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View all search resultsF&B industry’s challenges amid growth recovery momentum
Better handling of the pandemic, including the acceleration of the vaccination program, will boost consumer confidence and public mobility, which in turn will drive economic activity and people's purchasing power.
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he performance of the food and beverage industry has shown improvements in line with Indonesia's economic recovery. As an industry that provides basic necessities, the food and beverage industry has proven to be quite resilient during the pandemic despite experiencing a slowdown in gross domestic product (GDP) growth. Statistics Indonesia (BPS) data shows that the value of the food and beverage industry’s GDP never contracted during the pandemic.
Even in the second quarter of 2020 (2Q20), the food and beverage industry still grew by 0.2 percent year-on-year (yoy) while most industries experienced contraction. Therefore, the food and beverage industry is one of the sectors that is relied upon as a driving force of Indonesia's manufacturing industry going forward. National economic recovery is expected to accelerate in 2022. This is a growth momentum for the food and beverage industry, which is projected to grow by 5-7 percent this year.
However, various challenges arise and have the potential to hamper the pace of recovery in the food and beverage industry in the first quarter of 2022. Starting from the increase in Omicron cases followed by restrictions on mobility, which in turn has the potential to affect sales of food and beverage products, to the increase in commodity prices for food raw materials, particularly wheat price after the Russian invasion of Ukraine. As an illustration, the world wheat price has touched US$ 12.94 per bushel as of Monday, or a 67.1 percent increase year-to-date (ytd).
Regarding the increase in commodity prices, the trend of increasing prices of food raw materials such as sugar, wheat and crude palm oil has been taking place since the fourth quarter of 2020. Price increases accelerated in 2021 in line with the global economic recovery, energy crisis and the potential Russian invasion of Ukraine. As an illustration, the average price of wheat in 2021 rose by 23.9 percent yoy, raw sugar increased 34.8 percent yoy and crude palm oil rose by 60.7 percent yoy. Raw materials dominate about 80 percent of the production cost structure of the food and beverage industry.
After the Russian invasion of Ukraine actually occurred, commodity prices increased uncontrollably, especially wheat, which was the main export commodity of the two countries. Within two months, world wheat prices have almost doubled. If the Russian invasion of Ukraine is prolonged, we will see that the supply disruption of wheat will affect processed food prices in Indonesia, considering that this commodity is not produced domestically.
Indonesia imported 11.5 million tons of wheat in 2021, an increase of 8.6 percent from the previous year. Of this amount, Ukraine supplies 27.5 percent of Indonesia's total wheat imports or ranks as the second country of origin for Indonesian wheat imports after Australia with a share of 40.9 percent.
