Indonesia's Chocolate And Cocoa Confectionery Industry And Competitive Landscape 2023
Updated: December 31, 2023Industry Landscape
Demand Conditions
In 2022, Indonesia's imports of chocolate and confectionery containing cocoa (HS code 1806) amounted to USD 123.7 million in dollar terms (up 33% YoY), nearly double the country's exports which amounted to USD 76.9 million (up 9.6% Yo). In volume terms however the opposite was true with imports amounting to 23 million kilograms (up 41% YoY) exceeded by exports which amounted to 30 million kilograms (down 15% YoY).
At just 300 grams per person, Indonesia's chocolate consumption per capita lags behind Asian neighbors like Malaysia (500 grams) and far behind developed nations such as the UK (over 10 kilograms), reflecting room for growth as incomes rise. Indonesia's GDP per capita lags neighbors like Malaysia (at USD 14,657 in 2022, Indonesia's GDP per capita on a purchasing power parity basis is about half of Malaysia's USD 33,523) but incomes have grown at a faster rate (6% CAGR over the five year period between 2017-2022 for Indonesia, slightly faster than Malaysia at a 5.3% CAGR during the same period).
Supply Factors
Indonesia has an extensive cocoa supply chain and the country is the third biggest cocoa prcessor in the world; with the exception of cocoa beans (HS code 1801), Indonesia is a net exporter of all intermediate cocoa products cocoa powder (HS code 1805), cocoa butter (HS code 1804), and cocoa paste (HS code 1803).
For crop year 2021/2022, Indonesia's grinding volumes are estimated at 460,000 tonnes, down from 462,000 tonnes the previous year.
For crop year 2021/2022, Indonesia's cocoa bean production is estimated at 180,000 tonnes up from 170,000 tonnes the previous crop year (2020/2021).
As of at 2022, Indonesia's cocoa bean acreage is estimated at 1.44 million hectares, down from1.46 million the previous year according to FAOSTAT.
The Indonesian government has an ecouraging stance on the country's cocoa and chocolate industry. In particular, the government is aiming to develop the country's artisan or bean-to-bar chocolate industry (which currently accounts for just 2% of domestic chocolate consumption but has potential to rise to 10%), which not only supoorts the downstream chocolate industry but the country's upstream cocoa sector as well, as bean-to-bar chocolate makers typically demand premium beans translating into potentially better earnings for cocoa farmers. Katalis, a business development program backed by the Australian and Indonesian governments recently tied up with homegrown premium artisanal chocolate maker Pipiltin to assist Indonesian cocoa farmers tap into Australia's specialty chocolate market. In addition, the government is aiming to position Indonesia as a cocoa processing hub.
Trends And Opportunities
Chocolate is popular for gifting during Valentine's Day with search interest spiking in Indonesia during the period. Other significant festive seasons for chocolate sales include Christmas and Ramadan.
Challenges
Weak infrastructure, particularly cold chain facilities, makes chocolate transport a challenge particularly considering Indonesia's hot and humid climate. In 2023, Indonesia was ranked 52nd out of 63 countries in terms of infrastructure, in the World Competitiveness Ranking compiled by IMD.
Competitive Landscape
Delfi
Singapore-headquartered public-listed Delfi Ltd manufactures and sells and variety of chocolate products including chocolate bars, countlines and dragees sold under their owned brands including SilverQueen, Cha Cha and Delfi as well as agency brands such as Van Houten. Owned brands generated 58% of revenues in 2022 while agency brands accounted for the remainining 42%. As of 2022, about 66% of Delfi's revenues are generated in Indonesia where the company is a market leader with an estimated market share of 45%-50%. The remaining 34% of revenues are generated from regional markets notably the Philippines and Malaysia, along with the company's more than 15 export markets.
Recent financials:
FY 2022 (FY ended December 2022), revenues rose 19% YoY to USD 483 million, driven by strength in both Indonesia and regional markets which reported sales growth of 17.5% and 22.7% respectively during the year. Indonesia sales were driven by both own brands (particularly premium brands SilverQueen and Cha Cha) while regional market sales were helped by strong demand for agency brands in Malaysia.
Gross margins increased to 30.7% from 29.6% in 2021 driven by strong sales in the company's premium format category, higher overall sales volumes, and cost saving initiatives.
Net profit rose to USD 43 million and net margins increased to 9% in 2022 from 6.4% in 2021.
Operating cash flows dropped to USD 7.7 million in FY2022 from USD 77 million the prior year largely due to a higher cash outlay on inventories (operating cash flows before working capital changes rose to USD 73 million from USD 57.6 million the prior year). CAPEX rose to USD 3 million from USD 2.7 million in 2021. Going forward, management expects CAPEX to increase compared to prior years which had been curtailed due to the covid pandemic.
Future plans:
Delfi's plans over the coming years include a premiumization strategy, and continued product innovation (with a focus on healthy snacks) to support their strategy of launching new products every year to meet market demand, strengthen brand loyalty, and attract younger millenial and gen-Z consumers.
Cadbury
Mondelez-owned chocolate confectionery brand Cadbury's product portfolio includes chocolate bars, and individually wrapped pieces in pouches. Products are primarily sold through online and offline third-party retailers including supermarkets, and eCommerce marketplace platforms.
Recent developments:
Packaging innovations include the release of a new Cadbury Sharebag.
Marketing initiatives focused on online and offline promotion including social media, chocolate with toys, giveaways and contests (at least four during the year including promotions for Mother's Day, Teacher's Day), and pop-up trucks. Notably, Cadbury conducted a major promotional campaign early during the year, coinciding with Valentine's Day. The 'Pop Heart' promotion featured limited edition Cadbury bars in themed packaging with a heart shape in between the squares that can be popped out, and culminated in a concert (live and virtual) for customers who made a purchase of qualified Cadbury products.
Pipiltin Cocoa
Homegrown chocolatier Pipiltin Cocoa's product assortment includes chocolate bars, chocolate barks, cookies, and ice cream. Channels include online channels such as their direct-to-consumer online store on their website and eCommerce platforms such as Tokopedia, as well as offline channels such as boutique stores.
Recent developments:
New product launches (non-seasonal) during the year amounted to roughly ten (or nearly one new product a month) and included a single origin Milk Chocolate Bar with Melted Caramel, Milk White Honeycomb Chocolate, a '35G Chocolate Bar' designed as puzzle pieces, Chocolate Crocs Praline inspired by Jakarta's traditional Betawi crocodile bread, and at least six new flavors of chocolate barks (White Chocolate Matcha. Dark Cashew, Dark Orange Jelly, Dark Macadamia, pistachio, white chocolate with strawberries and yogurt). Seasonal launches include festive hampers for the holiday season, Jakarta Anniverary, Ramadan, and a limited edition Chocolate Strawberry Honeycomb bark for Valentine's Day. In addition, packaging designs were given a new look.
Dessert launches were mostly focused on ice cream and included indulgent choco tubs and new flavors for soft ice cream (at least three new flavors were launched namely doughnut ice cream, tiramisu, white chocolate matcha, pistachio). New flavors for cookies (pistachio chocolate), and beverages (iced dark chocolate milk) were rolled out as well.
Marketing initiatives covered both online and offline promotion including social media postings, contests and giveaways (at least seven during the year), trade shows (at least three during the year, two in Japan and the other in Australia), along with numerous offline events (at least five which included workshops and seminars).
Chocolate Monggo
Monggo Chocolate is a popular homegrown chocolate brand, with an assortment that includes chocolate bars, boxed assortments, and cooking chocolate, along with desserts such as gelato. Channels include their direct-to-consumer online store on their website, and their Chocolate Museum.
Recent developments:
Product launches were largely focused on seasonal promotions. Products rolled out during the year include collections with themed packaging for Chinese New Year, Valentine's Day, Ramadan and Eid ul Fitr, Easter, Independence Day of Indonesia, Halloween, and Christmas. Chocolate-flavored snacks launched during the year include chocolate flavored cookies.