Market Environment Analysis And Competitor Analysis In The Indonesian Confectionery Industry

PESTEL Analysis

Indonesia is a mountainous country found in the Southeast Asia, sandwiched by the Pacific Ocean and the Indian Ocean. This country is consists of 13000 islands and it is covered with swamps and rain forests (Ntiamoaha, & Afrane 2008). Indonesia attained its independence in 1945 after decades of the Japanese colonization. The official national language embraced in Indonesia is Bahasa that is a modification of Malay (Tijaja, & Faisal 2014). The majority of Indonesians are Muslims and other religion practice is eminent. Interestingly, Indonesia is a large trading environment where many countries have entrusted with their products and services, such as textiles and gas. The country is a developing economy with 22 percent of the population living below the poverty line.
1.1.1. Political factors

The Republic country has relied on the Roman-Dutch laws to establish its legal regulations and rules. It operates under the constitution that outlines all the practices and behaviours. Political stability is an important factor that defines the business environment. As the third largest democracies in the world, it has embraced democracy. Indonesia is a country that observes democratic principles (Deloitte 2012). For instances, it conducts elections after every five years. The president and deputy seek the direct vote from the citizens. In 2014, the country conducted the presidential and parliamentary election in which Joko Widodo emerged victorious thus forming the government (Putri, Sutopo, Prihawantara, & Matheos 2015).

1.1.2. Economic factors

In the Southeast Asia, Indonesia is the largest economy and the fastest growing economy worldwide. In fact, in 2012, it surpassed India as the second fastest expanding economy among the G20 countries after China (Transparency 2014). Currently, the country pursues a market economy structure that has made it’s a consumer-driven country. The domestic consumption defines it economy as it stands at 65 percent of the Indonesian GDP. With a population of about 240 million people, it has been possible to spur the economic growth (Deloitte 2012). In 2013, the GDP stood at $868.3 billion. For 2014 and 2015, it reported a GDP growth of about 5.4 percent and 5.9 percent respectively. In fact, the 2015 GDP growth surpassed the 2013 growth that was 5.8 percent (Smith 2015). The investment and export growth has also remained steady with the private consumption proving stronger than the public. Today, the country’s foreign direct investments signs are positive as Indonesia emerging to be the most attractive destination for foreign investors in the region.

Competitor Analysis

The driver of financing in Indonesia is the consumer segment that grew by 16 percent in 2013. In fact, the consumer financing segment has proved critical in developing and improving the Indonesian economy. For example, the country’s total multi-finance financing stood at 65 percent. In 2013, Indonesia reported an inflation rate of 6.4 percent (Smith 2015). Currently, the economic situation is encouraging with the foreign and direct investment reaching $35-40 billion annually (Deloitte 2012). It is also a leading exporter of thermal coal and palm oil, which are high-value commodities. Without a doubt, the country’s strong economic growth has helped it reduce poverty from 24 percent in 1999 to 11.3 percent in 2013.

1.1.3. Environmental factors

Indonesia boasts of a biodiversity and natural resources. To this effect, the country has incessantly pursued the sustainable development programs and policies (Pyo 2015). In fact, its forests are diverse, extensive, and valuable due to the huge reserves of diversity, timber, and traditional livelihood. The Indonesian government continues to play a key role in the providing the global environmental services. The coastline supports diverse habits such as mangrove forests, coral reefs, estuaries, lagoons, and swamps (Ntiamoaha, & Afrane 2008). The coastal zone is also sustaining the fisheries that are offering the proteins to the population. Therefore, Indonesia is a mega biodiversity nation because its environmental infrastructure remains strong but varies across its provinces (Schroth & Harvey 2007).

1.1.4. Socio-cultural factors

Indonesia is among the mostly populated countries in the world. The women population is slightly lower than males. As part of the country’s culture, its gender inequity index stands at 0.5 (Deloitte 2012). This indicates that the country performance fairly in the human development initiatives. The county is dominated by Muslims who form 85 percent of the total population. However, the Hindu Buddhists continue to influence the national culture and heritage. For instance, Bali and Java continues to influence the country’s overall culture.

1.1.5. Technology

Indonesia embraces the new technology with the majority of its citizens are internet users. Indeed, they have flooded the social media beyond the reproach. For instance, it is the fourth largest country with Facebook users and fifth globally in terms of twitter users. Compared to Tokyo, Jakarta had the highest number of tweets posted in 2012. Additionally, the manufacturing industry is embracing the new technology. However, most of the technology infrastructures the industries use are viewed as out-dated. Nonetheless, the manufacturing sector contributes significantly towards the country’s GDP (Euromonitor International 2016). The country also uses technology to drive its mechanized agriculture. This is evident in animal health, pest control, and seed cultivation among other sectors. In the hospitality industry, technology remains actively applicable. In fact, hotels, restaurants, and trading activities embrace e-payment, e-ordering and e-booking.

1.1.6. Environmental factors

Chocolate Confectionery

The Indonesian government has launched various programs meant to promote green environment (Disclaimer 2006). However, environmental pollution and deforestation remain rampant in the country. For instance, in 2012 along, the country beat Brazil in deforestation as it converted 840,000ha of forested areas to housing areas and plantation and industrial use. The forest fires are also dominant in the country and illegal lodging. Indonesia is also put on the spot over its high levels of greenhouse gas emissions. In fact, 85 percent of the emissions were associated with deforestations (Schroth and Harvey, 2007).

1.1.7. Legal factors

The Indonesian government has incessantly enacted policies that promote investments (Deloitte 2012). For example, in 2014, it enacted policies that boosted both the DDI and FDI. However, some of the policies are disastrous. For instance, an investor would take more than a year to access an operating license, especially in some industries. In the energy, pharmaceutical, transportation, and trading sectors, they remain affected vertically.

The confectionery sector in Indonesia is reporting a big growth. It is forecasted that by 2013, the industry will be valued at $2.6 billion (Abdulla 2015). The question that is pondering many analysts is the number of local players dominating the industry. Without a doubt, the local players understand the tastes and ability of its targeted customers thus offer its confectionary at a cheaper price. However, the international players are not just willing to leave the game to the local players alone. They are struggling to increase their market share. With a population of about 253 million people and the majority are youthful; the confectionary industry thus looks lucrative (Deloitte 2012). It presents attractive opportunities for many companies. This section analyses the impact and operations of both local and international companies in the industry.

2.1.1. Competitive Landscape

2.1.1.1. Ceres PT/ Petra Foods

Petra Foods is the leading player in the scene. Although it is a Singaporean company, it seems to have adopted the taste, purpose, and intent for the local market. This company’s confectionery portfolio contains ten master brands including Delfi, Ceres and SilverQueen (Abdulla 2015). The Euromonitor recognizes Petra Food as the leading company in this industry. Without a doubt, people believe that chocolate products damage the teeth and encourage overweight. However, its benefits are also driving people crazy. For example, dark chocolate relieves stress, lower cholesterol, and prevent pulmonary illness (Chan, Quach, Mensah, Sung, Cheung & Wake, 2012). In most cases, people of different ages have expressed preferences for chocolates and occasionally offer it as special gifts.  The trend continues to boost the sales and prospects.

Competitive Landscape

2.1.1.2. Mayora Indah

This is another important player in the confectionery industry in India. Since its inception in 1977, Mayora Indah has emerged to be a biscuit manufacturer (Euromonitor International 2016). Today, this local player has diversified in other industries such nutrition, coffee, chocolate confectionery and sugar confectionery segments. Based on its market share, this is the third largest player in confectionery sector. As a local player, the company has built a strong market share and distribution channel. For instance, Mayora Indah has established networks in the local villages and urban and remote areas (Smith 2014). Additionally, the company boasts of strong brand image that it has built based on the tastes of the Indonesian market.

2.1.1.3. Mondelez International

 In terms of market share, Mondelez International is the fifth player in the confectionery market. This international company engages in different product lines, such as Cadbury Dairy Milk, Toblerone, Cadbury Cashew & Cookies, and Cadbury Fruit & Nut (Smith 2015).

2.1.1.4. Nestle

Nestle company is among the serious competitors in the Indonesian confectionery industry. It continues to offer different products lines including Polo candy, Fox’s sugar candy, KitKat, Milo chocolate bars, and Nestle Crunch (Smith 2015).

2.2.1. Trends

In Indonesia, the gum industry is growing at an unprecedented rate. There are various factors that have contributed towards the growth. For instance, the continued expansion of retail outlets including hypermarkets, supermarkets and convenience stores enhanced the distribution of gum like the chewing gum (Deloitte 2012). This has improved the retail industry as the modern retail channels of distribution are emerging. Importantly, chewing gums gives people fresh breath relevant in daily activities including teeth whitening and the mint flavor that have increased people’s confidence.

2.2.2. Competitive Landscape

In the Indonesian gum sector, Perfetti Van Melle has emerged to be a force to reckon. This international company is also leading in the sugar confectionery categories. Perfetti Van Melle has overcome Mars Inc and Mondelez International (Nieburg 2013). By 2016, Perfetti Van Melle was controlling 58 percent of the gum market. This is due to its improved performance in chewing gum and bubble gum. This dominant player has incessantly used active promotions to widen its consumer base and increase the brand awareness.

2.2.3. Prospects

The gum sector has a positive prospect as different players intend to improve their distribution channels to reach out to all the customers (Deloitte 2012). The leading gum manufacturers in Indonesia have resorted to price promotions and development of new products. These efforts are likely to improve the growth of gums in the market.

Ceres PT/ Petra Foods

2.3.1. Trends

This product segment has proved attractive to many consumers across Indonesia. Since is affordable, nearly all ages have expressed preference to it. The manufactures have opted to offer different types of this product thus driving the sales volumes. According to Smith (2015), the leading manufacturers of sugar confectionery have continued to promote their products using different media to advertise including billboards, television, and social media platforms. This will contribute to an improved volume performance (Choi, and Kim 2015).

2.3.2. Competitive Landscape

In this sector, the international players continue to dominate including Perfetti Van Melle. This company has emerged to be the leader in the sugar confectionery market, where it boasts of 23% of value share (Euromonitor International 2016). Perfetti Van Melle This business dominates the market because it has diversified its product line of sugar confectionery to include Mentos, Chupa Chups, Fruit-tella, Chox, Golia, Marbels, and Alpenliebe as suggested by Fosfuri, Giarratana, and Roca (2016). It has also invested massively in the development of new products and marketing. The move will enable to remain the indomitable leader in the sugar confectionery sector. Other players in this sector include Knoimex pharmaceutical laboratories, the Indonesian Kapal Api Group, Nestle, and Mayora Indah (Euromonitor International 2016).

2.3.3. Prospects

The sugar confectionery is offered at the lowest retail price that making it a popular treat and affordable. Unfortunately, it remains fragmented as the top five local players boasting of about 39 percent of the total value share. It justifies that the segment remains fiercely competitive (Tijaja, & Faisal 2014). However, the segmented is expected to post a value CAGR of about four percent because it is driven by the Indonesian consumer habits. For instance, the majority have developed the desire to have a treat. With the fierce competition becoming eminent, the manufacturers will have to invest in differentiation strategy and launch new products at affordable prices. The stable prices have contributed significantly towards the purchasing consumer behaviors.

Doing business in Indonesia requires perseverance and patience as the company invests massively in resources and time (Ried, Frank, & Stocks 2009). It would be prudent for this company to consider the best market entry strategy.

3.1.1. Partnership

Doing business in Indonesia has proved challenging because of the bureaucracy. To this effect, partnership would benefit he foreign player (Alford 2014). For instance, the company can partner with the local player in the confectionery sector thus boost its chances of surviving. Given the current situation, where the international players are dominating the market, partnering with a local player would be a booster to the firm (Stringer 2015). Similarly, the strategy will allow the Haigh’s Chocolates to maximize the local networks that the local partner has established. These local players have also understood the taste and preferences in the local market. As such, Haigh’s Chocolates will manage to adapt and serve the local customers effectively (Kerry 1998).  

Mayora Indah

3.2. Value chain 

The majority have viewed chocolate to be unhealthy product that causes obesity and related health issues. To this effect, there is need for the organization to conduct value addition to make it safer and healthier for use (Stringer 2015). Importantly, the value addition focuses on improving the product quality. This will involve proper supply chain management.

3.2.1. Supply chain

Haigh’s Chocolates, as a multinational will have to invest in its supply chain and distribution strategies as explained by Putri et al. (2015). In fact, it will have to monitor the product quality from the farmer up to the end. The supply chain that it will adopt will consist of the cocoa growers, collectors, local traders, exports, local processors, and local manufacturers, domestic and overseas consumers.

 In each level of supply chain, there is a value addition that ensures the final product meets the expectations of the market. The diagram below shows a finer diagram for the chocolate industry.

 
3.3. STPD 

3.3.1. Segmentation

Haigh’s Chocolates has the obligation to identify the market segment its will target with its chocolate confectionery. The company will have to divide its market base on different variables including demographics, income level, gender, and age (Pyo 2015). The demographic segmentation indicates that this product would serve all gender and ages. It is important to consider the income level as a way of serving the targeted market. Since the majority of Indonesians are live above the poverty line, they can easily afford the chocolates.

3.3.2. Targeting

Haigh’s Chocolates targets all ages and sexes in Indonesia. This is because; all Indonesians of all ages have expressed love for the product. However, the youthful Indonesians stand a better chance to guarantee the company a future. Therefore, the chocolate confectionary offered to them should be a priority (Deloitte 2012). This youthful market share is also known for their love for valentine celebration. With this product, the company should develop the product that befits their needs for special occasions.

3.3.3. Pricing

Haigh’s Chocolates has to consider the current market rate as applied by key players in the market. For this reason, skimming pricing will be essential in allowing the firm to expand into the new market (Tijaja, & Faisal 2014). In fact, this strategy will serve the interest of the Indonesians who have expressed preferences to affordable chocolate confectionery.

3.3.4. Distribution

Since the advent of the internet, the internet penetration is high; Haigh’s Chocolates will have to invest in the modern distribution channels to serve its targeted customers (Haighschocolates.com.au. n.d.). For instance, it will use the social media to market and direct the customers to its online stores (Choi & Kim 2015). With the online store accessible, the firm will rely on the suppliers and its partners to deliver the product. Similarly, the organization will have to open new outlets in the remote areas where villagers can access the product. It should also take advantage of the established retail outlets such as hypermarkets and supermarkets to stock its chocolate confectionery.

4. Conclusion

Haigh’s Chocolates stands a better to succeed in the Indonesian market. Based on this article, it is evident that the chocolate confectionery segment is attractive. This is because; Indonesia has provided all the impetus of attracting investors. In the entire region, the country offers the best opportunity for the foreign investors. Haigh’s Chocolates should use the opportunity available to enter the chocolate confectionery to expand its market share and improve the profits. Importantly, the company should only consider partnership as way of entering the competitive chocolate market. With the local players struggling to survive, the entry of the Australian Haigh’s Chocolates would be essential to the local partner.

5. References

Abdulla, H., 2015, Oct 1. Indonesia- the Sweet and Sour of confectionary Market. Just-food. https://www.just-food.com/management-briefing/indonesia-the-sweet-and-sour-of-the-confectionery-market_id131152.aspx 

Alford, P. 2014, Feb 19. Indonesia’s Protectionist Trade Law. The Australian. https://www.theaustralian.com.au/business/jakarta-freely-admits-it-is-shielding-local-stakeholders/story-e6frg8zx-1226830971710# 

Chan, E.K., Quach, J., Mensah, F.K., Sung, V., Cheung, M. and Wake, M., 2012. Dark chocolate for children’s blood pressure: randomised trial, Archives of disease in childhood, vol.97, No.7, pp.637-640.

Choi, C.S. and Kim, K.H., 2015, June. Marketing Management in Social Network Platforms: Segmentation, Targeting, and Positioning. In 2015 Global Fashion Management Conference at Florence (pp. 97-102).

Deloitte., 2012. Indonesian Customs Guide 2012.

Disclaimer, 2006. Indonesia Cocoa Bean Value Chain Case Study. MicroREPORT 65: USAIDS.

Euromonitor International, 2016, Dec. Confectionery in Indonesia. https://www.euromonitor.com/confectionery-in-indonesia/report 

Fosfuri, A., Giarratana, M.S. and Roca, E., 2016. Social Business Hybrids: Demand Externalities, Competitive Advantage, and Growth through Diversification. Organization Science, vol.27, No.5, pp.1275-1289.

Haighschocolates.com.au., (n.d.). About Us – Haigh’s Chocolates. https://www.haighschocolates.com.au/about-us

Kerry, C., 1998. The Haigh’s Book of Chocolate. Wakefield Press.

Nieburg, O. (2013). Indonesian sugar rush sweet news for Petra Foods…but rivals could be lurking, ConfectioneryNews.com, https://www.confectionerynews.com/Markets/Indonesian-sugar-rush-sweet-news-for-Petra-Foods-but-rivals-could-be-lurking

Ntiamoaha, A. and Afrane, G. 2008. Environmental Impacts of Cocoa Production and Processing in Ghana: Life Cycle Assessment Approach. Journal of Cleaner Production, vol. 16, no. 16, pp. 1735–1740.

Putri, A.S., Sutopo, W., Prihawantara, S., & Matheos, R.C.D., 2015. Value Chain Improvement for Cocoa Industry in Indonesia by Input-Output Analysis. Proceedings of the International Multi-Conference of Engineers and Computer Scientists, vol. 2. ISBN: 978-988-19253-9-8

Pyo, S., 2015. Integrating tourist market segmentation, targeting, and positioning using association rules, Information Technology & Tourism, vol.15, No.3, pp.253-281.

Ried, K., Frank, O.R. and Stocks, N.P., 2009. Dark chocolate or tomato extract for prehypertension: a randomised controlled trial. BMC complementary and alternative medicine, vol.9, No.1, pp.22.

Schroth, G. and Harvey, C. A., 2007. Biodiversity Conservation in Cocoa Production Landscapes: An Overview. Biodiversity and Conservation, vol. 16, no. 8, pp. 2237-2244.

Smith, G., 2015, Dec 9. The Bitter-Sweet Taste of Indonesia’s chocolate. Thompson Reuters Foundation News. https://news.trust.org/item/20151208013433-17lre/ 

Stringer, R., 2015. Vanuatu: Bean to bar: Vanuatu chocolate. Partners in Research for Development, (1), p.10.

Tijaja, J. and Faisal, M., 2014, Oct. Industrial Policy in Indonesia: A Global Value Chain Perspective. ADB Economics: Working Papers Series, no. 411.

Transparency, 2014, Jul 29. Asia Pacific chocolate market- scenario, trends, industry analysis, size, share and forecasts, 2013-2019. Transparency Market Research. https://www.transparencymarketresearch.com/asia-pacific-chocolate-market.html