Note: This report includes forecasting data that is based on baseline historical data.
According to the United Nations, the current population of Indonesia in 2022 is 279,134,505, a 1% increase from 2021. Gross domestic product (GDP) in Indonesia reached US$1150.0 billion by the end of 2021, according to Trading Economics global macro models and analysts.
The population aged 30-34 is forecast to remain the highest income earners per capita over 2021-2040. In addition, the consumer group aged 35-39 will be predominant among the highest income earners of more than US$250,000, shaping luxury spending patterns in Indonesia. Millennials represent a large proportion of the overall consumer market, and their impact on the economy is huge.
Demand for consumer foodservice plummeted during the early stages of the pandemic and remained low throughout 2021, transferring sales to grocery shopping for preparing meals at home.
Chained consumer foodservice in Indonesia represented US$2,845.7 million while independent represented US$20,273.8 million in 2021. The independent consumer foodsevice had a 88.7% share among the total consumer foodservice in Philippines.
Full-service restaurant value sales decreased at compound annual growth rate (CAGR) of 0.08% from 2016 to 2021, reaching US$18.9 billion in 2021, whilst outlet numbers fall to 103,165.
Limited service restaurant value sales fell in 2021 to US$1.4 billion, whilst outlet numbers fall to 6,859.
Cafés/Bars in Indonesiavalue sales decreased by 8.7% from 2016 to 2021 in current terms in 2021 to US$1.4 billion, whilst outlet numbers increase to 7,977.
Self-Service Cafeterias value sales fell by 8.8% from 2016 to 2021 to US$112.6 billion in 2021, whilst outlet numbers rise to 590.
Street Stalls/Kiosks value sales fell in 2021 to US$1.04 billion, whilst outlet numbers decrease to 97,495.
Macroeconomic profile and consumer trends
According to the United Nations, the current population of Indonesia in 2022 is 279,134,505, a 1% increase from 2021. GDP in Indonesia reached US$1,150.0 billion by the end of 2021, according to Trading Economics global macro models and analysts. In the long-term, the Indonesia GDP per capita purchasing power parity (PPP) is projected to trend around US$11,750.0 in 2022, according to our econometric models.
Per capita income levels in Indonesia are set to more than double over the long term. Structural reforms and improving business environment are expected to help attract investment and boost job creation in higher-value-added industries, driving productivity and income growth. Over the long term, per capita consumer expenditure will increase at a faster pace compared to regional countries, thanks to improving living standards, low household indebtedness as well as a large middle class.
- Per capita gross income in Indonesia is forecast to increase by 118% in real terms over 2021-2040
- Middle Youth are projected to remain predominant in the top-income band by 2040, shaping luxury spending patterns in Indonesia
- Income inequality is estimated to decrease over the long term and remain moderate by global standards
- Social class C is set to be the fastest growing social class but social class D will remain the prevalent social class through to 2040
Despite the rapid economic development in the last decade, per capita income levels in Indonesia stand below the regional average. Relatively low female labour participation rate, weak labour productivity growth and skills shortages hinder income growth. Moreover, the COVID-19 pandemic poses additional challenges in creating better-paying, higher-productivity jobs. The Indonesian government pledged to keep its focus on human capital development and economic transformation to boost job creation in higher-value-added industries in coming years.
The population aged 30-34 is forecast to remain the highest income earners per capita over 2021-2040. In addition, the consumer group aged 35-39 will be predominant among the highest income earners of more than US$250,000, shaping luxury spending patterns in Indonesia. Millennials represent a large proportion of the overall consumer market, and their impact on the economy is huge. This generation is keen on adopting digital technologies in their everyday life and is set to remain among the main drivers of the country's digital transformation over the forecast period. They increasingly invest in smart home appliances that make life easier. Moreover, millennials also pay huge attention to sustainability and the circular economy due to growing concerns about climate change.
Although Indonesia has made great strides towards becoming an upper-middle income country over the past decade, the COVID-19 pandemic is expected to set back socioeconomic progress at least in the medium term. The pandemic has hit women particularly hard and deepened pre-existing gender inequalities. Women in Indonesia have experienced significant job losses and reduced hours since the start of the pandemic, as many of them were employed in hard-hit industries, such as textile and clothing, retail and hospitality. In addition, there are many more women than men who work in the informal sector, where the access to social support systems is limited. As a result, male average disposable income is nearly double that of females in the country.
The Indonesia foodservice market
Consumer foodservice in 2021: The big picture
The onset of the COVID-19 pandemic in 2020 resulted in dramatic declines in value sales across all channels in consumer foodservice in Indonesia, with most channels also witnessing declines in the numbers of outlets in operation as numerous independent establishments went out of business and chained players rationalised their outlet networks. Whilst the value sales and number of outlets will continue post negative growth in 2021, the decline will not be as large as that recorded in 2020 as the lifting of harsher restrictions encouraged stronger sales in the first half of the year. However, a big wave of COVID-19 in June-August 2021 forced the government to apply PPKM (Implementation of Restrictions on Social Activities or Pemberlakuan Pembatasan Kegiatan Masyarakat) to control the spread of the virus. These restrictions reversed the improvements in consumer foodservice and led to a summer of incredibly low demand. Whilst takeaway and home-delivery orders did increase within this period, it was not enough to compensate for the sales lost due to the restrictions on mall capacities, dine-in service, and consumer mobility. It should be noted also that the spike in demand for delivery services was at least partially due to the increased interest in convenience among Indonesian consumers and the increased availability third party food delivery apps. Promotions and discounts via these apps, including attractive cashback offers, also formed a strong incentive to buy via such apps.
Demand for consumer foodservice plummeted during the early stages of the pandemic and remained low throughout 2021, transferring sales to grocery shopping for preparing meals at home. In addition to being a reaction to the availability of dine-in consumer foodservice options, it also reflected the adverse economic situation - COVID-19 interrupted commercial activity in key sectors of the Indonesian economy diminishing purchasing power amongst the population. This affected lower-income consumers more than higher-income consumes, which led to a worse performance for categories that target lower earners, such as food-based street stalls/kiosks. It also led to players, particularly in full-service restaurants, creating special grocery bundles to sell alongside their restaurant business. Such bundles allowed consumers to create their favourite dishes from the comfort of their own home using restaurant-quality ingredients and following professional instructions created by the chefs at such restaurants.
Foodservice: chain franchises versus independent operators
In 2021, the overall leading player in consumer foodservice in terms of value shares is Fast Food Indonesia (the owner of the popular KFC brand), which will see an increase in share despite a decline in value sales. The company's strong presence in the online channel prevented it from posting bigger losses, whilst other players with less presence online struggled. Fourth-ranked Mitra Adi Perkasa however will record one of the largest negative growths of the major players as its biggest revenue contributors (Starbucks Coffee, Pizza Express, and Genki Sushi) have been struggling to sustain sales.
Chained consumer foodservice in Indonesia represented US$2,586.9 million while independent represented US$20,273.8 million in 2021. The independent consumer foodsevice had a 88.7% share among the total consumer foodservice in Philippines. The CAGR was down to −7.9% from 2016 to 2021.
|CAGR* % 2016-2021
|CAGR* % 2021-2026
|Consumer foodservice by type
|Chained consumer foodservice
|Independent consumer foodservice
Source: Euromonitor, 2022
*CAGR: Compound Annual Growth Rate
Solution for independent restaurants
The competitive environment is dominated by independent foodservice operators in all categories of consumer foodservice in Indonesia. However, independent foodservice operators experienced a worse period than chained foodservice operators as they tend not to have good delivery services. Despite the challenges from younger entrepreneurs who turned to informal foodservice upon losing their employment, many independent operators did not want to partner with online transportation applications because of their large service fees. This is typically around 20% of the value of the products sold. As such, most operators sought to establish their own in-house delivery services.
However, there was an upswing in demand for stand-alone, suburban independent foodservice in September 2021 when the PPKM restrictions were lifted. Many consumers were keen to travel and socialise with friends again but did not want to visit traditionally high-traffic areas such as malls or city centres. Thus, such venues on the outskirts of the city, particularly those with outdoor areas and Instagrammable views, saw a significant surge in visitors from the end of Q3.
Full-service restaurants in Indonesia
- Foodservice value sales decreased at CAGR of 0.08% from 2016 to 2021, reaching US$18.9 billion in 2021, whilst outlet numbers fall to 103,165
- Asian full-service restaurants is the best performing category in 2021, with foodservice value sales still decreasing by 0.08% in current terms to US$17.9 billion
- Foodservice value sales are set to rise at a CAGR of 10.5% from 2021 to 2026
- All the restaurants, chained or independent, grew negatively, ranging from 0.04% to 0.27% from 2016 to 2021
|CAGR* % 2016-2021
|CAGR* % 2021-2026
|Chained full-service restaurants
|Independent full-service restaurants
|Full-Service Restaurants by Type
|Asian full-service restaurants
|Chained Asian full-service restaurants
|Independent Asian full-service restaurants
|European full-service restaurants
|Chained European full-service restaurants
|Independent European full-service restaurants
|Latin American full-service restaurants
|Independent Latin American full-service restaurants
|North American full-service restaurants
|Chained North American full-service restaurants
|Independent North American full service restaurants
|Pizza full-service restaurants
|Chained Pizza full-service restaurants
|Independent Pizza full-service restaurants
|Other full-service restaurants
|Chained other full-service restaurants
|Independent other full-service restaurants
Source: Euromonitor, 2022
*CAGR: Compound Annual Growth Rate
Certain formats face greater difficulties due to hygiene concerns or location
Full-service restaurants will continue to experience negative value sales growth in Indonesia in 2021, albeit at a much slower rate than in the previous year. Some of the most popular full-service restaurants faced intense scrutiny as the COVID-19 pandemic triggered widespread hygiene concerns. Potentially problematic full-service restaurant formats include buffets, hotpot restaurants, and other table sharing concepts that have traditionally been popular in Indonesia. All these types of restaurants generally attract larger groups of guests, which automatically placed them at a disadvantage given that socialising in large groups was strongly discouraged. However, the requirement for diners to share serving utensils and to serve themselves from the same pots as other guests was the main concern, especially with regards to buffet restaurants and, to lesser extent hotpot restaurants. With many people balking at the idea of using communal spoons, forks, and tongs to serve their food from communal plates, bowls, and dishes, the buffet and hotpot concepts faced additional barriers to consumer acceptance during the COVID-19 pandemic.
Full-service restaurants that are outside malls are generally faring better that those inside malls in 2021 as Indonesians are proving to be more comfortable visiting locations in suburban areas. In fact, since the relaxation of the PPKM measures in September 2021, such outlets are becoming increasingly crowded as consumers continue to dine there.
The high-end positioning of-service restaurants places extra pressure on demand
Although all consumer foodservice channels faced a difficult trading scenario, full-service restaurants found itself particularly under pressure during the pandemic. This is because of the more affluent target consumer audience that the channel has in comparison with limited-service restaurants. The shift towards working from home involved mainly middle-income and high-income consumers, with less affluent people more likely to be required to physically show up for work outside of the home environment. As such, middle-income and high-income consumers were far more in-tune with and likely to strictly adhere to the principles of social distancing and home seclusion. Furthermore, more affluent Indonesians generally have higher hygiene awareness and pay more attention to their health, which made them more hesitant than their less affluent counterparts to dine out during the pandemic. Although many full-service restaurants shifted their focus towards home delivery and takeaway options, this was not enough to prevent significant sales declines across the channel over the course of 2020 and 2021.
Middle-income and high-income consumers tended to be less financially impacted by the pandemic than lower-income consumers. Nevertheless, many of them continued to show caution in spending. To manage the decline in purchasing power, most category players started offering attractive cut price promotions, both for dine-in and online delivery. Another strategy used to encourage consumers to dine-in more often was to increase the consumers' feeling of safety within the outlet. For example, many players maximised the use of digital technology by introducing digital menus and ordering. As well as being highly convenient, this minimises contact with menus (that others may have touched) and means that waiters do not need to approach the table as often. In addition, cashless payments via barcode scans became the main option during the pandemic.
Lower cost restaurants fare better; Pizza Hut continues innovating to retain lead
In Indonesia, full-service restaurants can generally be divided into two categories. The first refers to restaurants that cater to more affluent consumers. These are generally fine dining restaurants with beautiful and elaborately decorated interiors, higher-priced food menus, and wine service. The other category caters mainly to low-income and less affluent middle-income consumers, offering more basic service and with much simpler interior decor. Consumers dining in such restaurants are usually looking simply for something to eat and they will tend not to linger once they have finished eating. The second type is often closer to limited-service restaurants in terms of strategy and positioning than it is to more expensive types of full-service restaurants. The no-frills approach and low-price positioning of these restaurants means that they are really in competition with fast food and other types of limited-service restaurants. However, it also meant that they faced less pressure on demand as the economic situation in Indonesia deteriorated because many consumers traded down from the more expensive options to budget-friendly full-service restaurants.
Pizza Hut retains its position as the market leader under this category. Despite experiencing a significant decline in sales over the last couple of years, Pizza Hut will retain its leading position in the category, surviving through the implementation of several key strategies. The first is to continue product development and launch innovative products such as its Limo Pizza (a 1-metre-long pizza, three times the size of a normal large pizza, split into twelves slices). The second is to offer major discounts (sometimes up to 20%), especially on online ordering applications such as Grab or GoFood. Finally, Pizza Hut consistently aims to provide its products closer to consumers' homes through roadside selling strategies, most of which are located not far from their outlets. Thus, the price is relatively expensive for a roadside product (with roadside food sold by traditional sellers. In addition, the latter strategy allows Pizza Hut to continue to employ their staff members, even if the outlet they previously worked in had to be closed because of the pandemic.
Prospects and opportunities
Improvements rather than price promotions from operators as they strive to maintain image of quality
A full recovery for value sales of full-service restaurants is not expected to occur until 2025 due to the time it will take to restore consumer's confidence in dining-in. To do this, full-service restaurants operators will need to continue implementing and communicating their safety and hygiene procedures, showing that they are putting the health of their customers and staff first. They are also expected to focus on improving the performance of their existing outlets rather than establishing new ones. Thus, the growth in number of outlets in this category is set to continue to grow slowly in the forecast period. In term of outlet location, it is estimated that there will be a shift towards stand-alone locations.
Whilst full-service restaurants have historically been less dependent on takeaway and home-delivery services, most players will focus on improving these services in the coming years, particularly through the online channels. This gives players greater flexibility (in case there are further dining restrictions), caters to the consumer trend of convenience, and helps prevent turnover from falling further. With many consumers still wary about dining-in, it makes sense to currently reach out to consumers rather than wait for them to dine-in again. Some players are also offering new menus that are more delivery friendly, yet still restaurant quality. Maintaining quality is an important factor for full-service restaurant players, with most aiming to improve their delivery service rather than offering special eat-in promotions.
Diversification likely to be key to survival and success in full-service restaurants
The extremely difficult trading situation that unfolded for Indonesia's full-service restaurants during the pandemic has had at least one positive impact: category players are now fully aware of the importance of maintaining a diverse and agile positioning. Having options in terms of adapting the brand strategy if under pressure will be increasingly important for survival. In fact, the category players that had already adopted a more diverse and flexible positioning were also those that found it easier to enact effective strategies for overcoming the COVID-19 crisis. They are also likely to remain more relevant in the post-pandemic landscape. Most notably, companies that operate a diverse range of restaurant brands, such as Boga Group, were in a better position to weather the COVID-19 storm. The fact that the company was able to continue partially trading in this way enabled it to manage its workforce more effectively, allowing its kitchen staff to continue working in Boga cloud kitchens whilst the dine-in restaurants were closed. Creating a network of cloud kitchens and developing the infrastructure to operate as a delivery service in fact proved to be a relatively easy and efficient process, certainly more so than designing, building, and managing a traditional restaurant. As such, the strong performance of cloud kitchens during the pandemic is expected to remain a major trend across full-service restaurants during the forecast period. Boga has plans to further update and extend its menu in the coming years as well as expand its network of cloud kitchen locations to outside of Jakarta. Surabaya, Bandung, and Medan are the cities that are most likely to be targeted for this expansion programme.
Home delivery services expected to grow in popularity as category strives to gain presence in the online space
The increasing focus on home delivery that spread across full-service restaurants during the pandemic is expected to remain in effect throughout the forecast period as category players have already discovered the major advantages of utilising home delivery services. For instance, Ismaya Group responded to the onset of COVID-19 by launching an online food market named Ismaya Gourmet Shop, which centres on a home delivery service. This responds to the increasing interest towards preparing meals from scratch at home, whilst also eliminating the need to leave home to acquire the ingredients. It also provides an ideal meal solution for those who do not have very good cooking skills. Furthermore, it also offers consumers the opportunity to enjoy restaurant-quality specialties from the comfort of their own homes, with executive chefs from Ismaya Group restaurants having participated in the preparation of the food packages. These new initiatives are expected to remain in place until at least the end of 2022 and could well continue well after the COVID-19 situation has been resolved.
To manage the increasing shift to the use of online applications, players in this category must also strengthen their general digital strategy. The main challenge for full-service restaurants is that their menus are typically less suited for transportation and consumption at home. Limited-service restaurants and cafés have a far more suitable menu and have thus been able to adapt to takeaway and home-delivery better. Additionally, full-service restaurants tend to base their offering not just on the quality of the food but also on the concept and atmosphere of their venue. Hence, full-service restaurant food is currently not strongly sought after through online delivery platforms. In the forecast period, it is estimated that players in this category will significantly increase their cooperation with online platforms to provide the best price offers for consumers to encourage greater online ordering. Players will also need to introduce menu items that can be consumed in the same way at home as in such outlets.
Limited-service restaurants in Indonesia
- Foodservice value sales fell in 2021 to US$1.4 billion, whilst outlet numbers fell to 6,859
- Foodservice value sales are set to grow at a current value CAGR of 10.9%, over the forecast period to US$3.2 billion in 2026, whilst the number of outlets is expected to 7,423
- Chained limited-service restaurants represented US$1.3 billion sales in 2021, about 7.4 times more that independent limited-service restaurants did
|CAGR* % 2016-2021
|CAGR* % 2021-2026
|Chained limited-service restaurants
|Independent limited-service restaurants
Source: Euromonitor, 2022
*CAGR: Compound Annual Growth Rate
Continued value declines as COVID-19 measures keep consumers away
Limited-service restaurants will again experience double-digit declines in value sales in 2021, albeit at a slowed rate from the previous year. The implementation of government policies, namely PSBB (Pembatasan Sosial Berskala Besar - large scale social restrictions) and PPKM (community activities restriction enforcement), had a strongly negative impact on consumer visits to consumer foodservice outlets. This was especially true for dine-in, though the number of people placing orders for takeaway also did not increase due to consumers increasingly ordering online for home-delivery. The mall closures and reimposed restrictions in June 2021 in fact had a positive impact on online ordering, with this ordering method seeing rapid increases in popularity during the pandemic. Most of the players in this category, including McDonald's, thus offered price discounts for their drive-through services on certain days or at certain times to compete with online ordering. This strategy has proven to be effective in attracting consumer interest, especially since purchasing power has decreased drastically during the pandemic.
In 2021, KFC will retain its position as the leading brand in the category thanks to strategic collaborations and price discounts. For example, the player has partnered with online delivery service gojek since October 2020 to allow consumers to order its food items online and at cut-price promotions. In fact, the brand offer discounts of up to 50% several days of the week, usually Friday-Sunday. As such, the brand has been able to significantly increase its online orders. KFC also continues to innovate and regularly introduce new products to stimulate demand and create menus that suit the tastes of Indonesian consumers.
Drive-through services and contactless card payments remain particularly popular
One important factor to take into consideration when assessing the less negative performance of limited-service restaurants during the pandemic than other consumer foodservice categories was the fact that many of these outlets offer drive-through services. With many consumers becoming very concerned about the risk of contracting COVID-19 when visiting consumer foodservice outlets, the option of ordering food and receiving it from the safety of one's vehicle became extremely attractive. Further underlining the appeal of drive-through services was the option to pay with contactless debit or credit card. This ensured that consumers were able to complete their transactions whilst having very little or no physical contact with another person. This also enabled limited-service restaurants to fully comply with all the social distancing protocols that formed the core of the PSBB regulations that Indonesians endured for significant proportions of 2020 and 2021.
Many of the leading players in limited-service restaurants significant expanded the capacity they had to allow them to process orders for delivery. For example, online ordering apps and telephone orders became much more widely available to the population. Within two weeks of the PSBB regulations coming into force in 2020, the number of delivery orders increased fourfold and the average transaction value for delivery orders was 1.7 times the previous average daily transaction value. With the population largely remaining cautious throughout 2021, especially during summer 2021 when cases spiralled again and lockdown measures were re-implemented, such ordering methods retained their popularity in the second year of the pandemic. In response, the second-ranked brand McDonald's strongly invested in developing its McDelivery service, as well as installing additional drive-through windows for the collection of pre-placed orders. Similar initiatives were seen at other limited-service restaurants, preventing a stronger rate of current value decline.
Players reduce costs by closing outlets and limiting operating hours
The downward trend in the number of outlets will continue in 2021 as the category continues to suffer losses despite the favourable options of takeaway and delivery. Given the low sales many players within the category opted to close their outlets temporarily or even permanently. Similarly, most players that had plans of expansion chose to postpone adding to their outlet number, instead saving their resources, or investing in the provision of safer services within the outlets they already have. This is a largely defensive strategy that focuses on reducing operational costs so that company losses can be limited. Some also chose to implement reduced operating hours or let employees go to reduce costs. Such measures are helping brands to stay afloat whilst waiting for economic conditions to improve.
Another strategy that has been applied by most players in this category during the pandemic is collaboration with online transportation service providers. This allows them to extend the reach of their online ordering and home-delivery services to better meet consumers' demands and keep staff and customers safe. Furthermore, consumers are showing a marked preference for digital services during the pandemic, with use of e-commerce expanding rapidly. Two of the main providers in the country are gojek and Grab, both of which offer online ordering, digital payments, and home-delivery. They also promote package meals with lower prices - a strong incentive for consumers financially hit by the effects of the pandemic.
Prospects and opportunities
Special discounts and bundles to remain key strategy as consumers suffer from reduced purchasing power
Current value sales for the category are expected to grow at double-digit rates across the forecast period, leading to a full pre-pandemic sales recovery by 2023 and constant growth to 2026. Price discounts and bundle promotions are still likely to be the main strategies applied by players in the next few years due to the decline of consumer purchasing power. This is not expected to recover immediately, with the country set to endure the economic impact of the pandemic for some time. This strategy, which is already being implemented by leading players KFC or Mc Donald's, will encourage a greater volume of sales which in turn improves current value sales.
Innovation in response to low demand likely to remain a feature of the channel
One of the most important responses to the low demand for limited-service restaurants during the pandemic was constant innovation. Whether in terms of the food menu, ordering concepts, or marketing campaigns, the pressure on the category saw leading players revising their strategies to remain relevant and mitigate the negative impact of COVID-19 on their operations.
Also encouraging innovation in the category is the fact that Indonesian people tend to be very keen on novelty, especially younger urban dwellers. In fact, given the restrictions placed on the population during the last couple of years, the thirst for something new and engaging somewhat increased during the pandemic. Younger Indonesians are also looking for content to upload to their social media accounts, encouraging the leading players to create unique menus and format concepts that can become talking points on social media. Thus, discussion amongst friends, groups, and families is emerging as a crucial new form of word-of-mouth marketing.
Online ordering and cloud kitchens to gain further relevance
The huge increase seen in the popularity of third party delivery services during the COVID-19 pandemic resulted in many limited-service restaurants expanding their use of cloud kitchens - facilities used exclusively for the preparation of online home-delivery orders. In addition to the background pandemic trends, the highly effective use of promotions (such as promotional pricing and food bundling) and the proliferation of smartphones and rising use of mobile internet have spurred growth in online orders. As cloud kitchens allow players to reduce their overhead costs, they can slash the prices of their menu items to remain relevant and survive in the pandemic. The lower investment costs required to set up a cloud kitchen became extreme relevant during the COVID-19 crisis, and it is expected that all the leading players in limited-service restaurants will mimic this concept for home-delivery for existing outlets as well as for fulfilling orders placed via third party delivery apps. Therefore, they are expected to become even more popular amongst consumer foodservice players during the forecast period. However, in terms of normal limited-service restaurant outlets, players are expected to delay their expansion, waiting for a more favourable economic situation and more certainty in the tail end of the pandemic. Players in this category will focus on adding outlets only within locations with very high potential and are unlikely to open new outlets in malls.
One brand that so far been highly successful in its deployment of cloud kitchens is Hokben with its first HokBen Kitchen launched at the end of 2020 to specifically fulfil takeaway and home-delivery orders. Thus, they have no dine-in areas. Although this concept seemed alien at first to Indonesian people, the realities of the COVID-19 situation and the inability of limited-service restaurants to offer on-trade service have played a big role in familiarising the HokBen Kitchen among the country's population. Given the success of the concept, the player has continued to grow its outlet number, with this set to continue in the forecast period to cover more areas of Indonesia.
Cafés / bars in Indonesia
- Foodservice value sales decreased by 8.7% from 2016 to 2021 in current terms in 2021 to US$1.4 billion, whilst outlet numbers increase to 7,977
- Juice/smoothie bars was the best performing category in 2021, with foodservice value sales expected to grow at CAGR of 1% from 2021 to 2026, reaching US$12.1 million
- Foodservice value sales are set to increase at a current value CAGR of 22.6% from 2021 to 2026 over the forecast period to US$3.8 billion in 2026, whilst the number of outlets is expected to increase to 8,984
|CAGR* % 2016-2021
|CAGR* % 2021-2026
|Chained Juice/Smoothie Bars
|Specialist Coffee and Tea Shops
|Chained specialist coffee & tea shops
|Independent specialist coffee & tea shops
Source: Euromonitor, 2022
*CAGR: Compound Annual Growth Rate
N/C: Not calculable
COVID-19 restrictions have a particularly negative impact on category sales
The business focus of Indonesia's cafés, specialist coffee, and tea shops and juice/smoothie bars shifted dramatically as the COVID-19 situation unfolded. Many of these businesses had previously relied heavily on dine-in customers for revenue. Thus, they typically generated a substantial proportion of their revenue from on-trade service. However, with the strict approach to social distancing and home seclusion a major trend, many of the businesses operating within cafés/bars found themselves deprived of this important source of revenue as consumers favoured delivery and takeaways services instead. They particularly suffered when consumer foodservice outlets were required to close for on-trade service during the period of PSBB restrictions. Subsequent limitations upon on-trade and mall capacities and PSKK restrictions also hindered sales in 2021. However, despite the easing of the PPKM restrictions in September 2021 (allowing a greater number of mall visitors and the extension of café/bars opening time to near -pre-COVID-19 hours), consumers are still showing reluctance to dine-in at malls. Thus, the lifting of PPKM has not had a significant impact on sales of this category.
Among the café/bars worst hit are those located in shopping malls and lodging locations, with consumer footfall in these locations drastically falling. Such locations were not only hit by limited local demand (reluctance to socialise outside of the home) but also the almost complete shutdown of the global travel and tourism industries. It was therefore inevitable that the leading players in café/bars would increasingly focus on fulfilling takeaway and delivery orders, with online channels and telephone ordering coming to the fore. The stand-out brands in 2021 are Kopi Kenangan, Kopi Lain Hati, and Kopi Soe, all of which will record strong value growth, going against the general trend of the category. This is likely due to Indonesian consumers wanting to support domestic brands over international ones as well as being more likely to have stand-alone outlets in less urban areas.
High price sensitivity increases the importance of promotions and online offers
The preferences of Indonesian consumers have traditionally been heavily influenced by price promotions. Thus, introducing price strategies has been one of the most effective ways to boost demand and shape consumer behaviour in the country. At the onset of the pandemic, price promotions took on even greater importance as the Indonesian economy faltered under the pressure of the COVID-19 pandemic. With many people facing reductions in their incomes, the search for value for money became more of a priority.
The trend of purchasing via online delivery apps and e-commerce continued in 2021 particularly for cold coffee products like milk coffee. In fact, the growth rate for home delivery nearly reached four-figures in 2020. Factors contributing to the growth of online delivery, included the lockdown and mobility measure as well as attractive promotions through sales vouchers. This is true through both third party e-commerce marketplaces such as Kopi Kenangan and the player's own websites or apps. This method is very effective in attracting new customers and increasing the number of transactions. However, many third party delivery app operators raised the minimum transaction value that was required before a promotional voucher could be used. Since the popularity of third party food delivery services skyrocketed during the COVID-19 pandemic, they became increasingly influential in shaping the online purchasing behaviours of Indonesian consumers. This further increased the shift away from dine-in and takeaway orders and towards delivery orders.
Aesthetic and atmosphere remain integral to strong foodservice sales
Despite consumers remaining wary of dining-in at café/bars throughout the first two years of the pandemic, having a unique atmosphere within the outlet remains vital to securing customers. Stand-alone outlets (those not in shopping malls) and those on the outskirts or far from the city centre have been seeing higher demand, especially after the relaxation of the PPKM restrictions. This is because consumers are continuing to avoid the busiest areas, leading to greater sales in less traditionally busy venues. In addition, outlets in such locations tend to be more visually appealing or more "Instagrammable". With social media continuing to play an increasingly large role in consumers' lives, this is becoming an increasingly important factor when consumers decide where to visit. Other outlets in attractive locations, especially if outdoors, are also performing better than city centre or mall-based cafés, with consumers (particularly from the younger generation) increasingly seeking independent venues with a special ambience.
Prospects and opportunities
Quick channel recovery expected thanks to strong takeaway and delivery options as well as innovative menu items
Unlike most other consumer foodservice channels, the full value sales recovery of café/bars is expected to take only one or two years. This is possible because the category has proven itself to be more resilient to the effects of the pandemic, with multiple new brands (both chains and independents) entering the market in the last couple of years. Specialist coffee shops is a particularly fashionable channel, with consumers choosing such locations not just for socialising with friends but also for takeaway or delivery. This is because Indonesians enjoy trying new types of coffee flavours and, especially in the aftermath of the pandemic, will be keen to seek new experiences. The habit of buying for takeaway or delivery through online apps will remain a major trend in the forecast period, further contributing to the category's overall value sales and accelerating its recovery.
Café/bars operators also tend to be innovative in terms of their menu and product range. For example, the specialist coffee shops brands Kopi Kenangan and Janji Jiwa are increasingly offering snack products, like bread or croffles (croissant waffles), for both dine-in and takeaway. Such products are great for on-the-go consumption and are likely to see increased popularity as consumers become busier and seek convenient on-the-go food options. In addition, drinking coffee while eating bread has become a new trend among young people. To continue growing demand, it is likely that the brands will continue offering bundling packages (a snack item with a coffee product) at very attractive prices. Given the economic impact of the pandemic and the dominance of the younger generation within the category's customer base, maintaining appealing prices is likely to be key to success.
Expansion of distribution channels to remain a long-term trend in café / bars
Although the addition of café/bar outlets decelerated during the pandemic, it is estimated that in the forecast period, the number of café outlets, especially specialist coffee venues, will continue to grow significantly. The large customer base for coffee lovers is the main reason behind this with consumers increasingly seeking to try new, rich tastes or find a quirky independent outlet to socialise in with friends. Coffee players are constantly innovating their products allowing cafés to promote this as an attractive proposition. Furthermore, it is relatively easy to open a café outlet, as such venues tend to be smaller and have less major equipment than restaurants. This means that the starting capital is smaller, and more locations are available offering the required space.
Another of the key strategies that defined the response of the leading players in café/bars to the COVID-19 pandemic during 2020 was the stronger focus on alternative distribution channels. This started out as a reaction to the unavailability of on-trade service during the PSBB quarantine restrictions and quickly took on a life of its own as consumers came to realise the convenience that online ordering and home delivery represent. Category leader Starbucks for instance responded to the requirement for it to close all its specialist coffee and tea shops for on-trade service by focusing heavily on developing alternative distribution channels and increases focus on developing and omni-channel strategy, especially through third party delivery services such as Grab and GoFood. In addition, Starbucks focused its innovation on moving into street stalls/kiosks, providing service to consumers via vans that could be located or relocated in different high-foot traffic areas. Drive-through services also saw significant growth during the pandemic with demand unlikely to wane in its aftermath.
Purchase order system expected to become more popular
One new strategy that was a surprise hit in cafés/bars during the pandemic was the purchase order (PO) system. This was employed by many of the independent players that comprise most operators in café/bars. The PO system involves customers placing orders and paying for products long before they are prepared. This creates an open ordering system and has received a positive response from both customers and category players. For the operators of independent café/bars, it increases revenues and improves certainty, whilst also helping them expand their customer base. Meanwhile, customers benefit from knowing that they only need activate their order to have their beverage prepared. They can also enjoy price discounts via the promotions that are usually tied to purchase orders - a factor which became very important due to the deterioration of the economy during the COVID-19 pandemic. Indeed, the value for money that this represents for consumers is expected to underpin the growing interest in the PO system during the forecast period as the low purchasing power is set to linger long after the COVID-19 is resolved.
Self-service cafeterias in Indonesia
- Foodservice value sales fell by 8.8% from 2016 to 2021 to US$112.6 billion in 2021, whilst outlet numbers rise to 590
- Foodservice value sales are set to rise at a current value CAGR of 15.3% from 2021 to 2026 over the forecast period to US$229.6 billion in 2026, whilst the number of outlets is expected to increase to 608
- Independent cafeteria represented US$90.1 million in 2021, 4 times more that chained self-service cafeterias. It is expected to grow at a CAGR of 15.9% from 2021 to 2026, reaching US$188.5 million in 2026
|CAGR* % 2016-2021
|CAGR* % 2021-2026
|Chained Self-Service Cafeterias
|Independent Self-Service Cafeterias
Source: Euromonitor, 2022
*CAGR: Compound Annual Growth Rate
Value sales continue falling due to low consumer traffic in large retail outlets
Self-service cafeterias have faced a challenging couple of years as the impact of the COVID-19 pandemic placed significant pressure on sales, and a second year of value sales declines will be recorded in 2021. In Indonesia, self-service cafeterias is highly dependent on consumer foot traffic in retail outlets. This is because most outlets in the channel are located adjacent to supermarkets, hypermarkets, or large-format stores such as IKEA homewares and home furnishing stores. Consumers frequented such retail outlets much less during the pandemic as they wanted to avoid potentially high-traffic areas where the risk of contracting COVID-19 was thought to be higher. In addition, the fierce retail business competition (including e-commerce) which has led to the increasingly unpopularity of hypermarkets and the government's COVID-19 visitor restriction policy have had a strongly negative impact on self-service cafeteria demand. Many self-service cafeterias have started to offer a takeaway service, mitigating the pressure on sales, at least to some extent. Nevertheless, value sales will continue to see double-digit declines in 2021.
The channel faces challenges due to the drop seen in footfall in retail outlets
Another major reason for the reluctance of consumers to go shopping was the pressure that came on household incomes. This meant that discretionary spending was a low priority for most Indonesians, leading to only essential shopping trips and dining out less often. When consumers did opt to dine-out, they were more likely to favour more iconic and well-known foodservice options (such as KFC, McDonald's, or Pizza Hut) rather than the much less glamorous options that are usually on offer in self-service cafeterias. In fact, the selections offered in most self-service cafeterias tend to consist mainly of standard Indonesian dishes, with this food not dissimilar to typical home cooked meals. In addition, the selection of food typically varies from day to day and even over the course of the same day. This inconsistency meant that many consumers avoided self-service cafeterias during the pandemic.
Whilst most cafeterias offer the menus based on typical Indonesian regional tastes (with common dishes being chicken soup or fried rice), Lulu Hypermart has started including various dishes from the Middle East as well as a variety of special Indonesian food menus based on the region. The concept is starting to encourage a greater number of consumers to eat in their cafeterias.
IKEA establishes new outlets and Halal certification to improve performance
Unlike those located within hypermarkets, Ikea (another self-service cafeteria provider) is experiencing a slightly better performance than other players. In fact, the brand is the only competitor to open new outlets during the pandemic; in 2021 alone, IKEA established two additional new outlets in Indonesia, doubling its capacity from the year before, thus leading to value growth. Although mobility restrictions (PSBB and PPKM) strongly affected consumer traffic, especially in Q3 of 2021, the number of visitors significantly increased from September onwards when the restrictions started to be relaxed. In fact, the total number of visitors recorded in September 2021 was higher than that registered in July and August combined. Whilst the performance in its outlet may not be as high as in the pre-COVID-19 era (as many consumers are starting to purchase IKEA products via e-commerce, leading to less self-service cafeteria traffic) the greater number of outlets and therefore the brand's improved national coverage are contributing to its better overall performance than other players as well as its own performance last year.
Another way in which IKEA has boosted its sales is when it filed for Halal certification in 2020. Specifically, the company seeks to comply with Law No33/2014 regarding Halal Product Guarantees. Currently, the Halal certification that applies to IKEA Restaurant and Café covers dining areas, food service counters, bistro, and bakery areas, FIKA areas, and catering facilities covering employees. Therefore, all food and beverages served in these areas, both in Alam Sutera and Sentul City outlets of IKEA, have now had Halal assurance systems implemented. This can be seen as part of IKEA Indonesia's general efforts to provide a greater sense of security and comfort to its retail customers (opening its self-service cafeterias to a wider audience).
Prospects and opportunities
A slow and potentially difficult recovery ahead for self-service cafeterias
The forecast period is expected to see self-service cafeterias make a slow and potentially difficult recovery from the effects of the COVID-19 pandemic. With most outlets in the channel located within large-format retail outlets, including hypermarkets and supermarkets, the shift towards e-commerce and proximity retailing (via convenience stores and traditional grocery retailers) is likely to present major challenges for all operators that rely upon adjacent retail outlets for customer footfall. With hypermarkets being perceived as increasingly unattractive by the population, it is unlikely that the category will see a recovery to pre-pandemic levels of value sales within the forecast period.
To boost the chances of success, existing self-service cafeterias, such as those within Transmart, Carrefour or Hypermart, are expected to change their food concepts and menus in the coming years. In the review period, most have been dominated by "heavy food" (typically with a variety of rice-based dishes). However, in the future such venues are expected to shift towards offering snacks, including cakes and desserts. With consumers set to be increasingly busy and less likely (perhaps even too lazy) to enjoy a full meal at self-service cafeteria, this will be a necessary step to ensure player survival.
IKEA's move towards drive-in sales likely to remain in effect
At the height of the COVID pandemic, IKEA Indonesia implemented strict health and hygiene protocols in its Indonesian self-service cafeterias (as recommended by government authorities) to ensure the safety and comfort of customers and employees. The company also offered retail customers the option to order food from its IKEA Restaurants and Café outlets via a drive-through service. Orders were placed at counters located in the front lobbies of the buildings with customers arranging to collect their orders at the drive-through window at a predetermined time. The service has proven popular and is likely to remain on offer during the forecast period.
IKEA has another benefit within this category, in that it differs from most other outlets through offering fixed food menus (rather than one that changes day-to-day). This means that IKEA Restaurant now can explore the option of developing online-to-offline sales channels. The forecast period is expected to see significant development of such an approach, with the player's focus expected to increasingly shift towards takeaway and, increasingly, delivery via online-to-offline channel. This increased focus on such options reflects the limitations to the dine-in model. In fact, with the regulations relating to on-trade continuously changing and being updated, depending on the state of COVID-19 transmission, having the option to leverage online-to-offline offers consumer foodservice businesses the opportunity to mitigate the impact of government measures, the worst being the requirement to remain closed during quarantine lockdowns. The diversification of ordering and serving options to overcome the limitations of the channel's predominant format are likely to play a major role in determining the speed of the category's recovery.
Expansion of IKEA set to continue with mall-based store next
Whilst new IKEA outlets were opened in 2021, another is planned to be launched in 2022 within Mall Taman Anggrek. This is IKEA's first mall-based outlet, and it is anticipated that it will be at least 10,000 square feet. This creates opportunity for the brand to reach a wider consumer base as it can now attract those who seek comfort and convenience in their shopping experience as well as those visiting for recreational purposes. This is a different format to their existing outlets, with most others in the country being stand-alone. It also provides additional opportunities to attract customers to its consumers foodservice offerings as, unlike stand-alone Ikea outlets, it can attract mall visitors that are not specifically shopping for retail items in Ikea.
Street stalls / kiosks in Indonesia
- Foodservice value sales fell in 2021 to US$1.04 billion, whilst outlet numbers decrease to 97,495
- Foodservice value sales are set to rise at a current value CAGR of 13.7% from 2021 tp 2026 over the forecast period to US$1.9 billion, whilst the number of outlets is expected to rise to 100,026
- Independent street stalls/kiosks reached $US696.8 million in 2021, double the chained stree stalls/kiosks although it grew negatively at a CAGR of 7% from 2016 to 2021. However, chained street stalls/kiosks grew positively at a CAGR of 11.0%
|CAGR* % 2016-2021
|CAGR* % 2021-2026
|Chained Street Stalls/Kiosks
|Independent Street Stalls/Kiosks
Source: Euromonitor, 2022
*CAGR: Compound Annual Growth Rate
Stall locations and temporary status create major disadvantage for category
After registering a strong performance in 2018 and recording extremely high growth during 2019, street stalls/kiosks faced a bleak year in 2020 as the impact of the COVID-19 pandemic plunged the entire channel into negative sales growth territory. The main factor undermining the channel performance was that street stalls/kiosks, as the name suggests, are usually located on the streets. This meant that the strict adherence to social distancing and home seclusion limited custom as very few people were prepared to risk their health by spending their leisure time in public. Instead, they showed a strong preference for staying at home to minimise their exposure to the COVID-19 virus. It should be noted that the more well-established street stalls/kiosks with permanent pitches registered less severe sales declines than more temporary outlets that are located for instance in tents or mounted on mobile food carts. Furthermore, declines were stronger among independent street stalls/kiosks. This can be attributed, at least partially, to the less hygienic image these types of outlets have at a time when consumers are so focused on their health and immunity.
The trends for snack-sized street food and fried chicken mitigate overall decline
Although street stalls/kiosks will continue to register a negative performance in 2021, it should be noted that the situation could have been considerably worse, had it not been for the ongoing trend towards much-hyped snack-sized street food items such as the iced coffee dessert kopi kekinian. This snack is currently having a moment among the population of Java and is rapidly spreading to other parts of the country. Kopi kekinian is already widely sold under major speciality brands such as Kopi Kenangan and Kopi Janji Jiwa. Another product which has been trending for longer and is also becoming more popular as time passes is bubble tea - a powder drink with bubbles, brown sugar, and flavoured tea). This is ensuring that brands such as Onezo, Kokumi, and Xing Fu Tang are registering relatively favourable performances. These high-selling products are seen as a hybrid between a beverage and a snack and are often difficult to replicate at home due to the requirement of specialist catering equipment to achieve the right effect. Thus, the entire channel of street stalls/kiosks benefited from the desire to continue purchasing kopi kekinian or bubble tea. This was particularly relevant amongst younger consumers and students who would use these products as an escape from boredom while working or studying from home. Such consumers also tend to use social media more frequently and have thus been exposed to major bubble tea promotions via these channels. The trend towards kopi kekinian and bubble tea is part of a wider trend towards snack items in the Indonesian consumer foodservice industry and is helping cushion the sales declines in the category.
Other stalls that are holding onto survival in the pandemic include chained fried chicken stalls, such as those of Sabana. The reason behind their success is that fried chicken has become the food of the Indonesian people with appealing taste, high availability, lower prices, and the food bundles with rice (a staple for Indonesian consumers) contributing to its soaring popularity. The impact of the pandemic was only on sales per transaction which decreased slightly due to the reduced quantity purchased by customers. Other types of stalls did not enjoy the same popularity however, with some mobile burger stalls, such as those of the Edam burger brand, being closed due to low purchasing power (especially for lower income consumers) and thus low sales.
Chatime retains top brand position thanks to lingering bubble tea trend
Trends in street stalls/kiosks tend to come and go quite quickly. People in Indonesia tend to be quite open to trying new things. However, with consumers moving onto the next new thing quickly, many trends are short-lived. This leads to the rise of short-lived brands using these fads food as their main menu. Nevertheless, some food trends have stuck around including corn dog, dim sum with mentai sauce, and toasted sandwiches.
Chatime is the leading brand in this category in terms of foodservice value share in 2021, retaining its position through the high popularity of its main offering - bubble tea - and through offering attractive promotions. Such deals are especially common when offered in collaboration with online delivery services like gojek.
Prospects and opportunities
Low earning audience of most food stalls/kiosks will hinder the category recovery
Overall, the category is expected to need a long recovery period as most brands in street stalls/kiosks target lower middle-income consumers. The traditional consumers of street stalls/kiosks will also have been harder hit by the economic impact of the pandemic. Thus, when they budget their spending, the purchase of these street stall/kiosks foods is no longer likely to be a priority. It may be cheap, but it is still an indulgence for many.
Meanwhile, drinks like bubble tea are priced at a slightly higher price than would be seen at similar limited-service restaurants. Although it may seem expensive, these outlets are able to gain consumer interest through collaborations with food delivery platforms. They often offer special discounts through these platforms, making such items seem more affordable. Nevertheless, seeing as the main target group is middle- to upper-income consumers (who tended to be less financially affected by the pandemic), drinks such as bubble tea are likely to continue seeing strong demand in the forecast period.
Rising popularity of grab-and-go expected to present opportunities
With the consumer foodservice industry having strongly shifted towards takeaway at the peak of the COVID-19 pandemic, grab-and-go formats came to the fore benefitting street stalls/kiosks to some extent. This led many of the channel's top players, notably Kopi Janji Jiwa, to focus on pushing the grab-and-go elements of their foodservice concept. This involved explicitly encouraging consumers to leave immediately after receiving their coffee orders, rather than providing them with a place to sit or linger at the location. Whilst there are opportunities for growth for street stalls/kiosks within delivery, this lacks the spontaneousness of impulse purchasing - a large contributor to street stalls/kiosks sales in the pre-COVID-19 era.
Nevertheless, digitalisation is set to become increasingly strong in this category as operators build their online presence to meet consumers' increasingly technological lives. There are expected to be an increasing volume of interesting promotions, especially through apps and online payment systems. However, seeing as most street stalls/kiosks brands are mainly operated in franchise formats, the presence of all brand outlets is not guaranteed on food delivery platforms. Listing a product on a food delivery app also requires players to pay a service fee or commission fee that is a percentage of their food cost, making the cost even higher. For products that target low- to middle-income consumers through low prices, this additional fee is not favourable. Hence, whilst movement online could be preferable for mid- to higher priced products, it is a difficult decision for outlets offering only lower priced items.
Diversification of menus expected to attract attention and manage 'fad' trends
Another area of innovation that is likely to prove crucial in the channel during the forecast period is the development of more interesting and wider menus. Although this is expected to impact the wider consumer foodservice industry, it expected to be particularly evident in street stalls/kiosks. Many of the leading chained players in the channel specialise in one or two specific beverages or dishes, thus it is expected that these players will offer an increasingly wider range of products within their respective areas of expertise. At the same time, independent operators are likely to begin offering a wider range of options to become more competitive, both within the channel and with other competing consumer foodservice formats. However, short-term fads are a trend in this category so innovations (in both product variants and packaging) will need to be carried out to prevent current businesses from becoming a momentary trend.
Apart from bubble tea, contemporary drinks struggle to maintain consistent demand in street stalls/kiosks in Indonesia. The selling price of such products is quite high, and most consumers lose curiosity after trying it, with the price often not in line with their expectations. With many contemporary beverages stalls relatively deserted by customers during the pandemic, it is unlikely that brands will heavily invest in new outlets. Therefore, outlet growth is anticipated to slow even more in the coming years.
Top ten foodservice companies
In 2021, Yum! Brands Inc was the Indonesia's top food service company with value sales of US$584.2 million, representing a 2.6% share of the foodservice market. McDonald's Corp was the second largest foodservice company with value sales of US$316.5 million, followed by Restaurant Starbucks Corp (US$82.8 million), Eka Bogainti PT (US$82.7 million), and Sederhana Citra Mandiri PT (US$71.3 million). These top 5 company's, accounted for 4.8% of the total foodservice market in Indonesia.
|Share in 2021
|Yum! Brands Inc
|Eka Bogainti PT
|Sederhana Citra Mandiri PT
|La Kaffa International Co Ltd
|Bumi Berkah Boga PT
|Johnny Andrean Group
|Luna Boga Narayan PT
|Subtotal - top 10 foodservice companies
|Source: Euromonitor, 2022
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- Euromonitor International, 2022
- Euromonitor International, Country Report. 11 October 2021: Income and Expenditure: Indonesia
- Euromonitor International, Consumer Foodservice in Indonesia 2022
Foodservice profile in Indonesia
Global Analysis Report
Prepared by: Hongli Wang, Senior Market Analyst
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