Current brief packaging overview in Indonesia

1. PACKAGING INDUSTRY IN INDONESIA
EXECUTIVE SUMMARY
Shortage of Packaging Materials Become the Main Challenge in 2008
The food packaging industry in Indonesia continues to be lucrative, boosted by the continued switch from non-
packaged fresh products to packaged ones. Product packaging continues to grow in demand towards 2008, from
packaged food to packaged beverages, cosmetics and toiletries to household care products. The industry faced an
important challenge to meet the growing demand, from the rising cost of packaging in 2008 that has risen, due to the
shortage of packaging raw materials. Rocketing oil prices in 2008, posed a tough situation for packaging companies
as it resulted in a steep increase in packaging prices. However, a more significant issue in 2008 was the shortage of
packaging raw material. The shortage was most felt for the plastic packaging raw material made from polypropylene
(PP). The growing trend towards plastic packaging and away from more traditional pack types such as glass, meant
that the packaging companies suddenly had to either try to switch to other alternative plastic packaging raw
materials that do not use PP or have seen their profitability come under pressure due to such rising costs.
Stronger Regulations Implemented on Packaging
Regulations governing the packaging industry in Indonesia are still relatively minimal and the packaging industry
itself is still in an early development stage. As the pack types of various consumer goods products become more
varied over the review period, the government has tried to keep up with the introduction of new regulations. In
August 2008, Indonesia's food and drug administration body, BPOM announced a new regulation governing the
packaging materials used for food packaging. The regulation covers which materials are allowed or forbidden to be
used in food packaging, as well as specifying the penalty for the breach of the regulations. Implemented from
August 2008, the new regulation is meant to help improve the quality and safety of packaged food products. More
such regulations are expected to be announced on other consumer goods packaging in the coming years, however
the main challenge for the government will be the enforcement of these regulations.
Domestic Packaging Companies Still Dominate
The packaging industry in Indonesia is fragmented with numerous small to big local players as well as the presence
of multinationals. While some areas of pack types such as glass and metal packaging are consolidated due to the
more advanced technology required, other areas such as plastic and paper packaging are fragmented with small-
scale to big-scale companies serving various consumer goods companies as their clients. Local packaging companies
such as Dynaplast Tbk PT, Berlina Tbk PT have strong presence while multinationals are not as well established in
Indonesia up to 2008. This is in part due to the government regulations in import tariffs that have resulted in local
packaging companies, being able to offer more competitive rates for their products. More packaging players are
expected to emerge and foreign packaging companies will enter as well, leading to a more competitive industry.
The Way Ahead Still Bright for Packaging Industry
The packaging industry in Indonesia still has a lot of potential for growth, especially given the high proportion of
foods, beverages and non-foods that are still sold unpacked. Rising consumer awareness of the safety and hygiene
factors for packaged foods and beverages, means that consumers are increasingly opting for these products and the
demand for packaged is expected to continue to see good growth over the next five – ten years. However, as the
packaging industry matures, manufacturers will need to get ready to address more advanced issues such as the
environmental impact of packaging, recycling issues, the need to invest into eco-sustainable pack types. Other future
issues will include looking at packaging cost reduction, due to raw material shortages and rising prices.
Technological improvement in secondary areas of packaging, such as closures and labelling technology will also
need to be addressed as issues of closure safety, tamper proof packages and packages that can prevent
counterfeiting. The industry is also evaluating investments for developing packages that reduce handling and
logistics costs and improve efficiency in the total supply chain. The industry is set to move beyond basic issues to
more advanced demands on packaging that are emerging.

2. BEVERAGE PACKAGING - INDONESIA
EXECUTIVE SUMMARY
Solid But Slower Growth in 2008
The beverage packaging industry in Indonesia continues to be promising, with another year of good growth in 2008.
Although impressive, growth momentum was lower, perhaps as it may be reaching stabilisation levels. Beverage
packaging has not only been supported by riding on the back of a growing beverages industry, but also by the trend
that an increasing share of beverages are being consumed in the packaged form rather than in the loose/unpackaged
form. This, in turn, is supported by consumers’ growing awareness of the benefits of packaged beverages (safe,
better quality, affordability, more convenient packages compared to the unpackaged varieties often supplied by
small local companies).
Pet Bottles Continue To Surge
PET bottles continued to see a good performance in 2008, continuing from the review period, due to some of its key
benefits over competing packs, like glass, some of the key benefits include lighter weight, less fragility, lower cost,
easier to carry on the go, and ability to be moulded into a variety of shapes and sizes. PET has also given a tough
fight to another strong growth pack type – metal beverage cans. The presence of PET bottles has increased in many
more beverage sectors, such as RTD tea and carbonates. More brands have been launched in PET bottles packaging
towards the end of the review period, and the growth of PET bottles has been very encouraging as consumers
welcome this convenient pack type.
Glass Faces Threat From Various Directions
While PET bottles are on the rise, glass packaging has suffered from the growing popularity of the alternative pack
types. In beer and carbonates, glass bottles have been losing share to metal beverage cans. In RTD tea, glass bottles
have recently been threatened by PET bottles. In fact, for carbonates, glass bottles are also losing share to PET
bottles. Glass bottles were one of the most popular pack types for beverages in Indonesia during the review period,
with strong sales in RTD tea, carbonates and also beer. However, technological improvements in the packaging
industry as well as convenience and cost factors have resulted in glass packaging becoming less appealing, and
alternative pack types are growing in demand.
Flexible Packaging Remains Highly Relevant for Many Popular Beverage Sectors
Flexible packaging remained among the important pack types in beverage packaging. It maintained its relevance in
some important beverage categories in Indonesia, especially hot drinks - tea, coffee, and other hot drinks -, as well
as smaller volume areas like powder beverages. It has remained successful due to some key benefits offered, such as
lighter weight compared to erstwhile packs for hot drinks vs glass, metal tins – thus lower freight and transportation
costs, good barrier properties, lower material costs. It was also very suitable for new product/pack innovations such
as the growing trend towards small sachets in fast growth areas such as coffee, including 2-in-1, 3-in-1 hot and 4-in-
1 instant coffee.
Slower But Stable Performance Is Expected in the Forecast Period
Beverage packaging is expected to still register good growth in the forecast period. A continued slowdown in
growth is likely after the stronger growth in the review period, but growth in actual volume terms will still be very
favourable. More developments are expected not just in terms of more modern packaging such as metal beverage
cans or PET bottles, but also in terms of more varied packaging design such as for liquid cartons and more
innovative closures. The trend for pack sizes, meanwhile, is likely to become more diversified, with more smaller
but also bigger pack sizes made available by the beverage companies.

3. KEY TRENDS AND DEVELOPMENTS
Glass continues to be threatened by competing pack types
Glass packaging had been one of the most popular pack types within beverage packaging up to 2008, among the
favourites with another very popular pack – rigid plastic packaging, which enjoys massive sales due to strong
demand for bottled water. However, glass packaging’s status was strongly threatened over the review period.
Alternative pack types have not only emerged but performed successfully to start taking away share from glass
packaging. Trade sources commented that this trend was becoming stronger towards the end of the review period
largely due to technological factors. Up to the late 1990s and even the early 2000s, cost factors still presented
obstacles to developing alternative pack types such as PET bottles or metal beverage cans, as the packaging
technology in Indonesia was not yet advanced enough to manufacture these pack types in a cost-effective manner.
However, with technological advancements, it has become more affordable and more feasible to come up with metal
beverage cans and PET bottles.
Outlook
Glass is likely to see a continued threat from competing packs like PET and metal cans in the forecast period.
According to industry sources, there is no news about any big technological developments for glass to help make it
more competitive versus PET or metal cans. Seen as the traditional pack type, which is relatively affordable to
produce but very costly to transport due to breakage issues, glass packaging faces serious disadvantages. Given the
archipelago structure of Indonesia, transportation costs play a major role in the overall cost of beverage products and
the disadvantages of glass packaging will encourage manufacturers to keep pursuing technological approaches to
reduce the production costs of metal beverage cans and PET bottles.
The old-fashioned image of glass packaging as well as lack of interest from manufacturers in developing this pack
type will prove to be a serious challenge for the success of this pack type. However, in the long term there is
potential for glass packaging to maintain a niche presence by repositioning the pack type as premium packaging of
premium beverages targeted at high-end consumers.
Impact
The impact of the development of alternative pack types has been quite visible in the glass packaging performance.
Towards the end of the review period, volume growth slowed down across overall beverage packaging types. In
fact, volume growth has managed to remain positive since manufacturers still perceive the benefits of maintaining
the glass packaging presence for various retail channels such as warung kiosks.
Glass packaging is still quite affordable, but some key issues that remain concerning glass versus other pack types
are its higher transportation costs, fragility and breakage costs, as well as consumer inconvenience due to fragility
and greater pack weight. At the same time, PET bottles and metal beverage cans have grown strongly, in many cases
at the expense of glass, across various products. In beer and carbonates, metal beverage cans were chipping away at
the volume share of glass bottles towards the end of the review period. PET bottles, meanwhile, threatened glass
bottles’ stronghold of RTD tea, and it also gained considerable success in carbonates, just like metal beverage cans.
Glass packers are expected to face up to these concerns by trying to develop lighter glass bottles - while still
maintaining the technical ability to hold the product and provide safe barrier properties - and enhancing the image of
glass as a premium pack to target the emerging segment of premium beverages, such as premium juices or premium
health and wellness beverages.

4. Convenience Keeps Growing in Importance for Beverage Packaging
Several beverage products are impulse products and consumers always go for the convenient option in purchasing
the products. Accessibility of the product through streetside warung kiosks and not just the affordable options in the
independent small grocers or supermarkets is key for this kind of impulse product in beverages.
While convenience of the product itself is always in demand, increasingly, the convenience aspect is also sought in
terms of the packaging of the beverage products. Furthermore, more consumers are on the move, especially in the
urban areas. As such, consumers increasingly seek packaging for the drinks that are convenient to carry. Thin-wall
plastic containers, or better known as plastic cups in Indonesia, is one such pack type. The single-serve feature of
this pack type appeals to consumers who want to consume the product in one go as they are on the move.
Meanwhile, PET bottles hold stronger appeal for consumers who want to still carry the product for consumption
later on as well. As the packaging is light and easy to carry, PET bottles are becoming more appealing to consumers.
Metal beverage cans also offer convenience aspects, although the lack of reusability compared to PET bottles and
the higher prices than thin-wall plastic containers do not make it the most obvious choice for consumers seeking
more convenient packaging.
Outlook
Demand for convenience through packaging is likely to grow even stronger over the forecast period and in the long
term. Beyond just seeking packaging which is easy to carry and to consume, more specific demands may arise, such
as in terms of the closures of the products. More sophisticated closures which make it easier to consume the
beverage may be a further development in the overall trend towards convenience for beverage packaging in
Indonesia.
Impact
Thanks to the convenience trend, growth of PET bottles and thin-wall plastic containers was boosted further over the
review period. While there are a number of factors contributing to the encouraging performance of these pack types,
convenience plays quite a key role, especially in urban areas. Meanwhile, glass packaging suffers from this trend as
it tends to be more suitable for consumption on the spot rather than on the go. While affordability still works in
favour of glass packaging, its lack of convenience hurt the growth towards the end of the review period.
Convenient pack types such as PET bottles and thin-wall plastic containers are set to benefit further from the
convenience trend, while, in contrast, bulky pack types such as glass packaging are set to lose out even more.
However, just the convenience in the pack type itself will not be enough as consumers seek even more convenience.
Manufacturers will need to come up with innovation in terms of shape of the bottle and other packaging designs. In
addition, innovations in terms of closures will also be essential to convince consumers of the convenience aspect of
the particular packaging.
Premium Concept in Packaging Still Niche But Starts To Emerge
Beverage packaging products in Indonesia – especially for hot drinks and soft drinks – are by and large seen as mass
products. Premium drinks are still a relatively foreign concept in Indonesia, with the exception of certain products in
alcoholic drinks, which command a high price and have a niche consumer base. However, as the beverage industry
becomes more established, more manufacturers try to differentiate their products by choosing a premium
positioning. In pushing the premium image of the product, the companies in turn attempt various approaches, such
as advertising. Increasingly, there is stronger emphasis on using the product packaging as well to convey the
premium image. A few examples include Sari Wangi Gold Selection for tea, launched in 2008, which is
communicated as premium through the more sophisticated design of the packaging. However, such usage of
packaging to convey premium image was still in the very early stages in Indonesia up to 2008.

5. Outlook
In the forecast period, more concrete attempts at premiumisation are expected from beverage manufacturers, due to
rising incomes and growing consumption of lifestyle foods and beverages. Innovative pack types conveying more
sophisticated image or more sophisticated closures may be used as way to convey premium image.
Impact
With only initial attempts seen by manufacturers as yet to convey premium image through packaging, the impact on
packaging sales of certain pack types was limited up to 2008. No specific pack type or pack size has benefited in a
huge way from this emerging trend, as the focus is still more on the packaging design. Certain pack types have
indirectly benefited from more premium image overall, such as the growth of metal beverage cans over the review
period. Metal beverage cans are seen to be more a modern and stylish packaging and certain brands such as Nescafé
in RTD coffee have benefited from having this packaging compared to competitors which have less stylish
packaging design. However, actual attempts to use packaging for premiumisation of beverage product itself
remained limited in 2008, with limited impact on pack type or pack size sales.
Polarisation Across Pack Sizes
The trend towards small packaging sizes was quite evident over the review period. However, increasingly, another
trend emerged alongside the smaller pack sizes in 2008 – the opposite trend towards bigger family packs.
Historically, industry players had been uncertain about the prospects of bigger pack sizes for beverage products.
Given the tendency of Indonesian consumers to perceive beverages as impulse products and the hesitation to buy in
bulk, several attempts to push for bigger pack sizes, which ultimately have lower unit prices, had struggled for sales.
However, towards the end of the review period manufacturers revived their efforts in trying to push for “family size”
packs, and the efforts were met with better results than previously.
Outlook
While the trend towards smaller pack sizes is unlikely to diminish, increasing variety of pack sizes is expected to
emerge. Cost concerns and desire for convenience will keep fuelling demand for smaller pack sizes. At the same
time, more frequent consumption of the products, increasing willingness to buy in bulk in order to make less
frequent shopping trips will be a few factors working in favour of bigger pack sizes. The trend towards bigger pack
sizes may also be encouraged should home delivery options be made more available in the medium to longer term
for various beverages.
Impact
Widening of the pack size spectrum is being witnessed in many beverage sectors. As the beverage industry becomes
more established in Indonesia, there is a growing base of consumers who are open to the concept of buying in bulk
for lower price and also for the convenience of making less frequent purchases. In addition, greater frequency of
consumption of the beverages, especially soft drinks, also triggered purchases of bigger packs towards the end of the
review period. Manufacturers’ launches of bigger packs included Sosro RTD tea in a 1-litre pack in 2007 as well as
Fanta, Sprite and Coca-Cola in big 2-litre bottles in 2008. It remains to be seen whether these products can take off
well beyond 2008, however industry players believe the prospects are stronger in the forecast period compared to
what they were in the review period
Polarisation in pack sizes will have mixed effects on packaging of beverages. No clear impact will be seen on
volume sales, due to the opposite effects smaller and bigger pack sizes will have on volume sales. However, the
increasing variety in pack sizes can work in favour of beverage packaging, as consumers will have more options to
choose from. It will be essential for the manufacturers to make their beverage products available in a wider range of
pack sizes, to cater to the different needs and demands of the consumers.

6. Environmental Concerns Become Slightly More Visible But Still in Their Infancy
Up To 2008
As a developing country, major issues on consumers’ mind were still to do with the economy and people’s own
livelihood in Indonesia up to 2008. More advanced issues such as environmental concerns and especially recycling
of packaging is still not yet too upper most in most people’s minds. However, there are encouraging signs for
manufacturers taking up the initiative to adopt a more environmentally responsible approach to the packaging of
beverages. A number of companies have worked to ensure good quality certification of their packaging or using the
concept of “greener factories” where they seek to maintain the machines better for more efficient and less
environmentally harmful usage. Other manufacturers have also championed the use of certain pack types, such as
liquid cartons, pushing these pack types as more environmentally friendly pack types for beverages.
Outlook
In the longer term, this trend has the potential to take a stronger hold in Indonesia, depending on various parties’
involvement. Should the government encourage the practice of recycling and provide the necessary facilities for
recycling, consumers can start to have the mindset of recycling their beverage packaging. In turn, their
environmental awareness is likely to grow as well and demand for environmentally friendlier packaging can grow.
Manufacturers may also push the environmental issues further, however for this trend to really grow, government
involvement will be quite important.
Impact
The concept of environmentally friendly packaging in Indonesia up to 2008 was still very much in the nascent stage,
and no visible impact was yet being seen in the growth of certain pack types or any huge growth in returnables. In
fact, the initiative is still largely coming from the manufacturers’ side and there is no wide-scale campaign among
consumers as yet regarding the environmental aspects of the beverage packaging.
Should the concept of environmental concern take off in the longer term, there is the potential for growth in
returnables, beyond just glass returnables, which were already common by 2008. In addition, the usage of certain
packaging materials such as PET may face a challenge as consumers and manufacturers seek more environmentally
friendly pack type alternatives. It will be important for manufacturers not only to wait for consumers to be ready to
embrace environmental issues related to beverage packaging, but also to push the concept themselves. Packaging
companies and manufacturers have already started detailed evaluation of aspects like the cost of producing
environmentally friendly packs, which will place a burden on the cost or will be shared by various entities in the
industry, will consumers be ready to pay extra for environmentally friendly packs, will environmentally friendly
packaging be confined merely to the container/pack or will it be extend to labels, closures, production and
distribution systems and thus go across the product-pack life cycle. Thus the prospects for environmentally friendly
packaging are encouraging and are expected to strengthen in the forecast period.

7. NON FOOD PACKAGING - INDONESIA
EXECUTIVE SUMMARY
Improvement in performance of non-food packaging
Non-food packaging recorded stronger volume growth in 2007 as a result of rising consumer disposable incomes
and increasing demand within areas like cosmetics and toiletries and OTC healthcare. The rising popularity of
smaller packaging formats and the introduction of new more convenient stand-up pouches has also provided a
further boost to non-food packaging sales in recent years.
Flexible packaging dominates non-food packaging sales
Non-food packaging sales in Indonesia are dominated by tobacco, with OTC healthcare and cosmetics and toiletries
also making strong contributions. Within these areas, flexible packaging accounts for the vast majority of packaging
sales due to its convenience and affordability. The fact that flexible packaging continued to grow strongly in 2007
highlights the promising potential for non-food packaging as a whole over the forecast period.
Tobacco records largest unit sales whilst OTC healthcare is most dynamic
segment
Tobacco is the largest non-food packaging segment in volume unit terms, with the next largest segment cosmetics
and toiletries accounting for only 15% of tobacco volume unit sales in 2007. The fact that most Indonesian men are
smokers means that demand for tobacco products remains extremely high in the country. However, OTC healthcare
was the most dynamic non-food segment in 2007. The increasing focus on preventive products meant that vitamins
and dietary supplements recorded impressive volume growth in 2007, with many packaging formats within the
segment, such as metal and glass packaging, recording double digit volume growth.
Healthy prospects for non-food packaging
Despite maturing tobacco sales, non-food packaging still has significant potential for healthy growth over the
forecast period. The absence of any significant anti-smoking campaign in Indonesia means that tobacco sales should
continue to increase, albeit slowly, in the coming years. In addition, demand within non-food segments such as
cosmetics and toiletries and OTC healthcare should continue to rise in-line with rising disposable consumer
incomes.

8. KEY TRENDS AND DEVELOPMENTS
Demand for non-food packaging increases in-line with rising sales
Tobacco, which accounts for the majority of non-food packaging sales, continues to experience stable volume
growth, thereby fuelling demand for paper based packaging. The fact that other non-food segments also recorded
dynamic growth in 2007 helped to boost overall packaging sales in 2007.
Current Impact
OTC healthcare, which was the second largest non-food packaging segment in 2007, still has significant potential
for future growth, mainly as a result of the rapidly increasing demand for vitamins and dietary supplements. In
addition, cosmetics and toiletries is also performing well, not only within less developed areas like fragrances and
skin care, but also within more traditional segments like bath and shower products and hair care, where demand
continues to increase. The smallest non-food segment in Indonesia, pet food and pet care products, also recorded
strong volume growth in 2007. However, demand for such products remains limited to middle and upper income
consumers.
Strong growth within a large number of non-food segments helped to boost demand for non-food packaging in 2007.
Indeed, non-food packaging innovation remains limited due to the fact that strong growth is already being realised
as a result of natural sales growth. Even the mature tobacco segment continued to record packaging volume sales
growth in 2007, albeit at a slower pace than in 2006. However, the majority of packaging growth can be attributed to
rising demand within areas like cosmetics and toiletries, OTC healthcare, disposable paper products, and pet food
and pet care products.
Outlook
While tobacco and household care can now be considered as being mature segments, cosmetics and toiletries, OTC
healthcare, disposable paper products, and pet food and pet care products still have strong growth potential. Growth
will be highest within OTC healthcare over the forecast period due to increasing consumer health awareness, while
pet food and pet care products will also perform strongly, albeit from a much smaller consumer base.
Future Impact
Increasing maturity within the large tobacco and household care segments means that forecast period non-food
packaging volume growth, despite still being healthy, will be lower than that recorded in 2007. In a bid to boost
growth and in response to increasing competition and declining natural sales growth, producers are likely to
increasingly focus on the introduction of new innovative packaging formats over the forecast period.
Stronger pack diversification fuels consumer interest
Flexible packaging dominated non-food packaging sales in Indonesia in 2007 thanks to its affordability and
convenience. Paper-based containers are also popular, largely due to their strong use within tobacco. Sales of other
packaging formats remain limited. However, recently, rising demand within cosmetics and toiletries and OTC
healthcare has helped to boost demand for alternative formats such as metal and glass packaging.
Current Impact
Thanks to new product developments within areas like OTC healthcare, less established packaging formats such as
metal packaging and glass packaging recorded double-digit volume growth in 2007 at 13% and 12% respectively
and performed significantly better than more established formats such as rigid plastic, paper-based containers, and
flexible packaging. The increasing demand for higher quality premium products has been one of the main factors
behind the growth in sales of these alternative formats.

9. Outlook
As packaging increases in sophistication over the coming years, a growing number of new innovative packaging
formats, such as aluminium trays and pouches, will be introduced. For example, Effem Foods is set to introduce a
stand-up pouch version of its Whiskas cat food brand in the near future. Whilst some new packaging formats will
help to reduce unit prices, others will be targeted towards higher income consumers who are prepared to pay extra
for premium quality.
Future Impact
The increasing development of newer non-food segments such as pet food will help to fuel packaging sales over the
forecast period. Producers will increasingly look to the use of innovative packaging in order to differentiate their
brands and to target specific consumer groups. However, it should be noted that affordability will continue to be the
most important attribute for the majority of Indonesian consumers.
Increasing demand for convenience fuels pouches sales
The increasingly hectic pace of modern life in Indonesia means that a growing number of consumers are demanding
quicker and more convenient non-food packaging solutions. In response to this trend, an increasing number of
manufacturers are using new convenient packaging formats such as pouches and certain closures within household
care.
Current Impact
The introduction of pouches has proven popular with consumers and the new format recorded strong volume growth
in 2007, especially within cosmetics and toiletries, household care, and pet food and pet care products. However,
thus far pouch packaging remains unavailable within tobacco, OTC healthcare, and disposable paper products.
Closures are also performing well, recording higher volume growth than that which was recorded within non-food
packaging as a whole in 2007, and an increasing number of new innovative and convenient closures continue to be
introduced.
Outlook
An increasing number of more convenient packaging formats such as pouches will be introduced over the forecast
period, especially within pet food and pet care products, household care, and cosmetics and toiletries. In addition,
producers will focus on using more convenient closures such as easy-open cans over the coming years.
Future Impact
The increasing availability of more convenient packaging formats and closures will help to boost non-food
packaging sales in the coming years. However, such higher value innovations are only likely to prove popular
amongst higher income urban-based consumers.
Stronger push for more affordable packaging in order to attract lower income
consumers
Flexible packaging is the most popular non-food packaging format, largely due to its affordability – an important
attribute in Indonesia given the high price sensitiveness of the vast majority of consumers. In addition, to using
flexible packaging, manufacturers are also increasingly focussing on the use of new innovative packaging formats
and the introduction of smaller products in a bid to lower unit prices and attract lower income consumers. For
example, sachet packaging is now widely available within areas like shampoo and laundry detergents whilst blister
and strip packs continue to increase in popularity within vitamins.

10. Current Impact
Thanks to the increasing availability of smaller pack sizes within areas like cosmetics and toiletries, a growing
number of consumers are now able to afford non-food brands. The increasing affordability of such products should
help to ensure that the segment continues to perform well over the forecast period.
Outlook
Producers will continue to focus on introducing more affordable products over the forecast period. Sachet packaging
is likely to be introduced in a growing number of segments, especially where producers are determined to attract
lower income consumers. In addition, technological advancements such as the use of more cost-effective plastic
packaging production processes will help to make packaging more affordable.
Future Impact
Non-food packaging sales will be boosted by the introduction of new affordable packaging formats. However, it is
essential that manufacturers also concentrate on making sure that these new formats are available across all retail
channels and that they are accessible by lower income consumers in both rural and urban areas.

11. NON FOOD PACKAGING - INDONESIA
EXECUTIVE SUMMARY
Steady volume growth continues
Non food packaging volume growth continued steadily in 2008, having experienced ongoing development since
2006. The impact of the global financial crisis in the last quarter of 2008 in Indonesia encouraged manufacturers to
cut expenditure by using less packaging materials, or substituting with cheaper packaging materials. Smaller sizes
gained increasing acceptance in 2008/2009, as Indonesian consumers looked to save money and save space.
Dynamic performance of consumer health packaging
Consumer health packaging enjoyed the highest volume growth across all the markets reviewed, and continued
making headlines across almost all the types of materials used, except for flexible packaging. The market also
benefited from the expansion of modern retail channels all over Indonesia. The proliferation of hypermarkets and
health and beauty retailers all over Indonesia allowed manufacturers to display their products to more consumers,
and packaging, as well as pricing, has become a key selling factor. Although the consumer health market has shown
decelerating value growth since 2005, its packaging continued to perform well, with double-digit growth, due to the
extent of investment by manufacturers in innovative packaging types.
Tobacco pumps volumes into paper-based containers and flexible packaging
Tobacco remained the largest user of paper-based containers and flexible packaging in non food packaging in
Indonesia. The global financial crisis which was felt in the late quarters of 2008 in Indonesia did not affect the
tobacco industry, as it remained largely supported by strong domestic consumption. Overall, paper-based containers
continued to be the largest type of material used as primary packaging for non food packaging, while flexible
packaging was the most significant material used for secondary packaging. In volume terms, flexible packaging
dominated over paper packaging by a ratio of 10:3.
Urbanisation and the rise of modern retailers impacts packaging innovations
In 2009, over half of the population in Indonesia was living in urban areas. Urban and modern lifestyles influenced
developments and trends in disposable paper and tobacco packaging. The expansion of large retailers, including
hypermarkets, also continued to drive the development of packaging in key categories, including dog and cat food.
Innovations in personal care and home care packaging were also designed to reach the masses and win over
consumers who shopped in traditional channels.
Slower growth in the forecast period for non food packaging
Whilst growth is still expected, forecast period growth rates are expected to be slower than the growth rates in the
review period. A new excise tax for tobacco came into effect in February 2009, and a trend towards downsizing
within beauty and personal care packaging is expected to contribute to a lower CAGR in value terms over the
forecast period.

12. FOOD PACKAGING - INDONESIA
EXECUTIVE SUMMARY
Slower Growth for 2008
The food packaging industry registered a slowdown in volume growth in 2008. Slower volume growth across
various food products such as confectionery, bakery, sweet and savoury snacks, noodles and dried processed food
against a backdrop of stronger price increases played a significant role in the reduction of food packaging growth.
The more established nature of certain packaged foods also contributed to the slower growth in packaging demand.
Nonetheless, new pack types emerged in these sectors, sparking interest in new packaging developments. Notable
pack types emerging towards the end of the review period included stand-up pouches and blister and strip packs.
Flexible Packaging Remains Supreme But Rigid Plastic Grows Fastest
Flexible packaging dominated packaged food sales throughout the review period, with a presence across all key
packaged food products. Flexible packaging’s success is largely due to its affordability and flexibility. In addition, a
lot of the flexible packaging is for small sizes, which boosts the volume unit sales compared to pack types used for
bigger pack sizes. Nonetheless, with its already established status, flexible packaging only saw the best actual
increase in volume units sold in 2008, but not in percentage terms. Instead, rigid plastic packaging recorded the
fastest percentage volume growth in 2008. Rigid plastic packaging benefited from the growing popularity of HDPE
bottles within dairy products, particularly within yoghurt and sour milk drinks.
More Packaged Food Products Introduced in Smaller Sizes
Smaller pack sizes have been introduced for products such as ice cream with Wall’s Mini Cornetto as well as within
confectionery with new launches such as Silver Queen Caramel in 9g pack sizes. In addition, smaller pack sizes on
the whole have also gained strength, with improved volume share for products such as vegetable and seed oil or
jams and preserves. Smaller pack sizes have grown in popularity with the convenience appeal of single-serve
portions, the affordability of the lower selling price for the more price conscious consumers, and the portability for
consumers on the go. While bigger pack sizes have not lost out in appeal altogether, manufacturers have pushed for
more diversity in pack sizes, with the smaller pack sizes getting greater attention in 2008.
Urbanisation Provides Boost To Food Packaging
The fast-moving urbanisation trend has been the backbone of growth for packaging manufacturers, as such lifestyle
developments have ensured a continued shift from fresh foods to packaged foods, resulting in more demand and
orders for the packaging industry. Throughout 2008, packaging for meal replacement products, soup, pasta,
canned/preserved food, frozen processed food, dried processed food and chilled processed food saw volume sales
grow as a result of this trend.
Further Slowdown Expected in the Forecast Period
With a more established packaged food industry in Indonesia expected in the forecast period, the growth of food
packaging is also set to be more stable in percentage terms to settle at a 5% volume CAGR. However, in actual
volume increments, the growth in the forecast period will still be higher than in review period. Factors fuelling the
growth will include pack type innovations with blister and strip packs and stand-up pouches expected to play a
stronger role by 2013. In addition, the stronger push towards smaller pack sizes will also work in favour of volume
unit sales of food packaging over the forecast period.

13. KEY TRENDS AND DEVELOPMENTS
Urbanisation and Resulting Busier Lifestyles Provide Boost To Food Packaging
Indonesia is still a developing country with the majority of the population living in rural areas and agriculture as the
main source of income. The purchase of fresh food and cooking from scratch was still common in many parts of
Indonesia during the review period. However, the urbanisation trend also swept the country over the review period,
and with a higher proportion of the Indonesian population living in urban areas by 2008, there was a shift in
consumer lifestyles as well. In 2006, the number of urban households already surpassed that of rural households, and
the growth in urban households continued up to 2008. The more hectic, busier and faster-paced lifestyle resulting
from urbanisation has heightened demand for packaged food over fresh food.
Current Impact
As packaged food benefits from the urbanisation trend with a switch from fresh food, the food packaging industry
also benefits. The volume sales of various packaged food products stayed strong up to 2008, with double-digit
volume growth seen for the packaging of meal replacement products, soup, pasta, canned/preserved food, frozen
processed food, dried processed food and chilled processed food. Indeed, meal solutions products have benefited
significantly from the switch to packaged food as more consumers have less time to purchase fresh food regularly
and needed to instead turn to frozen or chilled processed food towards the end of the review period.
Outlook
The urbanisation trend will continue unabated in the forecast period, with the proportion of urban households set to
reach 57% by 2013. While the household size for urban households tends to be smaller than in rural households, it is
still evident that the urban population on the whole will already outnumber the rural population more considerably.
As a result, the impact of urban lifestyles will be more clearly felt among Indonesian consumers. Along with the
busier lifestyles, higher income levels are also expected, and stronger purchasing power among consumers can
benefit food consumption.
Future Impact
The packaged food industry is set to benefit even more from the urbanisation trend. On the one hand, consumers will
be more compelled to purchase packaged food more frequently as they will have less and less time to buy fresh food
daily. On the other hand, stronger purchasing power will also allow more consumers to have access to less basic
packaged food items. Beyond meal solution food products, other packaged food products are also set to benefit more
from the urbanisation trend. What manufacturers can do to benefit from the trend will be to highlight the benefits or
comparability of the meal solution products to their counterparts, to encourage further switching. Highlighting the
hygiene aspect of the packaging of the food products while having the convenience of longer shelf life will also be
crucial to encouraging the growth of food packaging in the medium to longer term.
More Consumers Demand Convenience in Their Packaged Food Products
Stronger purchasing power among Indonesian consumers has brought with it increasing demand for various features
beyond the basics in the products they purchase. Packaged food is one of the industries where the penetration of the
basic staples is already quite high and consumers are starting to demand more from the products. Convenience is one
aspect that consumers have sought even more during the review period, especially with the more hectic lifestyles in
the bigger cities and towns.

14. Current Impact
Packaging of food products has been one aspect where companies can offer consumers more convenience. The
demand for convenience in the packaging of the products is emerging, although it is still in its very early stages. The
virtue of the packaging itself as providing convenience has been appreciated for products such as frozen processed
food and chilled processed food. Smaller pack sizes have also grown in demand, as they are deemed to be more
convenient, especially by consumers on the move as well as for snacking. In addition, pack types and other
packaging features offering more convenience have also met with a good response. One such example is the
growing popularity of easy-open can ends for metal closures towards 2008, and another is the growing popularity of
pouches with closures, for products such as condensed milk.
Outlook
Consumers’ demand for convenience in their packaged food products is set to heighten in the forecast period.
Beyond the basic appreciation of the convenience of packaged food in itself over fresh food, consumers will be more
discerning and appreciative of more specific features of food packaging that can offer them added convenience.
Nonetheless, this more sophisticated demand in terms of convenience will not be universal, being more pronounced
among the affluent consumers.
Future Impact
More sophisticated pack types and closures are expected to be developed to cater to the ever-growing trend of
convenience. Pouches and flexible packaging will benefit from the convenience trend. Other than overall pack types,
manufacturers can also introduce more advanced features to the packaging, such as flexible packaging of boil-in-
the-bag for frozen processed food and microwaveable packaging to respond to the growing ownership of
microwaves. Closures, especially the more convenient types, will also further benefit from the trend. Easy-open can
ends will become more prevalent for metal packaging over standard can ends. Plastic closures will also benefit over
metal ones.
Rising Prices of Packaging Materials Being Felt
The increasing prices of various packaging raw materials were another concern in the overall packaging industry in
2008. Food packaging was not spared, with the rise in plastic raw materials also affecting the industry. Shortages in
the local supply of plastic raw materials and rising prices of the plastic materials with the surge in oil prices
necessitated more imports of plastic raw materials. On the whole, production costs for rigid plastic packaging
increased in 2008.
Current Impact
While rising raw material prices was an area of concern for food packaging, the impact of this price increase was
less significant compared to beverage packaging or non-food packaging. This is due to rigid plastic packaging not
yet having a huge share of overall food packaging. Instead, flexible packaging continued to dominate food products.
Furthermore, rigid plastic packaging has been associated with convenience and modern image, and consumers
purchasing the food products in rigid plastic packaging tend to have greater purchasing power. Amid the overall
significant price increases for food products in 2008, the price increase in plastic raw materials was ultimately not
felt significantly by consumers.
Outlook
Oil prices are expected to stabilise from 2009 onwards and, in turn, the price of plastic raw materials is expected to
be more competitive. There will be less need for importing of the raw materials, allowing overall costs for rigid
plastic packaging to be held down. Meanwhile, for other pack types, concern about rising prices is a possibility for
metal packaging.

15. Future Impact
With more favourable raw material prices, the food packaging industry is likely to benefit because the costs can be
pushed down. In turn, the overall price of the food products can be made more competitive, although price increases
in general will continue to be common for food products in Indonesia, as was the case across the review period.
Specific to rigid plastic packaging, this pack type can be pushed even more as a substitute for glass packaging and
also liquid cartons, thus allowing it to be one of the better performing pack types in the forecast period.
Modern Retailers Provide Wider Distribution Opportunities for Packagers
The retailing landscape in Indonesia is still dominated by traditional, independently-run retailers sprawled across the
archipelago. However, from the late 1990s, modern retailers have emerged and grown at an exponential rate to
threaten the status of traditional retailers. By 2008, there were already thousands of modern grocery retail outlets
ranging from hypermarkets to convenience stores. The most popular chains include Carrefour, Indomaret, Alfamart
and Giant.
Current Impact
Food packaging has benefited from the surge in growth of modern retailers towards the end of the review period.
Modern retailers tend to have better storage facilities, such as freezer and chiller compartments. In addition, the air
conditioning that all modern retail outlets have also allow more long-lasting shelf life of products, such as chocolate
confectionery, given the tropical climate in Indonesia. In particular for frozen processed food and chilled processed
food, their distribution has improved significantly because traditional retailers are less likely to have the facilities.
Traditional retailers also tend to sell more fresh food over packaged food. Therefore, food packaging has received an
added boost from the expansion of modern retail outlets towards the end of the review period.
Outlook
Modern retail outlets are set to have an even broader reach across Indonesia in the medium to long term.
Hypermarkets’ reach will spread beyond the big cities and also into second-tier cities such as Makassar, Denpasar
and Malang. For convenience stores, the growth will be even more rapid due to the use of franchising by the leading
convenience stores. More traditional retail outlets will either be phased out by convenience stores, or more owners
of these independent small grocers are likely to switch their outlets to convenience stores instead to stay
competitive.
Future Impact
On the whole, the evolution of the retail environment in Indonesia is set to work in favour of food packaging even
more. More shelf space for packaged food over fresh food will boost the growth of the packaging of these products.
More favourable shelf facilities in these modern outlets will also make it easier for the packaging aspect of the food
products. With modern retailers coming in different sizes, there are also further opportunities for more diverse pack
sizes to be sold in the modern outlets of varying sizes too, catering to different consumer targets. Industry players
can therefore tap into this trend towards modern retailing by ensuring that the packaging design is made to be
catchy, as the products will have more competition on the retail shelves too.