Indonesia Tea Development : An Opportunity

Presented atBandung International Tea Convention

4 Nov 2014

COORDINATING MINISTRYFOR ECONOMIC AFFAIRS

Musdhalifah MachmudAssistance to Deputy for Plantation and Horticulture

2

Where We Are Headed

~ 12 largest~ 12 largest

~ 8 largest~ 8 largest

8 – 9 % per annum 5 – 6 % per annum

3

The New Government

4

The New Government

5

Economic Development Creating Middle Class

Sumber : ADB, *estimasi 2012

ADB, Middle Class : $2 - $20 per capita/day

“Indonesian Middle Class become double in 10 years”

6

A once in Century Opportunity

Indonesia has once in a century opportunity toimprove the lives of all Indonesian by achieving a tenpercent rate of growth of national income andcreating 21 million good, productive job. Two facts have combine to create this opportunity:

1. China exports US$ 1,500 billion of labor intensivegoods , but its no longer competitive. Its labor costis shrinking and aging, wages are rising rapidly.

2. Indonesia has an estimate 20 million surplusworkers in agriculture.

(Prof. Papanek, 2014)

7

Economic Development has created job opportunities and reduced poverty

9.86

11.2410.28

9.118.39

7.877.14

6.56 6.14 6.255.70

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Peb

Tingkat Pengangguran

16.66 15.9717.75

16.5815.42

14.2013.33

12.36 11.66 11.47 11.25

5.00

7.00

9.00

11.00

13.00

15.00

17.00

19.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Mar

Tingkat Kemiskinan

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INDONESIAN ECONOMIC : Become 16th in the world

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

(1) United States(2) China(3) Japan

(4) Germany(5) France

(6) United Kingdom(7) Brazil

(8) Italy(9) Russia(10) India

(11) Canada(12) Australia

(13) Spain(14) Mexico

(15) South Korea(16) Indonesia

(17) Turkey(18) Netherlands

(19) Saudi Arabia(20) Switzerland

(21) Sweden(22) Norway

(23) Iran(24) Belgium

(25) Argentina

Sumber: World Bank, CEIC, IMF

97 6

2 2 2 2

2624

2826

1816 16

1990 1995 2000 2005 2010 2011 2012

China Indonesia

Keberhasilan pembangunan ekonomi indonesia telahmembawa Indonesia ke dalam kelompok G20.

Pada tahun 2012, Indonesia menjadi negara terbesar ke16 dunia (2005 masih di peringkat 26).

Indonesia berada pada arah yang benar.

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RESOURCES

Sumber: World Bank, CEIC, IMF

Human CapitalNatural Resources : Bio resource, Mining, SeaTourismNational StabilityTechnologyInfrastructure, etc

Natural Resources: Palm Oil, Rubber, Cocoa, Tea, Coffee, etc.

We need to maximize the benefit of tea to drive the economic of the farmerand the village.

10

70

80

90

100

110

2005 2006 2007 2008 2009 2010 2011

145

150

155

160

165

170

2005 2006 2007 2008 2009 2010 2011

The tea sector in Indonesia is shrinking – in area harvested, productionand export volumes

100

105

110

115

120

125

130

135

140

145

150

2005 2006 2007 2008 2009 2010 2011

Total Harvested Area (‘000 hectares),Indonesia 2005-2011

Sources: Badan Pusat Statistik, World Bank Presentation, January, 2014

Tea Production (‘000 Tons), 2005-2011

Tea Exports (‘000 Tons), 2005-2011

Current Situation: why the tea sector should be a source of concern

11

Increased tea consumption inemerging markets – since 2001, teaimports to many regions have beengrowing at rapid rates:• Middle East: up 61%• Latin America: up 127%• Africa: up 221%

Growing demand for high-value teasin mature markets, driven by interestin health benefits, connoisseur teas& new product formats:• With Starbuck’s acquisition of

Teavana, specialty shop tea salesare up 18% over the last year

• US Connoisseur Tea Sales: up450% since 1990

• Global Ready-to-Drink (RTD)bottle sales: up 41% since 2007

Despite the usual commodity-market ups and downs, global teademand and prices are generally trending upwards

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2005 2006 2007 2008 2009 2010

Global Tea Consumption (mln tons)& Composite Global Prices (US$/kg)

= Avg. global auction price (US$/kg)

= Global consumption (in million tons)Sources: FAO Intergovernmental Group on Tea, ITC Trademap, US Tea Association, World Bank Presentation, January 2014

Global demand drivers

Current Situation: why the tea sector should be a source of concern

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Indonesian Tea Consumption

Sources : Indonesian Tea Board

152,

589

151,

012

142,

342

137,

245

92,3

04

87,1

01

75,4

50

70,0

71

7,16

9

10,8

70

19,8

12

24,3

97

67,454ton

74,781ton

86,704ton

91,571Ton

0

10, 000

20, 000

30, 000

40, 000

50, 000

60, 000

70, 000

80, 000

90, 000

100 ,000

-10,000

10, 000

30, 000

50, 000

70, 000

90, 000

110 ,000

130 ,000

150 ,000

170 ,000

2009 2010 2011 2012Production (Ton)Export (Ton)Import (Ton)Domestic Consumption (Ton)

Indonesianconsumption/head is lowerthan some other countries

Consumptiongrowth 12%/year

and tend toimproveExport tea in bulk tea is priced for $3,- Consumers are

paying equivalent of $30 to $40 in value added forms.

But, Indonesian Tea Consumption Is Growing and Tend to Improve

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Keterangan:1. Makanan, Minuman

dan Tembakau2. Tekstil, Barang Kulit &

Alas kaki3. Barang Kayu & Hasil

Hutan Lainnya4. Kertas dan Barang

Cetakan5. Pupuk, Kimia &

Barang dari Karet6. Semen & Brg. Galian

bukan logam7. Logam Dasar Besi &

Baja8. Alat Angkut, Mesin &

Peralatannya9. Barang Lainnya

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Tea business opportunities in Indonesia is very promising

Sources: Indonesian Tea Board

Domestic consumption= 0,35 Kg/capita/yr.

Tea Farm Productivity:- Average : 1.200 kg/ha/yr.- The potential : > 2.500 kg.

The Potential To increase the volume of production. To increase the domestic demand. Will increase the global demand

Marketing strategy Develop the assurance of good quality. Establish the solid farmer’s organization Establish the promotion strategy with the target establiishing Indonesia

“national branding”

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Indonesia: Yesterday-Today-Tomorrow

Mall and Plaza were the one stop service that youth are looking for

Sources: http://enterthelab.com/index.php

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Indonesia: Yesterday-Today-Tomorrow

Youth are looking for a place that suits with their lifecycle and socialneeds.

Sources: http://enterthelab.com/index.php

17Sources: http://enterthelab.com/index.php

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Q : What Do You Drink at Lunch ?

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Soda Tea Mineralwater

Juice Other

5.20%

20.90%

55.70%

15.70%

2.50%

Surprizingly whatwas considered as“youth drink” isnow at the bottomposisiton

Sources: http://enterthelab.com/index.php

Anomaly of Indonesian People

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Q : What Kind of Beverage that Your Friends Buythe Most ?

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Tea MineralWater

Soda Juice Milk Other

62.60%

20.90%

7.80% 5.20% 1.70% 1.70%

Tea isconsideredmore as asocial drink

Sources: http://enterthelab.com/index.php

Anomaly of Indonesian People

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Tea business opportunities in Indonesia is very promising

Health issue is becomingmore salient.

Drinking tea is embeddedculturally in many

Indonesian eating ritual.Its not about the taste,but the social custom.

Sources: http://enterthelab.com/index.php

Anomaly of Indonesian People

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Thank You

COORDINATING MINISTRY FOR ECONOMIC AFFAIRS