Indonesia Investments wishes all Muslims a happy & generous Ramadan
25 May 2018 (closed)
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Stakeholders in Indonesia's food and beverage industry expect to see a 15 percent increase in sales during the Ramadan month and Idul Fitri celebrations (compared to normal conditions). Although the Ramadan is Muslims' fasting month, it is also a period when household consumption tends to rise sharply in Indonesia, specifically spending on food and drinks as well as clothes, bags and shoes grows significantly.
During the Ramadan month most Muslims fast during daytime. However, in the early morning and evening there are many breakfast and dinner parties, often celebrated with friends and families. These parties thus trigger higher consumption than during "normal" months. Meanwhile, Idul Fitri marks the end of the Ramadan month. During this week-long public holiday millions of "city people" visit their places of origin (usually in the rural areas or smaller cities). Hence, Idul Fitri also gives rise to higher consumption amid family gatherings.
Moreover, those who go back for a few days to their places of origin usually bring presents (or bring money that will be injected into the local/rural economy for example by buying local food and drinks including bread, biscuits, light drinks, syrup, flour, and cooking oil).
Rachmat Hidayat, spokesman for a local food and beverage industry association in Indonesia (FLAIMM), said many food and beverage companies are currently already preparing their stocks, consisting of various food and drink products, in the regions in anticipation of higher demand during the Ramadan and subsequent Idul Fitri celebrations. Meanwhile, food and beverage companies have also been boosting spending on advertisement in media recently.
Although household consumption has been sluggish in Indonesia over the past couple of years (dipping below the 5 percent year-on-year growth level), hence dragging down overall economic growth of Indonesia at a level slightly above the 5.0 percent (y/y), most analysts expect to see improving household consumption in 2018. The upcoming Ramadan month (that starts in mid-May) and Idul Fitri (second week of June) will be good indicators to measure the state of Indonesia's household consumption in 2018.
This year, stakeholders expect to see a 15 percent growth pace in consumption amid the Ramadan and Idul Fitri celebrations. Last year, turnover in Indonesia's food and beverage industry reached around IDR 1,200 trillion, hence approximately IDR 100 trillion per month. Thus, the expected 15 percent increase should boost turnover in the industry to IDR 115 trillion in this year's Ramadan/Idul Fitri period.
Last year, there only occurred a 5 percent rise in consumption during these Islamic events, a poor result that was blamed on consumers' weak purchasing power.
Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (GAPMMI), basically agrees with Hidayat although Lukman's growth prediction for consumption during the Islamic events in 2018 is a bit more cautious at a range of 10-15 percent.