The Indonesian beverage industry has registered steady growth rates in the last few years. PET packaging, which has been one of the largest beneficiary of this steady growth rate in the beverage industry has been able to raise its overall share in the total packaging market on the back of innovative designs and products.
OVERVIEW OF THE INDONESIAN BEVERAGE INDUSTRY
With a population of more than 260 million, Indonesia is world’s fourth most populated country. The country is also the largest ASEAN economy and beverage market. Beverage industry in the country has registered a steady growth rate in last few years on account of a number of factors.
Indonesia experienced relatively high economy growth during the last decade, which created new middle class society with better awareness towards a healthy life style and product quality. Growing economy, rising purchasing power, tropical weather that induces thirst, increased westernisation and changing consumer habits are some of the key factors, which have propelled the country’s beverage market.
INDONESIAN PET PACKAGING INDUSTRY PET
packaging has made great inroads in Indonesian beverage industry in last two decades. It has become the most cost effective way for the packaging of beverages on account of its lower cost, speed and ease of production, and logistical advantages as compared to some other forms of packaging such as glass containers.
Catered by about 80 PET preform and bottle producers of large, mid-scale and small scale producers, Indonesian PET producers have undergone major expansions and consolidation in the last decade. Currently, some of the major PET preform and bottle producers have some of the best equipped production facilities in the region.
DEMAND COMPONENTS OF INDONESIAN BEVERAGE PET PACKAGING INDUSTRY
Bottled water forms the largest component (on volume basis) of Indonesian beverage industry. Readyto-drink (RTD) Tea, carbonated drinks, packaged juices and sports & energy drinks, in that order are the next four largest components of overall beverage market. Share of PET packaging varies from very high (in the case of packaged water) to medium (in case of all other beverages).
Bottled water accounts for the highest share of PET packaging demand in Indonesia. French company Danone dominates the Indonesian market, accounting for about 50 percent of all bottled water sales with its majority owned Aqua brand. However, Nestle, Coca-Cola and PepsiCo and a host of small local companies have also invested heavily in the bottled water capacity in recent years.
The country has confronted problems of the poor quality of a drinking water as ground water is contaminated. The access rate of Improved-water supply facilities in the rural area is below 10%. Thus the demand for bottled water is growing rapidly. For this reason, in 2015, Indonesia government announced the policy for the expansion of infrastructures for the water supply.
Though, packaged water forms the largest component of PET container consumption in the country, but a large proportion of total packaged water consumption takes place through large gallon containers, where PET is not used. Results from a recent Indonesian government demographic and health survey claimed that 37% of urban households got their drinking water from gallons. After a one-time starter fee, refills cost Rp.17,000 – 19,000 for name-brand water and Rp.6,000 for offbrand water at a refill kiosk. Naturally, the latter is more affordable for lowincome families and has become a popular alternative to boiling water. In addition to the PET bottles and gallons, polypropylene cups are also widely used in Indonesia for packaged drinking water. This packaging medium accounts for about 14% of the total packaged water consumption in the country.
The Indonesian packaged water industry, comprising of about 660 companies, is projected to produce about 29.9 billion litres of drinking water in 2018, according to Aspadin data. Almost 80 % of it would be consumed in Java and Bali alone.
Rachmat Hidayat, Chairman of the Association of Indonesian Bottled Water Companies (Aspadin), says, “In 2018, we expect the packaged industry to grow at a rate of about 8-10%. However, the growth in the bottled water industry should be supported by a strong economy and good regulations of bottled water business in the country.”
Among other beverage categories, ready to drink tea (RTD), carbonated beverages (CSD) and packaged juices are major demand drivers for PET packaging. The RTD category in particular has been one of the major demand drivers of PET packaging. PET containers have successfully been able to displace glass containers for RTD packaging in the last few years.
Carbonated beverages have also seen a major shift from glass to PET containers in the last decade. Coca-Cola, the world’s largest producer of carbonated beverages, launched a new production line in 2017 in Indonesia producing highquality, lighter bottles, and reducing the company’s plastic usage by more than 800 tons annually.
“The Coca-Cola Company is the first to use this technology in sparkling soft drinks. The line in Indonesia is the second in the world for sparkling soft drinks,” says Coca-Cola Indonesia Technical Director Stewart Edmed. The Affordable Small Sparkling Package (ASSP) production line reportedly costs $21 million. Coca-Cola and German packaging company KHS collaborated to develop the technology, which reduces plastic usage in the production of PET bottles. The ASSP technology for sparkling soft drinks was first implemented in India. The new production line in Indonesia is at Coca-Cola’s factory in Cikedokan, West Java, which has a capacity of producing 188,000 bottles per hour.
EXCISE TAX ON PET BOTTLES?
Indonesian government has been contemplating to impose excise duty on PET packaging in food and beverage industry during the past few years. Proposed excise tax on PET bottles is between 200 – 500 IDR (0.02 - 0.05 USD). If implemented, the tax can have a very adverse impact on the Indonesian PET packaging industry, as Indonesia is home of the most cost sensitive consumers in the Asia region.
The government’s move to impose excise duty has come after a great uproar about the huge quantity of plastics being dumped in the Ocean. In fact, the country has become the world’s second-largest plastic waste producer, after China. Each year Indonesians use approximately 187.2 million tons of plastic according to a study published in the journal Science. Fajar Budiyono, secretary-general of the Indonesian Olefin, Aromatic and Plastic Industry Association (Inaplas) says, ”We strongly oppose imposition of excise tax on PET containers. Excise tax imposition will not be a solution to environmental pollution. Additional income for the state will not be significant, while it puts a major burden on the PET production industry.”
MAJOR PET PREFORM AND BOTTLE PRODUCERS
PT NAMASINDO PLAS PT
Namasindo Plas is one of the largest producers of PET bottles, preforms and closure caps in Indonesia. The majority of Namasindo’s products are used for bottled drinking water and sold domestically to large customers such as PT Aqua Golden Mississippi (Aqua), PT Tirta Investama (VIT), PT Ades Waters Indonesia, PT Tang Mas (2 Tang), and PT Sinar Sosro (PRIM-A).
PT Namasindo Plas was established and incorporated in Bandung (West Java), Indonesia in 2001. The company started its commercial operation by producing Polycarbonate (PC) gallon bottles from two machines. Currently, the company is armed with more than a hundred of machines to produce PET bottles and preforms. Company’s manufacturing facilities are located at Medan (South of Sumatera), Lampung (Sumatera), Sentul, Bogor (West Java), Batujajar, Padalarang (West Java), Cimerang, Padalarang (West Java) and Solo (Central Java). Netstal, Otto Hofstetter and Sacmi are the leading technology suppliers to the company.
PT TIRTA ABADI
Established in 2003 in Banten, PT Tirta Abadi has emerged as one of the largest producers of PET preforms in the country. The company operates two manufacturing facilities in the country at Banten and Surabaya with an installed capacity of 42,000 tons per annum of PET preforms for leading water, carbonated and other beverage categories.
Husky and Sacmi are the leading technology suppliers for the company.
PT HOKKAN INDONESIA
Japanese company’s Indonesian subsidiary, Hokkan Indonesia, which was established as a joint venture between Hokkan Group and Toyota Tsusho Group in 2011 has emerged as a leading PET packaging company for many leading beverage companies in the country. Company’s manufacturing facility at Bogor, West Jawa is equipped with state of the art equipment from leading technology suppliers such as Sidel, Husky and in house OS Machinery Corporation.
Hokkan Indonesia has been aiming at a unique business model, which is different from other beverage companies in Indonesia. Company’s Total Packaging System (TPS) concept, which features customer oriented production, in-house production of containers, substantial technical services for the customers and the direct procurement of materials.
PET RECYCLING IN INDONESIA
Though, no official figures are available on PET recycling in the country, but Indonesian authorities and producers have been taking PET recycling very seriously in the last few years. The Indonesian Plastic Recycling Association (ADUPI) was established in 2015 in Surabaya after an initiative by several plastic recycling players from various regions (Bandung, Bogor, Solo, Semaranf, Jogia, Gresik, Pasuruan, Sidoarjo and Surabaya) of the country. The Association was formed to tackle the increased volume of plastic waste, which was threatening to go out of control.
In addition to the recycling association, institutional PET preform and bottle producers and users have also initiated PET recyling. For example, Tirta Investama, the company behind DanoneAqua, Indonesia’s oldest and largest bottled water brand, has pledged to recover and recycle more plastics from the environment by 2025. The company signed up Sumber Alfaria Trijaya, the operator of Alfamart, one of Indonesia’s largest convenience store chains; digital app developer Smash; and the country’s largest mobile operator Telkomsel to install drop boxes for shoppers to collect their bottles for recycling.
According to a statement from the Tirta Investama president director, “ Within the next seven years, the local unit of Danone will recover more plastic than it uses and increase the proportion of recycled plastic in its bottles to 50 percent from 11 percent currently. Currently Danone-Aqua delivers more than two-thirds of our water in returnable, reusable jugs. More than half of our PET bottles are already being collected and recycled into new bottles or other materials, such as textiles. But we have decided that this is the right time for the investment.”