Foodservice Profile – Indonesia

Indonesia's consumer foodservice market

The Indonesian foodservice industry was valued at US$30.2 billion in 2023, falling by 5.9% annually since 2019. Sales growth is expected to be 1.8% annually over 2024 to 2028, reaching US$48.5 billion in 2028. All foodservice subsectors' retail sales, except limited service restaurants, declined over 2019 to 2023 mainly due to the impact of COVID-19 restrictions, however, all are expected to grow strongly over 2024 to 2028, ranging from 6.2% to 9.0% annual growth. Full-service restaurants is the dominant subsector in Indonesia with a 79.3% market share, followed by limited service and cafes/bars.

Food service sales in Indonesia remain below pre-pandemic levels. Following the end of pandemic related restrictions, growth was driven by an increase in consumer mobility, especially during major holiday periods, such as Eid al-Fitr. The recovery in foodservice by location is expected to be lead by travel, leisure, and retail with all increasing by over 10% annually, followed by lodging and standalone. Foodservice operators have also come under pressure from rising input costs, despite the softening of inflation. Food and energy prices also remain elevated and have had a negative impact of household discretionary spending.

Consumer foodservice by type

Full-service restaurants

Full-service restaurants is Indonesia's largest foodservice sector with retail sales of US$23.9 billion in 2023 representing a 79.3% market share. Sales declined 6.8% annually over 2019 to 2023. Over 7.9% annual growth is forecast over 2024 to 2028 as sales are expected to reach US$39.0 billion by 2028.

According to Euromonitor, full-service restaurants in Indonesia are divided into fine dining establishments that cater to affluent consumers and sit down restaurants that cater to low-income and less affluent middle-income consumers. The latter is often closer to limited-service restaurants in terms of menu and positioning than more expensive types of full-service restaurants.

Full-service restaurant sales are recovering but remain below pre-pandemic levels. Sales were boosted by increased mobility of consumers after the pandemic, including the return of workers to their physical offices and revival of family gatherings during weekends and holiday periods.

To remain competitive, full-service restaurants are expected to introduce healthier, more nutrient-rich menus and more environmentally friendly food choices, as consumers become more mindful of their own health and that of the planet. Unique dining experiences will continue to be highly sought after, as diners look to create memorable moments.

Limited-service restaurants

Limited-service restaurants is Indonesia's second largest foodservice subsector with retail sales of US$2.6 billion in 2023, representing an 8.5% market share. Sales grew 2.0% annually over 2019 to 2023. 6.2% annual growth is forecast over 2024 to 2028 as sales are expected to reach US$3.7 billion by 2028.

COVID-19 measures forced outlets to pivot to ecommerce and delivery in order to survive with some types more successful than others, such as middle eastern, pizza, burger, and Asian restaurants compared to convenience, bakery, chicken, and ice cream restaurants falling. Future annual sales is expected to grow strongly for all subsectors with latin American restaurants leading the way with 27.5% over 2024 to 2028, followed by convenience stores. McDonald's and KFC dominate the fast-food chain sector in Indonesia. International fast-food chains are opening new outlets in primary and secondary cities to expand their network coverage.

Two additional American fast-food chains opened in Indonesia, Popeyes and Long John Silver's. According to Euromonitor, the opening of Popeye's chicken in Indonesia is meant to cater to growing consumer demand for fried chicken. New restaurants that offer healthy restaurant concepts have also sprung up in Jakarta and other prominent cities. Burger King has added a plant-based Whopper to its menu in Indonesia, made with a vegan beef patty supplied by Unilever. Other restaurant chains that offer healthier menu items include Saladstop!, Burgreens, and Green Rebel which has partnered with other stores like Ikea and Starbucks.

Cafés / Bars

Cafés/bars are Indonesia's third largest foodservice subsector with retail sales of US$2.1 billion in 2023, representing a 6.9% market share. Sales decreased 5.8% annually over 2019 to 2023. 9.0% annual growth is forecast over 2024 to 2028 as sales are expected to reach US$3.4 billion by 2028. With players coming under pressure from rising input costs, they have been forced to increase prices as well as reduce the number of promotions, and this had a negative impact on demand.

According to Euromonitor, café/bar retail sales are expected to recover to pre-pandemic levels by 2026 with sales growth expected to be driven by outlet expansion, price promotions, and product/menu innovation. For example, coffee shop chains Kopi Kenangan, Tomoro Coffee and Kopi Nako are increasingly offering more chocolate, fruit-based or blended ice-based drinks. Kopi Kenangan and Janji Jiwa are also offering more snack products, like bread or croffles (croissant waffles).

This is consistent with Indonesia's growing coffee drinking culture as consumers seek out visually appealing cafés for hanging out with friends rather than for takeaway purchases. For example, coffee chain Kopi Kenangan has grown to more than 900 outlets in 2022 from 500 in 2021. Frequenting such venues is currently a major trend amongst middle to high income consumers, especially younger generations. Outlets in attractive locations, especially with outdoor seating areas, are especially attractive, with younger consumers in particular actively seeking out independent venues with special "Instagrammable" qualities.

Chained vs. independent outlets

All chained and independent sub-categories are expected to recover from the pandemic with annual growth averaging between 5% and 27.5% over 2024 to 2028 with chained Latin American limited service restaurants leading the way with 27.5% annual growth over 2024 to 2028, followed by chained European full service restaurants 24.1%), chained North American full service restaurants (12.6%), and chain convenience stores (12.5%).

Independent café/bar had higher sales than chained outlets in these categories over 2019 to 2023. According to Euromonitor, the number of coffee shops in Indonesia is growing with independent outlets leading the way and are expected to drive overall sales growth of the category. Growth in café outlets is partly attributable to the fact that it is relatively easy to open a café, as such venues require less starting capital, tend to be smaller, and have fewer pieces of large equipment than restaurants. For example, Indonesian operator Kopi Kenagan, which has more than eight hundred and fifty outlets across Indonesia, is aggressively expanding as well as Fore Coffee, which announced plans to open more than sixty new coffee shops in the country.

Chained full-service restaurants are expected to see slightly faster growth than their independent counterparts with several players, which focus on offering seafood menus, starting to expand their outlet numbers. For example, the Mie Gacoan restaurant chain, a subsidiary of PT Pesta Pora Abadi, is expected to register a particularly strong performance, continuing the trend established in 2023. It has a modern dining concept, based on noodles with adjustable spice levels, combined with affordable prices, the chain has established a particularly strong showing in the provinces of East Java, Central Java, West Java and Bali, with further outlet expansion expected, moving forward.

According to Euromonitor, chained limited-service restaurants will see higher sales growth over 2024 to 2027 compared to independent outlets. International limited-service chained restaurants like McDonald's are expected to struggle in the face of their perceived support of the Israeli forces fighting in Gaza. This is expected to provide opportunities for local chains to gain traction, at least for as long as the conflict continues. For example, Asian limited-service restaurants are expected to be a key contributor to growth over 2024 to 2028.

Players are likely to expand their food menus to include different types of Asian cuisine, such as ramen noodles from Korea, or Japanese-style all-you-can-get buffets, as offered by Shabu Shabu, for example. Young urban consumers will be the main target audience for these products as they are more willing to experiment with different types of cuisine. Young consumers are also likely to seek out content to upload to their social media accounts, prompting leading players to create unique menus and concepts that can help increase word of mouth marketing.

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Resources

• Euromonitor International:
  • Consumer foodservice in Indonesia (February 2024)
  • Full-service restaurants in Indonesia (February 2024)
  • Limited-service restaurants in Indonesia (February 2024)
  • Cafes bars in Indonesia (February 2024)

Foodservice Profile – Indonesia
Global Analysis Report

Prepared by: Kris Clipsham, Market Analyst

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