Key Market Trends in Indonesia's Retail Food Sector

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Bojan Mijatovic

Published Nov 22, 2024

In 2023, Indonesia's grocery retail sales increased by 3% YoY to USD 103 billion, driven by the strong performance of convenience and traditional grocers. This growth is a key economic indicator, reflecting a 5.1% expansion in Indonesia's economy. This is supported by declining inflation and rising private consumption, which accounted for over 60% of the growth. Indonesia's grocery retail sector is one of the most promising in Asia. The top growth products include dairy, baked goods, and frozen foods. Key retailers like Indomaret and Alfamart dominate the convenience store segment, accounting for 92% of sales and primarily offering local products. The local food and beverage industry is robust, with multinational corporations producing various goods locally. Indonesia's large population, growing middle class, and urbanization present opportunities for diverse consumer-oriented products, with a trend toward higher-quality, premium goods driving grocery sales. The retail sector continues to expand, particularly in convenience stores.

According to the United States Department of Agriculture (USDA) Retail Foods Annual report, Indonesia’s grocery retail sales climbed 3% year-on-year (YoY) to USD 103 billion in 2023, driven by the robust performance of convenience and conventional grocers. he country’s retail sector was an important part of the economic boost in Indonesia in 2023. With millennials and Gen Zers making up 48% of the population and a burgeoning middle class, Indonesia's demographic impacts spending and lifestyle patterns. These consumers are increasingly looking for innovative items that promote health and nutrition.

Overview of Indonesia's Consumer-Oriented Product Imports and Food Industry

Indonesia's consumer-oriented product imports reached USD 8.3 billion, with the US contributing an 8% share (USD 638 million). The top 10 growth products included dairy products, baked goods, baby food, confectioneries, frozen food, snacks, sauces, dressings and condiments, sweet biscuits, ice cream and frozen desserts. Valued at USD 83.1 billion (2023), the food industry is segmented into food exports (USD 38 billion), food imports (USD 6 billion), modern grocery retail (USD 25 billion), food service (USD 30 billion), food e-commerce (USD 4 billion), and traditional markets (USD 79 billion).

Figure 1. Indonesia Import Value of Processed Food 2019-2023

Source: Tridge, TradeMap

The Rise of Convenience Stores

Key retailers include Alfamart, Indomaret, Alfa Midi, Hypermart, Superindo, Transmart/Carrefour, Circle K, Lotte Mart, Farmer's Market, and Hero. Indomaret leads the category with almost 23,000 outlets in Indonesia, followed by Alfamart with 19,000 locations. With integrated distribution systems and controlled sourcing, these two corporations account for approximately 92% of convenience store sales in Indonesia. These two chains primarily sell local products, with a limited selection of imported items.

Aside from major retail chains, local businesses also have a significant presence in the food and beverage industry. Retail shelves are dominated by locally produced noodles, biscuits, candy, savory snacks, processed meat, processed dairy items (e.g., UHT milk, cheese, and yogurt), tinned fish, and fresh tropical fruits. Local producers have boosted the organic branding of fresh vegetables like spinach and kale to meet the growing demand for healthy lifestyle items among wealthy metropolitan populations. Multinational corporations, such as Nestlé, Unilever, Friesland Campina, Danone, and Kraft Heinz, manufacture dairy goods, ready-to-drink beverages, sauces, and baby foods locally.

Factors Driving Growth

Firstly, urbanization and demographics continue to drive growth. With a population of 279 million and a rapidly urbanizing society, there is an increasing demand for quick and accessible shopping solutions. Millennials and Gen Z, who comprise a significant portion of the population, prefer these stores' convenience and speed. Second is the product offering and localization. Convenience stores in Indonesia primarily stock local products that resonate well with consumers' preferences for familiar and culturally relevant items. This localization strategy, combined with a limited selection of imported goods, helps maintain competitive pricing and customer loyalty.

As mentioned above with data about GDP, rising disposable income means more consumers have the financial means to spend on premium products. This economic empowerment is leading to increased demand for quality over quantity.

Overall, Indonesia's substantial population, growing middle class, and increasing urbanization create a potential for a wide range of consumer-oriented food items. Middle- to upper-income consumers increasingly purchase higher-quality, premium goods, driving rising grocery store sales. Within the modern store category, the retail sector continues to expand driven by convenience store expansion in Indonesia.