Alcoholic Drinks in Indonesia - 2024 Market Summary
EXECUTIVE SUMMARY
Alcoholic drinks in 2023: The big picture
In 2023, alcoholic drinks in Indonesia witnessed modest volume growth compared to recent years as the post-pandemic recovery eased and social activities resumed normality. The Indonesian economy has been experiencing steady growth in recent years, with a rising middle class and increasing urbanisation supporting the expansion of alcoholic drinks. On-trade volume sales of alcoholic drinks fully recovered from the pandemic in 2023 and continued to climb due to growing demand from local consumers and international visitors. The increase in both domestic and international tourism has revitalised the hospitality sector with social drinking occasions continuing to gain relevance. Locally, rising consumer awareness and interest in different alcoholic beverages is expanding the customer base. Most Indonesians do not consume alcoholic beverages as the majority of locals follow the Muslim faith, so this industry faces some inherent limitations. Nonetheless, alcohol consumption is becoming more accepted and normalised in Indonesia, thus fuelling volume sales. The country's relatively young demographic profile, combined with rising affluence, has resulted in higher disposable incomes and a greater willingness to spend on premium products, including alcoholic drinks. Underlying macroeconomic factors, such as economic growth, urbanisation, and the expanding tourism industry are underpinning the development of the market. The country's recovering tourism industry plays a notable role in alcoholic drinks consumption, although inbound arrivals are still below pre-pandemic levels.
2023 key trends
Cocktail culture was one of the most prevalent trends in alcoholic drinks during 2023. Cocktails have gained popularity among consumers, especially in urban areas, as they offer a wide range of flavours and unique combinations. This trend has led to an increased demand for spirits, such as vodka, gin, and rum, which are commonly used in cocktail recipes. Additionally, there has been a growing interest in mixology, with bartenders and enthusiasts experimenting with new ingredients and techniques to create innovative and exciting cocktails.
Local specialities in alcoholic drinks continue to gain popularity as they benefit from greater exposure, as well as recognition from the government who seeks to promote Indonesia’s culture and heritage. Meanwhile, the image of local products has also improved as younger consumers develop a more positive perception of local specialities via social media. Players have either rebranded their products or simply dedicate more resources to branding and marketing resources on digital channels.
Another key trend is the increasing popularity of non-alcoholic or low-alcohol alternatives. Health-conscious consumers are seeking options that allow them to enjoy the social aspects of drinking without the negative effects of excessive alcohol consumption. This has led to the introduction of a variety of non-alcoholic beers, wines, and spirits in recent years. These products cater to consumers who are looking for healthier options or who want to reduce their alcohol intake.
Competitive landscape
In 2023, the Indonesian alcoholic drinks industry continued to be dominated by established players, with Multi Bintang Indonesia Tbk PT and Delta Djakarta Tbk PT at the forefront. The dominance of these domestic players is due to the popularity and reach of their beer brands, which cover all price segments and which also includes Multi Bintang Indonesia’s popular non-alcoholic beer brand, Bintang Zero. Beverindo Indah Abadi PT has bolstered its position in beer over the review period to strengthen its overall position in third place.
Local producers across spirits and wine gained an edge in 2023 as imported alcohol brands faced potential pricing challenges due to higher taxes and local currency depreciation. Moreover, the affordability and local origin of these Indonesian brands made them increasingly appealing. Two local companies went public in 2023 highlighting the greater dynamism in alcoholic drinks. These include beer producer Jobubu Jarum Minahasa PT, known for its traditional Manadonese liquor Cap Tikus, and Arpan Bali Utama PT, which specialises in unique Balinese wines like its acclaimed Rose Wine.
After a tough period during the COVID-19 crisis, players benefited from the reopening of on-trade establishments and their wide distribution reach. Recovery was supported by new product launches such as Multi Bintang Indonesia TBK’s Bintang Crystal, which is a lighter version of its Bir Bintang brand of domestic mid-priced lager that is aimed at expanding its target audience to consumers who prefer lighter and fruitier beer. Other companies such as Bali Hai Indonesia PT also launched similar products aimed at gaining deeper market penetration. Many alcoholic drinks companies focused their marketing investment on social media during the pandemic, establishing and maintaining a strong presence on the leading social media platforms. This was seen as an important way to maintain contact with customers and to encourage sales. For example, Multi Bintang collaborated with influencers and other key opinion leaders on various platforms, with Instagram the major focus of efforts to boost its online presence. In addition, more traditional brands such as those of Orang Tua Group also sought greater exposure through social media platforms such as Instagram.
Retailing developments
The retail sector has seen growth mainly as a result of the recovery from the dramatic impact of the COVID-19 crisis. There has been more shelf space dedicated to alcoholic drinks in offline retailers such as supermarkets, hypermarkets and specialist stores. Convenience stores continue to lose share as part of the downward trend brought forth by the 2015 state ban on the sale of RTDs in this retail channel.
E-commerce continues to gain prominence in alcoholic drinks, supported by the stronger familiarity of this channel since the pandemic when more consumers developed the habit of purchasing products online and came to appreciate its convenience, broad product offer and competitive pricing. At the same time, greater access to products online has also helped to increase consumer awareness about purchasing alcoholic drinks online. Some of the common ways to make online purchases include ordering from offline stores via WhatsApp to get the product delivered, and quick commerce. Promotional campaigns and events carried out by e-commerce retailers and third party delivery platforms incentivise consumers to order online. For example, the offer of free delivery is an effective strategy in driving consumers to purchase alcoholic drinks online. Other promotions such as price discounts and cash back have also proven quite effective.
However, it should be noted that online sales of alcohol drinks in Indonesia are officially banned, although sales do exist in something of a grey area. According to BPOM (the National Agency of Drug and Food Control), online sales of alcoholic beverages are officially prohibited. For this reason, major alcoholic drinks players do not directly sell their products online, unlike in other consumer goods industries such as hot drinks and packaged food. However, it remains unclear exactly what kinds of online alcohol sales are prohibited. In practice, there are different types of commercial activity that are classified under e-commerce in Euromonitor International definitions, but which are considered to be legal grey areas within the Indonesian regulatory context. A prime example of this is s-commerce sales via WhatsApp, by which consumers place orders with retailers on the social messaging app and then either collect their orders in a store or have them delivered via third party delivery providers such as Gojek. There are also on-demand delivery providers such as GrabMart and HappyFresh, which obtain their products from store-based retailers such as supermarkets, hypermarkets and drinks specialist retailers. In addition, consumer-to-consumer sales of alcoholic drinks are also becoming more common, which involves buyers obtaining products personally, either from distributors or consumer foodservice businesses, and then selling these products online as resellers.
On-trade vs off-trade split
In 2023, both on-trade and off-trade volume sales grew positively aided by rising consumption. On-trade volume sales fully recovered from the COVID-19 crisis, supported by economic recovery and the steady return of tourists. Domestic consumers were more confident to dine out and drink socially in 2023. Meanwhile, off-trade volumes saw a boost, largely due to the growth of e-commerce and third party delivery platforms, which enhanced accessibility and convenience for consumers purchasing alcohol for home consumption. The popularity of in-home consumption has remained strong since the pandemic, with consumers looking for more private settings to consume alcohol and also more economical ways to purchase alcoholic drinks as off-trade mark-ups are much lower than those seen in on-trade channels.
What next for alcoholic drinks?
Alcoholic drinks in Indonesia faces a prosperous period with strong growth expected, notably in beer and spirits. This trend is reflective of evolving consumer preferences and increased accessibility to a wider range of alcoholic beverages. As the industry adapts and expands, consumption of alcoholic drinks is expected to continue its upward trajectory, driven by both domestic and international demand. The wider acceptance of alcoholic drinks is expected to expand in Indonesia over the forecast period for several reasons. First of all, the Indonesian Government has become more supportive of the local alcohol industry by recognising some local drinks as representing a notable part of Indonesia’s heritage.
The 2024 presidential election in Indonesia could potentially hinder alcohol consumption. During election periods, economic and political uncertainties often lead to more cautious consumer behaviour, which might impact discretionary spending on alcohol. Excise tax rates for alcoholic drinks will also be revised upwards effective from 1 Jan 2024. Companies are expected to transfer these taxes on to consumers by increasing prices, thus causing some setbacks to volume growth. Price sensitivity is expected to remain heightened among some consumers due to economic uncertainty.
The off-trade channel should benefit from the efforts of domestic players to drive interest in consuming alcoholic drinks at home. This trend was informed by the pandemic and the resulting home seclusion trend. Given its success, players will continue to focus on driving consumption in the home over the forecast period. This should present new opportunities for manufacturers and retailers to develop new products for home drinking occasions, such as larger packs, kegs, home delivery and flavours adapted to local tastes. Towards the end of the review period, it was also observed that an increasing number of independent players were gearing up to invest in the retail channel. For example, small craft breweries are expected to look to offer products designed for consumption in the home.
MARKET BACKGROUND
Legislation
Legal purchasing age and legal drinking age (No changes)
Based on the Ministry of Trade’s legislation, Permendag No 20/M-DAG/PER/4/2014, both the minimum legal drinking age and the minimum legal purchasing age are set at 21 years old. Chapter 15 of the legislation states that alcoholic drinks can only be sold to consumers that are able to prove that they are over 21 years of age.
Drink driving
According to the road and traffic legislation number 14 passed in 1992, “A driver of a motor vehicle needs to be fully alert to be able to control the vehicle in a proper manner with no inhibition from sickness, fatigue or influence of alcohol or drugs which may affect one’s ability to drive”. A small amendment was made in 2009 to include inhibition from usage of mobile phones, televisions and video screens, as stated in the road and traffic legislation number 22.
Unlike other countries where drink driving is a serious social problem, drink driving is relatively uncommon in Indonesia, partly due to the generally low consumption of alcoholic beverages. Due to the relative rarity of such offences, mobile road and traffic police are not equipped with portable breath testers, although such equipment is available at police stations. There were no changes made to the legislation in this area during 2022.
If a driver drives a motorized vehicle on the road unreasonably and carries out other activities or is influenced by a condition that results in impaired concentration while driving on the road, he or she will be sentenced to imprisonment for a maximum of 3 months or a fine of a maximum of IDR 750,000.
The act of driving while drunk can also be charged under Article 311 of the LLAJ Law:
Every person who intentionally drives a motorized vehicle in a manner or condition that endangers life or property is subject to a maximum imprisonment of 1 year or a maximum fine of IDR 3 million. In the event that the act in paragraph (1) results in a traffic accident with damage to vehicles and/or goods as intended in Article 229 paragraph (2), the perpetrator will be sentenced to imprisonment for a maximum of 2 years or a fine of a maximum of IDR 4 million. In the event that the act in paragraph (1) results in a traffic accident with minor injuries and damage to vehicles and/or goods as intended in Article 229 paragraph (3), the perpetrator will be sentenced to imprisonment for a maximum of 4 years or a fine of a maximum of IDR 8 million. In the event that the act in paragraph (1) results in a traffic accident with serious injuries to the victim as intended in Article 229 paragraph (4), the perpetrator will be sentenced to imprisonment for a maximum of 10 years or a fine of a maximum of IDR 20 million. If the act in paragraph (4) results in the death of another person, the perpetrator will be sentenced to imprisonment for a maximum of 12 years or a fine of a maximum of IDR 24 million.
Advertising (No changes)
The advertising of alcoholic drinks is governed by legislation number 386/Men.Kes/SK/IV/1994, which states that an advertisement must not influence or encourage people to start drinking alcoholic beverages; advertising of alcoholic beverages must not feature the consumption of alcoholic beverages in activities that need concentration; there is a need for information that such consumption may jeopardise safety; the advertising of alcoholic beverages must not be targeted towards children under the age of 16 and/or pregnant women, or depict them in the advertising; and lastly, alcoholic beverages with an ABV of 20% and over may not be advertised.
Smoking ban (No Changes)
Central government legislation enacted in 2003 declared public places, health facilities, workplaces, places reserved for teaching purposes, children’s play areas, religious buildings and public transport as smoke-free zones. Facility managers are required to provide designated smoking areas. Whilst the enforcement of smoke-free zones is delegated to provincial governments, only a few provinces have declared smoke-free zones in municipal buildings and privately-owned buildings.
Since 2005, provincial government legislation for the capital city, Jakarta, has set out a maximum prison term of six months or a fine of IDR50 million for smoking in public places. In 2008, the provincial government of Surabaya enacted similar legislation, applying a maximum 3-month prison term or a fine of IDR50 million for the offence. This legislation has been effective since October 2009. However, the local government does not strictly enforce the legislation. The legislation is only effective in shopping centres and offices where smoking zones are allocated and smokers abide by the law. No single law enforcement unit is tasked with enforcing this legislation.
Some upmarket restaurants and cafés in Jakarta divide dining areas into smoking and smoke-free zones. Bars and lounges, on the other hand, are largely considered as smoking zones. Therefore, this smoking ban has had a relatively limited effect on the consumption of alcoholic drinks in on-trade channels.
There were no changes made to the legislation in this area during 2023.
Opening hours (No Changes)
There are currently no restrictions on the opening hours of off-trade outlets carrying alcoholic drinks or the hours for the purchase of alcoholic drinks. Modern retail outlets generally open daily between 07.00hrs and 22.00hrs. Some convenience stores and traditional outlets open 24 hours a day. Although the sale of alcoholic beverages itself is not a crime, there are some traditional outlets in lower-income areas that are closely associated with illegal activities. Some of these traditional outlets only operate after dark to avoid attention from the authorities.
The legal hours for the sale of alcoholic drinks in on-trade channels are governed by the Ministry of Trade and Commerce legislation number 359/MPP/Kep/10/1997, where Chapter 22 states that alcoholic drinks can only be consumed on premises between 12.00hrs and 15.00hrs and between 19.00hrs and 22.00hrs. On public holidays, except when the public holiday is for a religious festival, the latter sales period may be extended by a maximum of two hours. Depending on the lifestyle in each local area, the regional government may amend the schedule without adding to the total sales time. By the end of the review period, however, this legislation was still not enforced and sales of alcoholic beverages in on-trade channels were unrestricted in terms of time.
During the Muslim fasting period in the past, there were often instances where some nightclubs, pubs, cafés, bars and lounges were sealed off by Muslim activist groups to discourage visits to such outlets during the holy month of Ramadan. Although such activity is against Indonesian law, law enforcement officers are usually wary of creating tension with religious activist groups, and thus often choose not to take any action.
On-trade establishments
In 2023, non-alcoholic drinks experienced substantial growth primarily driven by the increasing focus on health among locals. The shift towards healthier lifestyle choices is making consumers more aware of the negative effects of alcohol consumption. Rising disposable incomes also contribute to this growth, allowing consumers to explore a variety of non-alcoholic beverages. Changes in lifestyle and dietary habits further support this trend, as more people seek healthier beverage options that align with their overall wellness goals.
TAXATION AND DUTY LEVIES
Alcoholic drinks in Indonesia are strictly regulated and each class of alcoholic drinks is subject to an import quota set by the government. The quota is determined by several factors, which include the actual import volume in the last three years of the review period, total demand from all licensed alcoholic drinks importers, the estimated number of tourist arrivals and estimated alcoholic drinks demand from the members of the Indonesian Hotel and Restaurant Association (PHRA).
Alcoholic drinks are subject to 10% VAT. All alcoholic drinks companies are also subject to income tax. The effective tax rate is set at 25% for most companies and at 20% for public companies that list at least 40% of their shares in the Indonesian Stock Exchange and meet certain other requirements.
The Ministry of Finance legislation Permenkeu No 158/PMK.010/2018 issued an increase in the excise duty for class A alcohol from IDR13,000 to IDR15,000 which was effective from 1 January 2019. All other excise duty remained the same. The remaining classes were unchanged; for class B alcoholic drinks (ABV above 5% and not exceeding 20%), excise duty is set at IDR33,000 per litre for domestic products and IDR44,000 per litre for imported ones; for class C alcoholic drinks (ABV above 20% and not exceeding 55%), excise duty is set at IDR80,000 per litre for domestic products and IDR139,000 per litre for imported ones.
From 1 January 2024 the following changes were made to the taxation and duty levies on alcoholic drinks.
Group A: IDR16,500/L for both domestic and imported beverages
Group B: IDR42,500/L for domestic beverages and IDR53,000 for imported beverages
Group C: IDR101,000/L for domestic beverages and IDR152,000 for imported
OPERATING ENVIRONMENT
Contraband/parallel trade
Contraband remains a pressing issue for alcoholic drinks in Indonesia. Alcoholic drinks are often smuggled by first falsely declaring the goods at customs and then selling them either in the market with counterfeit excise duty ribbons or without excise duty ribbons at all. High import tariffs, coupled with increasing demand for alcoholic drinks in the country, continue to present illegal traders with large potential for profits. This is especially true for spirits, which is subject to the highest rate of import tariff and excise duty. Whilst there are no official statistics, industry players estimate that the black market for spirits could be at least nine times as large as the legal market in volume terms – a huge loss of revenue for the government.
There have been many regulations put in place to curb the growth of contraband and parallel trade in Indonesia. For example, excise duty ribbons are customised with a company’s identification number and their orders are being monitored more closely to prevent companies from using the ribbons for unregistered products or from reselling the ribbons to illegal importers. Customs enforcement at ports are also becoming more stringent to ensure that only registered products with excise duty ribbons are allowed to enter. However, considering that the import tariff is likely to remain high and that demand for imported alcoholic drinks will continue to increase, the black market can be expected to thrive over the course of the forecast period now that lockdown measures have been eased and borders are reopened.
Duty free
According to Ministry of Trade legislation Permendag No 20/M-DAG/PER/4/2014, duty free alcoholic drinks can only be imported by state-owned enterprises appointed by the Ministry of Trade. Duty free stores are allowed to sell duty free alcoholic drinks to:
Members of the diplomatic corps and families who are staying in Indonesia and purchase duty free products at city centre duty-free shops (TBB or Toko Bebas Bea) in unlimited quantities;
Expatriates and families that are staying and working in Indonesia for international foreign agencies and organisations that work in cooperation with the government of Indonesia and purchase duty free products at city centre duty-free shops (TBB or Toko Bebas Bea), except for duty paid products according to the procedure (with a limit of 10 litres per adult per month);
Any person leaving Indonesia, who purchases duty free products at the departure duty free in unlimited quantities;
Any person leaving Indonesia, carrying out a transaction in a departure duty free in unlimited quantities before the customs checkpoint, where the products are handed over only at the departure handing-over terminal after the customs checkpoint;
Any person arriving in Indonesia from overseas, who purchases duty free products at the arrival duty free according to the passenger limitations (limited to one litre per adult).
With Indonesia’s growing inbound and outbound travel pre-COVID-19, as well as the increasing number of expatriates living in the country, duty free sales can be expected to grow over the forecast period, as international travel resumes and gradually returns to more normal levels. Furthermore, with alcoholic drinks being less widely available in duty paid stores due to the January 2015 restrictions on retail distribution, consumers are also likely to have more incentive to purchase alcoholic drinks in duty free stores, for example in airports’ international arrival halls.
Cross-border/private imports
It is common practice for Indonesian tourists to purchase alcoholic drinks on their visits overseas for personal consumption or as gifts for family and friends to take advantage of airport duty free. The high import tax on alcoholic drinks in Indonesia makes such practice financially expedient, in addition to providing access to the wider selection of alcoholic drinks that is typically available overseas. International visitors to Indonesia by air are permitted to bring alcoholic drinks into Indonesia with a maximum of 1 litre per passenger with an alcohol content below 70%.
There are no official statistics regarding cross-border/private imports of alcoholic drinks in Indonesia. However, the number of cross-border shopping trips for alcoholic drinks may be quite significant due to the substantial number of Indonesians that travel to neighbouring countries as tourists, for business purposes or for medical check-ups, and the culture of looking for good value products on such occasions. However, cross-border trips and therefore private imports are likely to have been significantly impacted during the COVID-19 pandemic with Indonesia closing its borders and putting movement restrictions in place.
With Indonesia’s borders closed to most travellers, including both inbound and outbound travellers, there were far fewer opportunities for local people to engage in the cross-border trade and duty free shopping during 2020 and 2021. Furthermore, the much stricter border and customs controls that were in place due to there being far fewer passengers and a much greater need for bio security meant that it was much riskier and more difficult for people to engage in the clandestine cross-border trade in untaxed alcoholic drinks. The withdrawal of COVID-19 restrictions and the reopening of international borders provided conditions for a revival of cross-border activity in 2022.