40,000 tons was processed. By which Nampa members
processed 20,000 tons into variety of products such as sausages,
meatballs hamburgers, smoked beef, etc.

o In Singapore, Malaysia and Vietnam meat consumption in 2010 was at

least 7 kg per capita, or almost 3-4 times compared to Indonesia (Table
1).

o Meat processed to meat consumption ratio in those neighboring

countries was estimated at least 15%, or at least twice compared to
Indonesia.
Table 1. Meat Consumption per Capita 2010 ( USDA )
http://www.indexmundi.com/agriculture/?country=vn&commodity=beef-and-veal-mea

Argentina 56 Australia 36

Malaysia 7 Singapore 7

Brazil 39 Vietnam 7

Mexico 17 Egypt 8

Philipine 4 Japan 10

Indonesia 2 Iran 10
Table 2. Sausage Production Volume in Indonesia vs Asean Year 2007
(based on meter casing imported )

Country Population Sausage Average

( million ) production Mtr/person
( m casing)

Indonesia 220 57.600.000 0.26

Philipine 83 635.000.000 7.65

Thailand 64 465.000.000 7,26

Malaysia 27 150.000.000 5.55

 Table 2 compares sausage production volume between Indonesia and some neighboring countries in
2007, it shows that Indonesias sausage production volume was far below neighboring countries.

Indonesian GDP per capita has increased significantly, in 2010 the GDP was USD 3,000 per capita
(Table 3), and becoming over USD 3,500 in year 2012.

Table 4 shows the growth of middle class in Indonesia, where in 2003 middle class in Indonesia was
about 37.6% of the population, it become 53.5% in year 2010, Its about 130 million people. which
means that middle class population in Indonesia was more than the total population of Australia ,
Singapore and Malaysia combined.

Increasing trend of the need for healthy and convenience foods and ethnic product ,produce a
significant role all of processed food .

From the above, it is believed that both consumption of meat and processed meat per capita would
increase significantly. Which translates to the bright outlook of the beef processing industry.
Tabel 3. The GDP per Capita is Growing
Table 4. Indonesian Middle Class Growth
 Table 5. Growth of Sausage Consumption
(source : Research by CIC Corinthian )

Year Volume Population Avg Cons Growth

( ton ) ( .000 people) ( gram) ( %)
2007 20,571,2 224,904.9 91
2008 28,149.8 227,779,1 124 35.1
2009 39.980,3 230.632,7 173 40.3
2010 57,114.4 233,477.4 245 41.1
2011 71,507.2 236,331.3 303 23.7
2012 83,443,6 239,174.3 349 15.3
Average 31.1
 Table 5 shows that sausage industry growth between 2007 to 2012 is 31%.

But Table 6 shows that trend for products made from processed chicken
grow faster than those made from beef. The data shows, that in 2007
products made from beef is 197% or 1.97 times products made from
chicken, while in 2012 decreased to 112.4 % or 1.1 times products made
from chicken.

Its happened due to government policy to achieve self-sufficiency in beef by

2014, which made beef become so scarce and prices soared . While the
other side, chickens raw material is more available and cheaper. Thats why
the growth of processed chicken is higher than meat.
Table 6. The Growth of Sausage by Raw Material
(source : Research by CIC Corinthian )

Raw 2012 2011 2010 2009 2008 2007 Avg

material ( ton ) (ton) (ton) (ton) (ton) (ton) Growth

Beef 42,299.6 38,864.2 30.143,0 22.458,8 16.511,6 12,843.5 27.2

Chicken 37,518.5 31,280.5 24,194.0 15,305.0 9,942.5 6,499.6 42,8

Beef/chicken 112.74 117.85 124.59 146.66 166,07 197,60

(%)
 Meat Industry Problem for Having Beef as Raw Material

Two main problems faced by meat processing industry since 2012 are, one inability of local
cattle farms to meet the needs of industrial raw materials, and second decrease the amount of
meat imports from approximately 100,000 tons per year in 2010 and 2011 to 34,000 tons in
2012 and 32,000 tons in 2013.

As a result of this policy, at the end of the 1st semester in 2012 meat processing industry was
finding difficulty in obtaining raw materials, and had informed the government about the
possibility of some beef processing industry to collapse. The government then gave a positive
reaction by giving an exclusive quota to Nampas member for amount 7,000 tons in the 2 nd
semester of 2012, resulting the total import quota to be 41,000 tons from the original 34,000
tons quota, which include quota for APMISO and ADDI for 750 tons each.

For 2013, the national quota is reduced again to 32,000 tons, in which it includes 14.500 tons
exclusive quota for Nampa members , and also approximately 4,500 tons for small processed
beef industry represented by 3 associations, namely APMISO, ADDI and ASPERDATA.

Details of which can be seen in Table 7: Beef Import Quota.

 Tabel 7. Beef Import Quota

Year National NAMPA Aspedata APMISO AIDDI

Quota

ton ton ton ton ton

2012 34.000 plus 7.000 750 750

7.000 ( sms2) (Semester 2)

2013 32.000 14.500 1600 1.400 1.500

 Explanation for Table Beef Import Quota

Nampa : National Meat Processor : Big and medium size industry, have 31 members.

Aspedata : small size industry.

Apmiso : association of Mie bakso (chicken / meatballs noodles) stalls / small restaurants who
also produce bakso ( meat ball ).

AIDDI : small size industry .

On 2012 , The government approved additional quota exclusively for NAMPA for 7.000 ton, so
the total quota is 41.000 ton.

On 2013 , until August 2013 no additional quota yet.

On 2011 : the total import for Beef was 90.000 ton.

 Given the meat processing industry increase during recent years and the future
potential growth of 20%, the quota is inadequate to meet the industrys
demand.

Due to current quota, NAMPA could only manage to keep the existing capacity
and can not growth to higher industry.

To ensure that the import quota for 2014 also takes into account industrys
demand to growth, currently (August 2013) a survey is being carried out by an
independent surveyor.

It is believed that if with the win-win base support of Australian industry , the
industrys growth could reach 30 percent and maybe even up to 50%, which
means that there are great prospects in this field.
 Moreover, Indonesian processed products have not yet produced typical
Indonesian ethnic products such as rendang, rawon, and semur. The industry is
currently focused to western product such as sausages, burgers, smoked beef etc.

If we added the Indonesian typical ethnic products on our line of production , it is

estimated an excellent export opportunities other than domestic market .

NAMPA was build in 2002 with 15 members. Now, we have 31 members consisted
of big and medium-scale enterprises which accounted from at least 80% of the total
production of big scale and medium processed meats in Indonesia. There is still
some medium enterprises that are not becoming Nampas member yet. Other than
big and medium size industry , there are also many (estimated to be thousands)
small businesses with huge numbers (to thousands) of which their total output is
estimated, at maximum, to equal the production by 31 NAMPA members.
 Constraints

Supply of local beef with good quality and competitive prices are
still limited , and also inadequate quota for supply from import, are
hindering the beef processing industry to grow.

Lack of cold storage facilities for the domestic market, lack of well
certified slaughter house . (From more than 1,000 slaughterhouses
in Indonesia, only a few dozen certified slaughterhouses ).

Lack of domestic supply of production supplies and food additives

such as sausage casings, binders, food coloring , TVP and seasoning,
which made most of them are imported, with the risk of lack of
continuity supply.
 No industry specialized in manufacturing meat processing
machines, neither simple or sophisticated, ranging from knives to
integrated meat processing engine.

Lack of trained manpower and competence based training institute

to improve skills of processing Industry employees.

Lack of incorporate international specifications for export products

because lack of experienced to exports processed meat products.

No specific research institute for the development of processed meat

products industry, there is only for food in general .
 Investment / Cooperation Opportunities

Existing regulations in Indonesia allowed to import beef for raw

materials for meat processing industry if it can not supply by
domestic products either because the amount is insufficient or the
specification does not match the need of meat industry.

This gives an opportunity for industry to get win-win cooperation

from Australia. Because the need to import Australian meat
products will still increase despite the growth of domestic meat
production.

Currently 80 percent of beef supply for NAMPAs member is

imported mainly from Australia, or about 16,000 to 20,000 tons
per year and is projected at least to increase by 25 to 35 % per year.
 Table 8. Simulated Increase in Production
on Growth of 25, 35 and 50% Sales per Year (in ton of beef raw material)

Year Existing 15 % 25 % 35 % 50 %
2012 20. 000
2013 20.000
2014 23.000 25 .000
27,000 30,000
2015 26.450 31.250 36,450 45,000
2016 30.418 39,063 49,208 67,500
2017 34.980 48,828 66,430 101,250
2018 40.227 61,035 89,681 151,875
 Growth target of 50% is an optimistic target while 15% is a conservative target.

While between 25% to 35% is very likely to be achieved with further cooperation or investment by
Australia, because 25% to 30% increase have been occurred. Furthermore, the acceleration of the
increase will be supported by increasing in number of Indonesian middle class, rising GDP per capita ,
trend for fast food consumption, convenience and healthy foods.

Table 8 simulates the growth of production, using basic assumption that production in 2013 will be
the same with 2012. Within 5 years, if projected growth is only 15% per year, it will be 40,000 tons, if
25 % 61,000 tons, if 35% 89 ,000 tons and if 50% will be 151,000 tons. In summary, with conservative
estimate, its projected that there will be an increase by 3 to 4 times from the amount needed this
year.

Competency-based training aid for processed meat industry employees by conducting training both in
the Australia and establishing competency-based training institute for meat industry in Indonesia.

Improving skill of workers will have a significant impact to push the growth of the Indonesian meat
processing industry which in turn also provide opportunities for Australia to supply the demands
increased for the processed meat industry in Indonesia.
 Direct investments in meat industry supplies such as sausage casing, spices , knife, processing
machine, will also give good impact for both countries because the potential market is big and also
can be used by factory using chicken and fish as raw material and also by food processor in general ,
which is also growing fast in Indonesia .

Establishing cold storage chain as part of marketing mix so that the domestic market can be opened
wider, and also allows the distribution of raw materials and finished products more quickly and widely
spread to all area of Indonesia.

Cooperation to increase the ability to produce processed meat based on original Indonesian food like
rendang, rawon, semur so that we can supply the local and export market with good quality
products and reasonable price.

Work together to improve Indonesian Meat processing industry so the International chain
restaurants such as Mc Donalds and Burger King agree to use the products from Indonesian
processed meat industry

Upgrade the quality of indonesian meat processed products using Australian meat, meet the
standard for Australian / International market for Indonesia ethnic food and halal certified products.
Tabel 9. Bussiness Potential
 Conclusion

Prospects of growth of the beef processing industry In Indonesia is

huge and could reach at least between 25% -35% per year due to:

The low per capita consumption of beef and processed meat.

Indonesian per capita income growing along with rising GDP resulting that there are already
more than 130 million middle-income citizens who are potential consumer.
There is a tendency of consumers asking for convenient, healthy, and original Indonesia
products, all of which are potential to be fulfilled by Indonesian meat processing industry.
According to the research results by CORINTHIAN, sausages production posted average
growth between 2007 to 2012 of 31%, was achieved without further cooperation with
Australia.
Australia is a major producer of beef and also has the advanced processing technology, so
the willingness to work together based on win-win will yield a big benefit for both country.
 Fields that can be done by Australia.
In the short and medium term ,can supply beef as raw material for industry direct from
Australia, long-term can supply form Australian livestock farm investment in Indonesia.
Investment in plant producing : Casing, spices, filler, binder, coloring agent and Investment
in making machine for meat processing machine. Out put of these two investment can
supply also the need of chicken processor ,fish processor and in general all food processor.
Which also growing fast in Indonesia.
Doing competence based training for processed meat worker in Australian training
institution and helped establish ,meat processed competence training institutions in
Indonesia.
Help create and enhance Indonesia's processed products to be acceptable purposes
including developing export Indonesian ethnic products such as rendang, rawon, stews.
Help access export original indonesian meat processed product to other countries by meat
distribution network already owned by Australian exporter so Indonesia can export the
product like rendang, rawon, etc .
 THANK YOU

NAMPA
Grand Wijaya Centre Blok F No. 83 B
Jl. Wijaya II, Kebayoran Baru, Jakarta Selatan
Indonesia
Ph. +6221-7248455 Fax. +6221-7262087
Website : www.nampa-ind.com Email : nampa@nampa-ind.com