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International Packaging Sector Targets Indonesian Manufacturers

With the largest population in ASEAN, Indonesia's fast developing manufacturing sector has become extremely attractive to many producers of packaging machinery, resulting in this year's AllPack event in Jakarta being hugely well-attended.

Photo: The packaging sector: A useful barometer of the health of any manufacturing economy.
The packaging sector: A useful barometer of the health of any manufacturing economy.
Photo: The packaging sector: A useful barometer of the health of any manufacturing economy.
The packaging sector: A useful barometer of the health of any manufacturing economy.

Driven by the country's vast and growing manufacturing industry, Indonesia now boasts a vibrant packaging sector. In line with this, the AllPack Indonesia trade show has emerged as both a crucial barometer of the overall state of the country's economy, as well as one of Asia's premier showcases for packaging technology. Tellingly, it attracts a large number of overseas exhibitors, all of them seemingly convinced that the potential of the sector remains largely untapped.

Of course, among these overseas exhibitors, Chinese companies are preeminent. A regular attendee at the event, for instance, is GuangDong HengSheng Colour Printing, manufacturers of systems that produce flexible packaging products for food, everyday goods and cosmetics. Explaining the company's presence, Overseas Marketing Manager Albert V Chan said: "We are currently looking for the right market for our expansion outside of China and we think Indonesia could be the one."

According to Chan, the mainland market is currently approaching saturation point, making the sector highly competitive. By comparison, Indonesia, he believed, remained relatively under-served.

Expanding on the prospects he sees in the country, Chan said: "There are many food factories in Indonesia and we want to target them as potential users of our packing machines. At present, we are still testing the market, but we can already see promising growth indicators."

With a population of more than 250 million people and a fast-growing manufacturing sector, Indonesia is widely seen as a primary target by many overseas manufacturers of packaging machines and equipment. As a result, the vast majority of the largest players in the Asian packaging industry attended this year's AllPack event.

Foremost among these was the Fragstar Corporation, one of Malaysia's leading plastic-bag manufacturers. From its two Malaysian factories, the company currently produces around 5,000 tonnes of carrier bags per annum.

Explaining his presence in Jakarta, Kuak Way Siang, the company's Business Manager, said: "We have been exporting our products to a number of international destinations for a long time now and we thought it was about time we accessed the Indonesian market. There is just so much manufacturing activity here."

At present, Fragstar counts Australia, New Zealand, the UK, the Netherlands and France among its export markets. It also has a rapidly growing presence in other parts of the EU and the Asia-Pacific region. Given Malaysia's proximity to Indonesia, Kuak sees accessing this neigbouring market as a huge opportunity for his company, saying: "While competition may be stiff here, we are still keen to test the market."

Travelling from slightly further afield was INV Pack, a Spanish stickpack and packaging-solutions business. Justifying the company's 15,000-mile round trip, Area Manager Ismael Galceran said: "We see a huge market for our machines in Indonesia, largely on account of the country's bustling manufacturing sector. We are also looking for resellers, both here and in other Asian countries."

INV Pack's stickpack machines are designed to repackage sugar, coffee and other crystallised granulated products into smaller quantities, something that Galceran sees as a definite growth area. He said: "With consumers looking for coffee, sugar and creamer in smaller quantity packs, many manufacturers now produce their products in small quantities and pack them into stick packs. Our machine does that for them."

Photo: Komas: Counting on quality to build market share.
Komas: Counting on quality to build market share.
Photo: Komas: Counting on quality to build market share.
Komas: Counting on quality to build market share.
Photo: F&B: A fast growing sector in Indonesia.
F&B: A fast growing sector in Indonesia.
Photo: F&B: A fast growing sector in Indonesia.
F&B: A fast growing sector in Indonesia.

Despite the clear potential of the Indonesian market, accessing it is, apparently, not all that straightforward, at least according to Vita Chen, International Account Manager for Allen Pack, a Taiwan-based manufacturer of packaging machines. Explaining the problem, he said: "Import tax is an issue for many of the foreign companies doing business here. Indonesian buyers are concerned about importing from Taiwan because of duty tax so, instead, they import from the Chinese mainland."

This year, Allen Pack was showcasing its range of sleeving machines, shrink tunnel machines, PET shrink label film and polyvinyl chloride shrink film packaging systems. Expanding on the company's history, Chen said: "We have been the leading manufacturer of shrink packaging materials and machinery in Taiwan since 1980. We see our machines as being of a higher quality than those of many other brands. Despite this, we find that Indonesian customers often prefer Chinese brands, inevitably because of their lower prices."

Competition from Chinese companies was also a major concern for Iwai Kikai Kogyo, a Tokyo-based manufacturer of sterilisation and heat-exchange machines for the F&B sector. Echoing Chen's concerns, Olivia Kristanto, Iwai Kikai Kogyo's spokesperson, said: "We see the quality of our machines as being higher than comparable Chinese equipment. Of course, our price is also higher as quality is often related to cost."

At present, Iwai Kikai Kogyo ships machines directly from Japan to Indonesia, where it has a growing client base, including a number of major brands – most notably Yakult and Pocari Sweat. It also has a substantial customer base in several other ASEAN countries, including Thailand and Malaysia.

Explaining the company's current priorities, Kristanto: "We are attending this exhibition in a bid to secure more customers and expand our presence in Indonesia. The growth of the country's manufacturing industry means there is a huge demand for our machines, especially in the F&B sector."

Among the comparatively few overseas companies to have already established a local distribution network is Komas, a Korean specialist in thermoforming vacuum-packing machines for cheese, seafood, sausages, sliced meat, beans, pickled food, ham and poultry products. Jong Yul Kim, the company's Overseas Sales Director, said: "We were among the first foreign companies to establish a local distributorship in Indonesia. We did this by securing a partnership with Tamaru Mitrasejati, a Jakarta-based machinery company."

An established manufacturer of vacuum sealing and rollstock packaging machines, Komas has adopted an internationally oriented, technology-driven strategy in order to remain competitive. Despite the flood of Chinese products into Indonesia, Jong believes the quality of his company's products will allow it to thrive in this new market.

Although overseas companies are obviously keen to carve up Indonesia's packaging sector, many local companies seem unfazed by this influx of competitors. Clearly philosophical about this flood of new arrivals is Genio Ming, Executive Marketing Officer for Jakarta-based Cipta Cahaya Nusantara, a specialist robotic packaging machine manufacturer.

He said: "Although competition is stiff, the sector is expanding and we continue to grow every year. At present, our product range includes systems for packaging a variety of beverages, including water, juice, tea and coffee."

Cipta Cahaya Nusantara is also the Indonesian distributor for Fortune, a Philippines-based manufacturer of packing machines. At present, while the company has also been exporting high-tech packaging machinery to Thailand and several African countries, it still sees Indonesia as its focus. Ming said: "For now, we want to concentrate on the local market. The domestic manufacturing sector is continuing to expand and we are confident that we can compete with any overseas company."

Overall, the high attendance at the event was seen as a testament to the health of the sector, as well as to the clear potential of the Indonesian market. Acknowledging this, Yenni Fransica, a spokeswoman for Krista Exhibitions, the company behind AllPack Indonesia, said: "This year, there were far more overseas businesses attending the event than there were in 2015. Given the size and vibrancy of the market, this should really come as no surprise."

Photo: Packing them in: More than 20,000 people attended this year’s AllPack Indonesia expo.
Packing them in: More than 20,000 people attended this year's AllPack Indonesia expo.
Photo: Packing them in: More than 20,000 people attended this year’s AllPack Indonesia expo.
Packing them in: More than 20,000 people attended this year's AllPack Indonesia expo.

AllPack Indonesia 2016 was held at the Jakarta International Expo from 5-8 October 2016. The show attracted more than 20,000 visitors, as well as exhibitors from 42 different countries.

Geoff de Freitas, Special Correspondent, Jakarta

Content provided by Picture: HKTDC Research
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