T

he country’s packaging industry expects revenue to grow at a double digit rate this year on the back of stronger demand from end-user industry, which is expanding along with the country’s economic growth, a business association says.

The local packaging industry could reap Rp 40 trillion (US$4.36 billion) in revenues this year, up by 11.1 percent from last year, boosted mainly by the local food and beverage and pharmaceutical industries, says Arianna Susanti, the business development director of the Indonesian Packaging Association.

The local food and beverage industry annually consumes around 70 percent of the total packaging supply, according to the association’s data.

The Indonesian Food and Beverage Producers Association (Gapmmi) estimates that total food and beverage (F&B) sales nationwide will increase by 10 percent to Rp 710 trillion this year, while the spending on all types of medicines will rise by 12.6 percent to Rp 42 trillion this year, according to the Indonesian Pharmaceutical Association.

“Demand for the packaging of food and beverages continues to surge and at the same time, product innovation has been developing,” she said, citing the variations made in the nonalcoholic drink lineups as an example of innovation.

Innovation, Arianna added, would also happen in the packaging of personal care products, such as shampoo, particularly those targeted at young people.

The higher demand for packaging would mostly be driven by plastic-based packaging — flexible packaging and rigid plastic packaging — which would likely contribute around 56 percent of the overall demand as had been the pattern in the last three years, she said.

“In the past, plastic-based packaging only accounted for around 51 percent, but now the demand has increased significantly as it is considered more efficient,” Arianna said in a reference to a shift from once-popularly used materials, such as glass, to new materials, including polyethylene terephthalate (PET).

According to Arianna, given the stable growth rate of more than 10 percent annually, the local packaging industry’s revenue would likely double by 2016.

However, she said, a challenge might come from the supply of raw materials, of which between 25 percent and 40 percent were imported at present.

Out of the total imported raw materials, those for plastic packaging accounted for the highest proportion at 40 percent. The government imposes import duties of up to 20 percent on raw materials for the downstream plastic industry.

This year, the local industry could need around 3 million tons of plastics, up 17.14 percent from last year, the Indonesian Olefin and Plastic Industry Association (Inaplas) vice chairman Budi Susanto Sadiman said.

However, the association had earlier estimated that imports of plastic raw materials would decline by 2.62 percent to 1.19 million tons this year as several local producers have upgraded or increased the utilization rate of their production capacity, including top petrochemical firm Chandra Asri Petrochemical and PT Polytama Propindo (Polytama).

Indonesia imports propylene and polyethylene mostly from other ASEAN countries, the Middle East, the United States and European countries.