packaged drinking water in indonesia

8/3/2019 Packaged Drinking Water in Indonesia

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IB Assignment:Steps to launch a productin an overseas market

GROUP 5

AbhishekKumar

11DM006

Apurv Jain 11IT009

Hema Koppala 11FN041

Shaurya VikramSingh

11FN096

B Sri Harsha


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COUNTRY OVERVIEW

IndonesiaIndonesia is an archipelago comprising approximately 17,508 islands, 33

provinces with over 238 million people, and is the world's 4th most

populous country. Indonesia is a founding member of ASEAN and a member of

the G-20 major economies. The Indonesian economy is the

world's seventeenth largest economy by nominal GDP and 15th largest

by purchasing power parity. Indonesia's estimated gross domestic product

(nominal), as of 2010 was US$706.73 billion with estimated nominal per capita

GDP was US$3,015, and per capita GDP PPP was US$4,394 (international

dollars). June 2011: At World Economic Forum on East Asia, Indonesian president

said Indonesia will be in the top ten countries with the strongest economy within the

next decade. The Gross domestic product (GDP) is about $1 trillionand the debt

ratio to the GDP is 26%. The industry sector is the economy's largest and accounts

for 46.4% of GDP (2010), this is followed by services (37.1%) and agriculture

(16.5%). However, since 2010, service sector has employed more people than other

sectors, accounting 48.9% of the total labor force; this has been followed by

agriculture (38.3%) and industry (12.8%). Agriculture, however, had been the

country's largest employer for centuries.

Inflation:

The inflation rate in Indonesia was reported at 3.79 percent in December of2011. From 1997 until 2010, the average inflation rate in Indonesia was 13.26percent. The inflation rate fell to 3.79 percent in December 2011. Furthereconomists predict an inflation rate of around 3.5 percent in January 2012.


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As an Emerging Market:

Indonesia is the only major emerging stock market to have posted any realgains in 2011, a year in which the broad MSCI emerging stock market index lost 20percent and underperformed developed markets in a flight from risk. But forIndonesia, which many say should turn the BRIC club into BRIIC; last year was oneof surging growth, with the worlds largest coal exporter helped by rising commodityprices. Indonesia won back a coveted investment grade rating last month; its firstsince the Asian financial crisis of 1997.

MARKET OPPORTUNITIES:

1. ENERGY:

1.1. Electrical Power shortages (as in 2005).

1.2.8% demand increase per year.

1.3. Demand for sub contracts - 13 future projects.

2. TELECOMMUNICATION EQUIPMENT AND SERVICES:

2.1.Forecasted growth rate- 30% to 40 %.

2.2.Imports account for 90% of this market.

2.3.Market size estimated at more than $5 billion.


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3. INDUSTRIAL CHEMICALS:

3.1.Total Import- $8.1 billion(in 2006)

3.2.FDI(in 2006)- $101.6 million

3.3. Opportunities in Organic chemicals, Raw materials and Plastic

products.

4. ENVIRONMENT TECHNOLOGIES:

4.1.Market estimated at more than $ 25 million.

4.2. Major issues: Deforestation, Sewage, Water pollution (Ground WaterContamination).

5. RETAIL INDUSTRY:

5.1.Opened to foreign investment in 19985.2. Foreign retailers account for only 8% of outlets but capture 40% of total

retail sales.

6. FRANCHISES:

6.1.Home to 250 foreign and 50 local franchises.

6.2. Best prospects in- Food and Beverages, Education, Business Aids.

6.3.Estimated future growth of 5%.

7. INFORMATION TECHNOLOGY:

7.1. Growth rate forecasted at 15%.

7.2. Imports account for around 80%.

7.3. Prospects-PCs and High end servers.

On the basis of the above information, we decided to use the issue ofWATER POLLUTION AND GROUND WATER CONTAMINATION and launch ourPackaged Drinking Water in Indonesia.


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Bottled Water Big Business in Indonesia

Even though Indonesia water resources accounted has for almost six percent

of the world water resources or about 21 percent total water resources in the Asia

Pacific region, in fact clean water is becoming serious problem in Indonesia. Based

on data shows that water consumption tends to increase significantly, total water

demand in 2000 is approximately 156,000 million m per annum. It is predicted that

the figure will be doubled to 356,575 million m per annum by 2015. However the

availability of clean water in term of quantity tends to decrease due to

environmental degradation and pollution. The rate of water resources degradation

accounted for 15-35 % per capita annually.

In the recent, at least 80 percent of 250 million Indonesian has no access to

piped water. Due to difficulties and limited access to clean water large number ofpeople still using river for drinking water, bathing, and washing. There was an

indication that people in the village uses river as drinking water resources tends to

decrease from 22.8 percent to 22.5 percent during period 1999-2002. However,

during the same period, there was an increasing trend people using river for

washing and bathing from 65.2 to 66.2 percent.


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Indonesia Soft drinks Market Value, 2000 - 2010, US Dollars (m)

In Indonesia, over 100 million people lack access to safe drinking water. The

consensus is that Indonesia is witnessing a major behavioral shift toward

dependency on bottled water. Of course this turn to the bottle is primarily occurring

in the middle classes but the Asian Development Bank estimatedthis class grew

to 43 percent in 2009, which in a population of around 245 million is no small figure.In the same year, Indonesia consumed 15.7 billion liters of bottled water, making it

one of the largest total consumers in Asia, second only to China.

Before bottled water became a serious market in Indonesia, people boiled

their water. For those connected to the piped network, you could boil it a couple of

times and be satisfied that it was drinkable. Outside of the network, water would

probably be sourced from a local well, and it might need to be boiled then sit

overnight for the sediment to settle before it could be consumed.

These days, things are both better and worse. In major cities like Jakarta, the

water has become increasingly contaminated a consequence of urbanization,

increased pollution of surface water sources, the leaching of sewage into

groundwater, increased salinity from rising sea levels, and over extraction by

unregulated neighborhood wells and industry. At the same time, people who can

afford it now have the convenience of bottled water being sold on every street

corner and in every shopping center in gallons, liters and small compact bottles

a trend that has emerged only within the past 15 or so years.

The French company DANONE dominates the Indonesian market, accounting

for around 60% of all bottled water sales with its majority owned Aqua brand; but

Nestle, Coca-Cola and PepsiCo are also players and all signs point to market

expansion. A huge host of small local companies has also appeared in the last 10

years, offering more competitive prices. In 2010, membership of Indonesias

Association of Bottled Water Companies reached 183 local and foreign owned

businesses. Some small-scale entrepreneurs set up re-filling stations that provide

treated water sourced from either mountain springs, their own well, or sometimes

from a source connected to the piped network. So selling water is big business now

in Indonesia whether you are a large company or a small private vendor.


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When there is such little public trust in government to provide clean water,

no wonder business is booming. Even people who are connected to a piped water

supply only use it for showers and washing dishes, they cook with bottled water. So

homes that are being supplied with treated water through their pipes are also

regularly purchasing bottled water for their everyday consumption probably from

one of Aqua-DANONEs 11 springs and 15 factories.

The Aqua brand is growing fast, and with net profits raising by 16% in 2009the company has plans to expand its bottling factories (and therefore the natural

springs it uses). This kind of investment in the outer districts of Indonesia is

welcome it provides jobs, and revenue via company taxes and the tariffs charged

for using spring water.

With the consumption of 15.70 billion liters of water in 2009, Indonesia has

emerged the seventh-largest bottled water (mineral and non-mineral) market in the

world. In Asia Pacific, Indonesia is the second largest in terms of total bottled water

consumption, and the third largest in per capita bottled water consumption. Owing

to the rising presence of contaminants in the water and relatively low entry barriers,

the Indonesian bottled water market is expected to register double-digit growthrates until 2016. Apart from favorable economic factors, the market will also get a

boost from the rising spending power of young urban consumers and improving

health and safety awareness in the country. Large population in the urban cities of

Indonesia and enhanced health and water safety awareness are the key drivers of

the market, says the analyst of this research. Bottled water in Indonesia is a safer

alternative to tap water for consumption, and the majority of the population

considers it more affordable than residential water treatment equipment.


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Participants find it easy to set up plants due to the low grade of technology

and investment required; but once they enter the market, they will have to be wary

of counterfeiters. They also face competition from water refilling station operators

that sell questionable-quality water at competitive prices. Additionally, Indonesian

authorities are introducing the use of Air Rahmant (low concentrate of sodium

hypochlorite) and Sodis (solar disinfection) that eliminates biological contaminants

in water, lowering the demand for bottled water.

Bottling plant owners can still feel optimistic due to an expanding middle

class population, which translates to higher sales. Furthermore, the rise in the

prices of tap water and fuel has caused consumers to turn to bottled water.

Companies that are willing to invest in multiple manufacturing facilities and

systematic logistics for distribution in this archipelagic nation are likely to succeed.

Interestingly, the Government is making efforts to decrease its reliance on imports

and instead, depend on local production, notes the analyst. This has creatednumerous job opportunities and is likely to attract more investments to the bottled

water market.


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- Notarize company deeds- Notarize registration certificate- File with the Statistical Bureau- File with the Ministry of Industry and Trade, Ministry of the Economy, or therespective ministries by line of business- Notify municipality of start-up date

- Obtain certificate of compliance with the company law- Obtain business license (operations permit)- Obtain permit to play music to the public (irrespective of line of business)- Open a bank account and deposit start-up capital- Perform an official audit at start-up- Publish notice of company foundation- Register at the Companies Registry- Sign up for membership in the Chamber of Commerce or Industry or the Regional

Trade Association

2. Tax-related requirements:- Arrange automatic withdrawal of the employees income tax from the company

payrollfunds

- Designate a bondsman for tax purposes- File with the Ministry of Finance- Issue notice of start of activity to the Tax Authorities- Register for corporate income tax- Register for VAT- Register for state taxes- Register the company bylaws with the Tax Authorities- Seal, validate, and rubricate accounting books

3. Labor/social security-related requirements:- File with the Ministry of Labor- Issue employment declarations for all employees- Notarize the labor contract- Pass inspections by social security officials- Register for accident and labor risk insurance- Register for health and medical insurance- Register with pension funds- Register for Social Security- Register for unemployment insurance- Register with the housing fund

4. Safety and health requirements:- Notify the health and safety authorities and obtain authorization to operate fromtheHealth Ministry

- Pass inspections and obtain certificates related to work safety, building, .re,Sanitation and hygiene

5. Environment-related requirements:- Issue environmental declaration


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- Obtain environment certificate- Obtain sewer approval- Obtain zoning approval- Pass inspections from environmental officials- Register with the water management and water discharge authorities

Following are the regulations specific for Bottled Water Plants

Indonesia is a member of Asia Middle East Bottled Water Association (ABWA);hence all the plants have to follow the guidelines of ABWA. Bottled water is a highlyregulated product, subject to international, national and industry standards. TheIndonesia Food and Drug Administration (FDA), under the Federal Food, Drug andCosmetic Act (FFDCA or the Act), regulates bottled water as a food product. Thisincludes packaged water sold in smaller containers at-retail outlets as well as largerfive-gallon containers distributed to the home and office market. Like all foodproducts except meat and poultry (which are regulated by USDA), bottled water is

subject to FDAs extensive food safety and labeling requirements, which include:

- Food adulteration and misbranding provisions;- Nutritional labeling provisions;- General Good Manufacturing Practices (GMPs);- Bottled water GMPs;- Bottled water standard of identity; and- Bottled water standard of quality, which is as stringent as the IndonesiaEnvironmental Protection Agencys (EPA) standards for public water supplies.

Average Time (in Days) Required for Setting up a Business

DATA RELATED TO STARTING A

BUSINESS

YEAR

2010

Rank161st

( world)Procedures (number) 9Duration 60 daysCost (GNI per capita) 26%Paid in Minimum Capital (GNI percapita)

59.7%


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According to a World Bank report, the average time taken to start a business inIndonesia is high in comparison to other countries within East Asia and the PacificRim as well as OECD countries, despite the relatively fewer procedures to befollowed.


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References

www.tradingeconomics.com

www.researchandmarkets.com

en.wikipedia.org

www.sourcesecurity.com

www.bi.go.id

packaged drinking water in indonesia

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