New ruling on alcoholic beverages will not solve supply shortage

arts and culture

The government’s plan to allow local alcoholic beverage makers to expand their capacities will not solve the shortage supply problem and cope with country’s reliance on imports, says the Indonesian Employers Association.

Sofyan Wanandi, chairman of the Indonesian Employers Association, said that the planned regulation would not solve the problem because most local alcoholic beverage makers produced beer.

“Wine and liquors are mainly imported, therefore we will still have to depend on imports,” he said.

He suggested the government open the door to foreigners to produce liquors and wine in Indonesia to reduce imports. “Doing so would provide jobs as well as income from taxes for the government,” Sofyan added.

In the planned revision of the negative investment list (DNI), existing producers of beer and other alcoholic beverages would be allowed to expand their capacities, however, the sector remains closed to newcomers. The new policy was designed to help cope with Indonesia’s widening trade deficit and the shortage of liquor and wine.

Intan Abdams Katoppo, president director of PT Hotel Indonesia Natour, shared Sofyan’s view, saying that since the planned regulation would still ban the entry of newcomers, the country would still rely on imports to meet demands.

“We offer imported beverages because the quality of local products are not up to par with international ones,” she said. According to him, Bali-based beverage companies have started to produce wine and liquor, but local products were still unable to match the quality of imported drinks.

Wine distributor and bar VIN+ in Kemang, South Jakarta, for example, offers Bali wine in its stores, but sales have been low. The company focuses on selling wine from Chile, Australia, Spain, Italy and France. “They are the most popular,” marketing manager Nadine Saskia said.

The Indonesian Hotel and Restaurant Association (PHRI) nevertheless welcomes the government’s planned ruling, saying that it would help cope with the surging beer demand, especially in tourist destinations.

“The number of foreign tourists increases yearly. Tourists like to drink,” PHRI Executive Director Cyprianus Aoer said.

According to 2013 data from the Central Statistics Agency (BPS), the number of foreign tourists in Indonesia during the January to August period of 2013 had reached 5.64 million people. The figure rose more than 8 percent from the same period last year.

Liquor and wine supplies are very limited due to high import duties imposed by the government. As a result, prices of these beverages tend to spike during the holiday season in major tourist destinations.

Meanwhile, Dave Tumiwa, food and beverage management consultant of the Wolthers-Graciano, said import regulations should be eased to boost supplies and help lower prices.

“A bottle of wine that costs US$10 in Australia can be sold for $35 here,” Dave said. Restaurants, he said, earned as much as 50 percent of their income from beverage sales. “It’s a promising business here,” he said.

Indonesia has seen its demand for alcoholic beverages grow by about 10 percent every year. The distribution of these drinks in Indonesia is restricted to 22 importers.

PT Delta Djakarta, which produces the popular Anker Bir, will continue to focus on beer production even though the planned regulation would technically allow it to branch out into wine-and liquor-making. Delta imports its malt, the main ingredient of beer, from China, Australia and Germany.

The company still saw the western part of Indonesia as its main market, Delta trade marketing group manager Hari Wiyanto said. There was still room for beer production capacity growth, he added.

The two most popular beer brands in Indonesia, Bir Bintang and Anker Bir, together account for 60 percent of the beer market in Indonesia.

Delta Djakarta produced 738,266 barrels of beer in the January to November period of 2013, up 10 percent from the same period last year. Besides Anker Bir, Delta also produces Anker Stout, Kuda Putih and foreign brands Carlsberg Beer, San Miguel Beer and San Mig Light under license.

“Beer consumption in Indonesia is still lower than in Malaysia and China. The escalating arrival of tourists poses a strong opportunity to develop the market,” Hari said.

Each province is allowed to impose its own regulations on alcoholic beverage sales after the Supreme Court this year repealed a presidential decree that sets the rules nationally.

The law, however, also says that distributors may only sell alcoholic beverages to stores that have a tax registration number (NPWP) and sales license.

Dave Tumiwa warned that the decentralization measure could encourage local administrations to impose more fees on distributors, a move that would likely raise prices even further. (tam)

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