East Java-based bottled water producer Tanobel Food and Beverage plans to gradually expand its number of production facilities over the next few years to cater to increasing demand in the local market.

Tanobel, producer of the Cleo brand, currently runs 18 factories and expects to build another 32 in the next few years, with an annual investment of at least Rp 100 billion (US$7.67 million).

“We will operate a new mid-sized factory with a capacity of 200 million liters of water per year in Purworejo, Central Java, by November. We will add three or four more production facilities next year,” Tanobel founder Hermanto Tanoto told reporters recently in Surabaya.

In 2017, Tanobel plans to build drinking water factories in Semarang, Central Java, and the East Java cities of Ngoro, Pasuruan and Banyuwangi.

There are approximately 800 bottled water companies in the country, producing a total of 1,800 brands. Around 60 percent of the companies, however, run on a small to medium scale, targeting only a particular regional or provincial market.

The Association of Indonesian Producers of Packaged Drinking Water (Aspadin) recorded that the production of bottled water reached 24.7 billion liters in 2015 and was expected to rise to 27.2 billion liters by the end of this year, indicating a 10 percent year-on-year (yoy) increase.

The association said the top four brands were Aqua, Vit, Club and Cleo. The first two brands are produced by global food giant Danone while Club is made by PT Asahi Indofood Beverage Makmur, a joint venture of publicly listed PT Indofood CBP and Japanese beverage group Asahi, leaving Cleo as the only top brand fully owned by a local business.

Tanobel’s 18 factories currently spread across the archipelago, with most of them located in Java. The company, which holds a 5 percent market share, produces up to 2 billion liters of drinking water per year.

Hermanto added that his company was aiming to have at least 50 water factories nationwide before penetrating Southeast Asian markets to face global competition, particularly after the implementation of the ASEAN Economic Community late last year.

Hermanto predicted that the country’s growing economy would provide a boost for the bottled water industry to reach even greater growth of up to 20 percent next year.

In August, President Joko “Jokowi” Widodo promised 5.3 percent growth in gross domestic product (GDP) next year, slightly higher than the 5.2 percent growth forecast for 2016.

Another reason for the strategic expansion was cutting transportation costs, which currently make up 12 to 16 percent of total production costs. With lower production costs, the company would not need to increase the price of its products.

“The bottled water industry depends on transportation and distribution. Those who have an extensive distribution and transportation network will survive,” Hermanto said.

Previously, Aspadin chairman Rachmat Hidayat said the association had urged its members to keep providing customers with low prices to help maintain the growth of the industry.

The Industry Ministry, meanwhile, has targeted 7.8 percent growth for the food and beverage industry this year.

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