CERAMIC TABLEWARE INDUSTRY STILL ORIENTED TO THE DOMESTIC MARKET.
The growth in the domestic production and consumption of ceramic tableware, which was rapid during the 1980's, started to slow down early in the 1990's. This was so because the size of the domestic market for such tableware was still limited. In view of tiffs, a number of producers made efforts to export their products. In the early years of the 1990's, the volume of Indonesia's ceramic tableware exports showed significant growth. Over the last few years, however, the volume of such exports has been quite stable, despite the fact that the number of ceramic tableware producers in Indonesia has kept on growing as shown by the fact that the total production capacity of the ceramic tableware industry, has soared from 376 million pieces per annum in 1993 to 630 million pieces now.
Given that the per capita consumption of ceramic tableware products in Indonesia is still small, the domestic market for such products still has a good potential to grow. However, the opportunities on the domestic market are available more for low-quality products than for high-quality ones. Since the profit margin with low-quality ceramic tableware products is small, not many investors have been interested in developing this industry. In view of the fact that the middle-upper income market segment for ceramic tableware is still limited, this industry is attractive only to investors wishing to relocate their factories to Indonesia. Such investors already have access to technology and to export marketing networks.
This report discusses the current condition of Indonesia's ceramic tableware industry, the developments in the import and export of such products, and the obstacles to the efforts at increasing ceramic tableware exports. One of such obstacles is the high dependency on import sources for basic materials. However, with its comparative advantage in terms of human resources and with the growing number of skilled personnel in the area of ceramic tableware production, the industry can be expected to increase its exports.
Ceramic tableware products are household appliances made of ceramic such as plates, pots, and cups & saucers. Such products are produced through several stages, from the processing of the basic materials, to the shaping of the product, the making of glazing materials, and the burning process. The basic materials for such products are as follows: clay, kaolin, quartz, fledspar, and certain auxiliary materials.
In the initial stage, all the basic materials are processed. Then, they are shaped into a product. Subsequently, the product is burned under certain temperatures without causing damage or defects. There are a number of different shaping processes such as casting, pressing, and jiggering. Casting is usually used to shape tea pots, pressing to shape saucers, and jiggering to shape plates. A product that has been shaped is subsequently burned, glazed, and decorated.
Under the Indonesian Industrial Standard (SII), the maximum limits on the contents of poisonous elements such as lead (Pb) and cadmium (Cd) in the basic materials for ceramic tableware products have been determined because such products are used for eating and drinking purposes. This is to avoid the possibility of excessive contamination which can harm human health.
The maximum limits on the contents of chemicals in such basic materials vary according to the types and shapes of the products. Ceramic tableware products are differentiated from one another according to their shapes such as flat tableware (plates and the likes), tableware with a small cavity, and tableware with a large cavity such as cups, mugs, milk containers, tea pots, and the likes. Apart from this, the influence of acids contained in solid food and drinks on the basic materials for ceramic tableware products is also taken into account.
Table - 1 Maximum limits on contents of metals in extracts for ceramic tableware, SH-0451-81
Contents (ppm) Samples tested Capacity (ml) Lead (Pb) Cadmium (Cd) Products with cavity > 1,100 2.0 0.2 Products with cavity < 1,100 7.0 0.7 Flat products any capacity 20.0 2.0
Source: Data Consult
Ceramic tableware also has three different quality grades according to the types of basic materials used and the temperatures under which they are burned. One of them is tableware stoneware, which is characterized with its bottom having the light-brown or cream color. Tableware stoneware is burned in temperatures of between 1,060-1,280 centigrade degrees. The second quality grade is soft-porcelain tableware and the third ultra hard porcelain tableware. Both soft-porcelain and ultra hard porcelain tableware products have white bottoms. The former is burned in temperatures of between 1,280-1,350 centigrade degrees and the latter between 1,410-1,530 centigrade degrees. Ultra hard porcelain tableware products are mostly used by hotels, and they come in a wide range of shapes such as plates, trays, bowls, egg stands (double and single), containers for salt, pepper, butter, jam, and mustard, double astrays, and cups and in a wide range of sizes.
According to the SII, ceramic tableware products of the semi-porcelain and porcelain types which are used for tea and coffee should have glazed surface with hardness of over 4 Mohs. As for saucers, their edge should have a minimum impact resistance of 0.147 him in the case their bottom parts should have a minimum impact resistance of 0.074 Nm in the case of the the former and 0.098 Nm in the case of the latter. As for ceramic tableware products with a cavity (such as pots, cups, sugar containers, and milk containers), their bottom parts should have a minimum impact resistance of 0.074 Nm in the case of those, of the semi-porcelain type and 0.098 Nm in the case of those of the porcelain type.
Thus, local ceramic tableware product can be divided into three different quality grades: superior, medium, and low. Those of superior quality are mostly consumed by star-rated hotels and expensive restaurants, which procures them directly from the producers. Meanwhile, ceramic tableware products of medium and low quality are mass-produced and supplied to the free market.
Production capacity 630 million pieces/annum
Currently (as per November 1997), them are 38 ceramic tableware producers operating in Indonesia with a combined production capacity of 630 million pieces/annum. Geographically, these companies are concentrated in Java. This is so largely because most consumers of such products -- both households and hotels/restaurants -- found in Java. Another reason is that Java has good infrastructural and public facilities such as roads, drainage systems, and gas distribution networks that are very supportive of the production and distribution of ceramic tableware products.
West Java is home to 21 producers with a combined production capacity of 338 million pieces/annum, which is 53.7% of the total. East Java has 8 producers with a combined production capacity of 131 million pieces/annum, and Central Java 2 with a combined production capacity of 61.5 million pieces/annum. The remaining ceramic tableware producers are found in Bali, Pontianak (West Kalimantan), and Jakarta.
Among the largest ceramic tableware producers in Indonesia are PT Sango Ceramics Indonesia, PT Lucky Indah Keramik, PT Han Kook Ceramics Indonesia, PT Kedaung Oriental Porcelain Industry (PT KOPIN), PT Industri Keramik Indonesia Mutiara (PT IKI Mutiara), PT Indo Keramik Inti Widya, and PT Sari Koyotoki International.
The first ceramic tableware producer to operate in Indonesia is PT IKI Nusantara, whose plant is located in Surabaya, East Java. Established under the domestic investment (PMDN) scheme in 1974, PT IKI Nusantara currently has an annual production capacity of 6 million pieces. It products include plates with diameters of 6-10.5 inches, bowls with diameters of 6-7 inches, coffee sets, and cups.
PT Lucky Indah, whose plant is located in Tangerang, West Java, came into operations in 1977 and currently has an annual production capacity of 31.5 million pieces. In 1990, the company took over the assets of PT Lucky Keramik Indonesia, which is located in Bogor. These two companies are owned by the same shareholders.
Lucky ceramic tableware products are readily available on the market, especially at super-markets, large cities. Every Lucky product has the brand name and the word hotelware written on it. This is meant to keep up the image of Lucky products, which come in a wide range of shapes and sizes such as spoons, small bowls, plates, sugar containers, milk pots, and others.
One ceramic tableware product which is quite agressive in expanding its production is PT Kedaung Oriental Porcelain Industry (PT KOPIN), which operates under tile foreign investment (PMA) scheme and is affiliated to the Kedaung Group. With its plant located Tangerang, West Java, PT KOPIN commenced its operations in 1991. The company is jointly owned by DK Lim & Sons Investment Pte. Ltd. of Singapore and its local partners PT Kedaung Industrial Ltd. and PT Angsa Daya. PT Angsa Daya is known for its ceramic tile products, which it markets under brand name IKAD.
Initially, PT KOPIN had an annual production capacity of 19.35 million tons. Now, following the completion of its optimization program, the company has an annual production capacity of 26 million pieces. PT KOPIN's product range includes dinner plates, meat plates, side plates, saucers, bowls, tea cups, tea pots with covers, sugar pots with covers, creamers, and platters.
PT KOPIN markets its products under the indigenous brand name "Kopin," which is less well-known than the international ones such as Sango, Han Kook, or Haeng Nam. Even so, PT KOPIN has managed to export 70% of its output to a number of countries. The company's main market segment is the household sector. However, it has also started to produce high-quality ceramic tableware products to cater to hotels and restaurants.
Another large-scale ceramic tableware producer operating under the PMA scheme is PT Han Kook Ceramics Indonesia, which is jointly owned by Han Kook Chinaware Co. Ltd. of South Korea and its local partner PT Indomas Tata Perdana. PT Han Kook Ceramics Indonesia established its plant on the basis of a license issued in 1991 by the Investment Coordinating Board (BKPM). In 1993, the company expanded the production capacity of its plant, which is located Tangerang, West Java. The company uses bone porcelain as the main basic material for its tableware products, which it markets under brand name Super Strong. The company's leading products are named Super Bone. Up to now, PT Han Kook Ceramics Indonesia has been the only ceramic tableware producer in Indonesia to use china bone as the main basic material.
Another famous brand of ceramic tableware is Sango, which is produced by PT Sango Ceramics Indonesia. With its plant located in Semarang, PT Sango Ceramics Indonesia commenced its operations in 1980 and initially had an annual production capacity of 25.95 million pieces. In 1992, the company expanded its annual production capacity to 37.45 million pieces. Sango ceramic tableware products are widely used not only by households of middle-upper income levels but also by hotels, restaurants, and catering companies in major cities in Indonesia.
On the domestic market, PT Sango Ceramics Indonesia markets its products mostly under brand name Sango. On the export market, however) the company's products come in different brand names as requested by the importers. These brand names include Monroe, Gibson, and Picadilly. The company's ceramic tableware products come in different types such as ultra-hard porcelain hotelware, chinese restaurantware, and rim shape.
Sango's high-quality ceramic tableware products are now faced with a new competitor, namely PT Doulton Multifortuna, which produces similar products under brand name Royal Doulton. Operating under the PMA scheme, PT Doulton Multifortuna--which is partially owned by an English investor--has invested US$ 31 mill to produce up to 7,250,000 pieces of tableware and 250,000 pieces of giftware per annum.
Table - 2 Ceramic tableware products and their production capacities, 1996
Production capacity Location of (pieces/ Producer plant Status year) PT Crown Porcelain Ltd. Jakarta PMDN 3,240,000 PT Han Kook Ceramic Tanggerang PMA 13,500,000 Indonesia PT Jatake Keramindo Tanggerang PMA 5,400,000 Kharisma PT Lucky Indah Keramik Tanggerang PMDN 31,500,000 PT Pearland Tanggerang PMA 4,200,000 PT Adiasa Inspirasi Tanggerang PMDN 12,000,000 PT Kedaung Oriental Tanggerang PMA 26,000,000 Porcelain Industry PT Kencana Foundry Tama Tanggerang Non-PMA/PMDN 24,000,000 PT Indo Keramik Inti Tanggerang PMDN 38,000,000 Widia PT Doulton Multifortuna Tanggerang PMA 7,250,000 PT Haeng Nam Sejahtera Bekasi PMA 5,990,000 PT Sri Intan Tokai Bogor PMDN 2,400,000 Industry PT Lucky Keramik Bogor PMDN 39,900,000 Indonesia PT Quenn Setyabudhi Semarang PMDN 24,000,000 Ceramic PT Sango Ceramics Semarang PMDN 37,450,000 Indonesia PT Jatisuma Indah Surabaya PMDN 7,500,000 Keramika Industry & Co. PT Industri Keramik Surabaya PMDN 6,000,000 Indonesia Mutiara PT Sari Koyotoki Tulungagung PMA 7,448,000 International PT Semeru Agung Probolinggo PMDN 25,000,000 Keramika Indonesia PT Gloria Megah Sidoarjo PMDN 21,600,000 PT Iga Sundari Bali Non-PMA/PMDN 23,400,000 CV Timbang Titi Jaya Pontianak PMDN 4,348,000 Others 192,388,000 Total 630,000,000
PMA = Foreign Investment;
PMDN = Domestic Investment
Source: Investment Coordinating Board/Data Consult
Dependency on import sources for basic materials
The basic materials for ceramic tableware products such as clay, feldspar, and kaolin can be procured from local sources. However, Indonesian kaolin and clay have low quality because they contain high contents of impurities such as Fe203 and Ti02. Therefore, some producers of high-quality ceramic tableware prefer to procure such basic materials from import sources, especially from China. Feldspar, plastic clay, and talc are also procured from import sources.
For the past five years (1992-1992), with the growth of the industry of high-quality ceramic tableware in Indonesia, the volume of such imports grew quite significantly at an average annual rate of 19.5%. It grew the most rapidly in 1995, from 75.6 thousand tons in 1994 to 132.1 thousand tons or by 74.6%. In 1996, despite a slight decline, the volume of such imports was still as high as 125.3 thousand tons. However, some these imports are also used by other industries such as paper, rubber products, paint, and pharmaceuticals.
The high growth in such imports in 1995 is suspected to have resulted partially from increases in the production of high-quality ceramic tiles. Then, granito tiles were in high demand. In 1995, the domestic production of ceramic tableware also rose rapidly with the commencement of operations of a large-scale producer and of a few expansion projects.
Table - 3 Indonesia's kaolin imports, 1992-1996
Volume Value Year (tons) (US$ '000) 1992 69,595 19,529 1993 74,637 20,437 1994 75,597 20,084 1995 132,108 37,142 1996 125,343 33,353
Source: CBS/Data Consult
Investor interest low
According to data from the BKPM, the investor interest in the ceramic tableware industry has been low over the last few years, as shown by the fact that for the period of 1996-November 1997, only one new project and one expansion project in this industry were approved. This is unlike what happened late in the 1980's, when the investor interest in this industry was quite high.
The new project project belongs to PT Kuan Lin Ceramic Industry, and it was approved under the PMA scheme by the BKPM in 1996. With an investment commitment of US$ 835,000, this company will establish a plant to produce teasets and non-tableware ceramic products. As for teasets, the plant will have an annual production capacity of 180,000 sets. Meanwhile, the expansion project belongs to PT Indo Keramik Inti Widya. With an investment commitment of Rp 9 billion, this company will increase its annual capacity of ceramic tableware production by 8.4 million pieces. This expansion project, which was approved by the BKPM in 1996, is scheduled to be completed in 1999.
Earlier, in 1995, a new project in the ceramic tableware industry was approved under the PMA scheme by the BKPM, and it belongs to PT Doulton Multifortuna. Through this US$ 31 million project, PT Doulton Multifortuna wishes to have the capacity to produce up to 7.25 million pieces of ceramic tableware per annum. This project is a relocation of a ceramic tableware plant owned by Royal Doulton in England. Originally, the relocation was scheduled to be completed in April 1998. However, since a ceramic tableware plant is relatively easy to construct, PT Doulton Multifortuna managed to commence its commercial operations a few months ago.
Unlike Doulton, PT Global Housewares Industries--whose project was also approved by the BKPM in 1995--has not commenced production up to now. With an investment commitment of US$ 2 million, PT Global Housewares Industries intends to have the capacity to produce 3 million pieces of decorative plates and 2 million pieces of decorative cups & bowls per annum. This project is scheduled to commence its commercial operations in mid-1998.
Table - 4 New investment plans in ceramic tableware industry, approved by Investment Coordinating Board in 1996 - October 1997
Production capacity Name of company Location Status (pieces) New project: PT Kuang Lin Serang, PMA Tea set Ceramic Industry West Java 180.000 sets Expansion project: PT Indo Keramik Tanggerang, PMDN - Dish Inti Widya West Java 5,040,000 - Bowl 2,520,000 - Asthray 840,000 Investment Date of Commencement Name of company ('mill.) approval of operation New project: PT Kuang Lin US$ 0,83(*) 1997 2000 Ceramic Industry Expansion project: PT Indo Keramik Rp 9 bill. 1996 1999 Inti Widya
(*) Including investment in non-tableware ceramic products
Source: Investment Coordinating Board/Data Consult
Production growth slows down
Unlike in the previous years, the growth in the domestic production of ceramic tableware showed a slowdown for the past five years (1992-1996). For the period of 1989-1993, Indonesia's ceramic tableware production grew at an average annual rate of 27.2%, with the highest rates achieved in 1989 and 1990 due to the commencement of operations of several new projects. For the period of 1992-1996, however, the growth in such production averaged only 7.6% per annum because not many new projects were implemented and because the supply of import ceramic tableware increased during this period.
In 1990, as has been mentioned earlier, the growth in the domestic production of ceramic tableware reached its peak level due to the commencement of operations of several new projects such as PT Kedaung Oriental Porcelain, PT Haeng Nam Sejahtera, PT Haft Kook Ceramic Indonesia, PT Jatake Keramindo Kharisma, and others. Besides, the continued improvement in Indonesian economi led to hike in the consumption of various types of manufactured products, including ceramic tableware.
Meanwhile, a new tendency is growing among people in major cities to present cash instead of gifts to wedding couples. This has had a significant impact on the domestic demand for ceramic tableware. However, the growing demand of hotels and restaurants for high-quality ceramic tableware has prevented the domestic production of such products from declining sharply. Moreover, the export demand for Indonesian ceramic tableware has remained high although its growth tends to be stable.
Given that the production capacity of Indonesia's ceramic tableware industry is 630 million pieces/annum and that the actual output for 1996 was 494.8 million pieces, the rate of production capacity utilization with this industry is optimum, i.e. 78.5%, although it is low compared to 93.9% in 1993.
Table - 5 Indonesia's ceramic tableware production, 1992- 1996
Production Growth Year ('000 units) (%) 1992 338,528 - 1993 352,987 4.3 1994 374,200 6.0 1995 434,072 16.0 1996 494,842 14.0
Source: Department of Industry and Trade/Data Consult
Ceramic tableware products can be divided into four major categories as follows: all kinds of plates, cups & saucers, bowls, and others. Of these four categories, all kinds of plates is the most produced, followed by others, which comprises mugs, tea pots, pepper shakers, ashtrays, and creamers.
Table - 6 Indonesia's 1996 ceramic tableware production, by type
Production Share in Description ('000 pieces) total(%) Plate 192.88 39.0 Cup & Saucer 74.26 15.0 Bowl 84.24 17.0 Others 143.04 29.0 Total 494.42 100.0
Source: Data Consult
Imports up steadily
For the period of 1992-1996, the volume of Indonesia's ceramic tableware imports continued to grow and it did so the most rapidly in 1995 and 1996. In 1995, it reached 10,732 tons, up 149.1% from 4,309 tons in 1994. In 1996, it rose by 27.4% to 13,674 tons.
Of the different types, ceramic tableware of the porcelain types is the most imported. In 1996, for example, Indonesia imported a total of 13,674 tons of ceramic tableware, of which some 88.8% was of the porcelain type while the remaining 11.2% was of the pottery type. One reason for the continued growth in ceramic tableware imports is that people of middle-upper income levels feel good about having foreign products. Another reason is that the prices of import ceramic tableware products, especially those from China, are highly competitive on the domestic market.
Table - 7 Indonesia's ceramic tableware imports by type, 1992 - 1996
Tons US$ '000 Type of product 1992 1993 1994 Porcelain : - Plate of all kinds of 476 103 1,399 porcelain or china 300 244 878 - Tea or Coffee cups and saucer 1,037 765 1,552 of porcelain or china 509 800 987 - Tea or coffee cups of 92 134 55 porcelain or china 134 158 89 - Tea or coffee saucers of 15 1 228 porcelain or china 16 3 97 - Tea or coffee cups of 87 2 11 porcelain or china 117 5 8 - Bowl of size of less than 6" 32 20 34 of porcelain or china 22 12 52 - Bowl of size 6" & more of 97 59 24 porcelain or china 72 24 39 - Other tableware, kitchenware 1,768 1,210 632 of porcelain or china 1,941 1,698 798 Subtotal 3,604 2,294 3,935 3,111 2,944 2,948 Pottery - Plates of all kinds other 41 29 14 than of porcelain or china 31 18 38 - Tea or coffee cups and saucers 173 64 27 other than of porcelain or china 86 43 8 - Tea or coffee cups other than 19 8 263 of porcelain or china 18 7 322 - Tea or coffee saucers other than 21 - - of porcelain or china 10 - Tea or coffee pots other than of - - - porcelain or china - Bowl of size of less than 6" other - - 26 than of porcelain or china 20 - Bowl of size 6" and more other 55 4 2 than of porcelain or china 37 4 2 - Other ceramic tableware, 153 88 42 kitchenware 200 108 37 Subtotal 462 193 374 382 180 427 Total 4,066 2,487 4,309 3,493 3,124 3,375 Type of product 1995 1996 Porcelain : - Plate of all kinds of 6,029 porcelain or china 2,046 - Tea or Coffee cups and saucer 1,335 of porcelain or china 625 - Tea or coffee cups of 86 porcelain or china 71 - Tea or coffee saucers of 222 porcelain or china 71 - Tea or coffee cups of 12 porcelain or china 28 - Bowl of size of less than 6" 337 of porcelain or china 108 - Bowl of size 6" & more of 316 porcelain or china 202 - Other tableware, kitchenware 1,942 of porcelain or china 1,059 Subtotal 10,279 12,143 4,210 5,317 Pottery - Plates of all kinds other 58 than of porcelain or china 68 - Tea or coffee cups and saucers 93 other than of porcelain or china 43 - Tea or coffee cups other than 25 of porcelain or china 20 - Tea or coffee saucers other than - of porcelain or china - Tea or coffee pots other than of 1 porcelain or china 4 - Bowl of size of less than 6" other 9 than of porcelain or china 10 - Bowl of size 6" and more other 37 than of porcelain or china 13 - Other ceramic tableware, 230 kitchenware 981 Subtotal 453 1,531 1,139 1,801 Total 10,732 13,674 5,349 7,118
Source: CBS/Data Consult
Every year, China is the largest supplier of ceramic tableware to Indonesia. In 1996, for example, China supplied Indonesia with 10,833 tons, which accounted for 79.2% of the latter's total ceramic tableware imports. The second largest supplier is Hongkong, which in most cases serves as a broker for Chinese ceramic tableware products. The volume of such imports from European countries like England has been relatively small but the value quite high. This is so because ceramic tableware products imported from European countries are not mass-produced; they are hand-made and have an artistic design.
Table - 8 Indonesia's 1996 ceramic tableware imports, by country of origin
Country of Volume Value origin (tons) (US$ '000) Porcelain: China 10,833 3,643 Hongkong 856 264 England 260 1,082 Singapore 77 63 Japan 50 79 Thailand 14 98 Others 53 88 Subtotal 12,143 5,317 Pottery: China 980 734 Australia 463 942 Hongkong 36 14 Netherlands 17 11 Singapore 15 20 Others 20 80 Subtotal 1,531 1,801 Total 13,674 7,118
Source: CBS/Data Consult
For the past five years (1992-1996), the volume of Indonesia's ceramic tableware exports showed the tendency to be stagnant, with an average annual growth rate of only 3.2%. In 1996, it even declined by 7.1% from 22,715 tons in 1995 to 21,899 tons. However, the value of such exports rose by 4.1% from US$ 54.13 million to US$ 56.37 million.
Compared to imports, ceramic tableware exports have been high, more so in terms of value. The value of such exports has been high because Indonesia exports mostly high-quality ceramic tableware products to Asia, Europe, Africa, Australia, and the United States. On the other hand, Indonesia's ceramic tableware imports are mostly "cheap" products from China.
Indonesian ceramic tableware products have high competitive power on the international market because the producers which export them are companies operating under the PMA scheme in which the foreign partners have not only the necessary technology to produce such products but also access to the global market. They are, for example, "Sango" and "Han Kook," two brand names that are already popular on the international market.
One exporter-producer, namely PT Kedaung Oriental Porcelain (KOPIN), exports its products using a local brand name, Kopin. Initially, the company had difficulties penetrating the international market due to the local brand name it uses. However, thanks to its agressive promotional campaigns and to its establishment of marketing offices in several countries, PT KOPIN has managed to export some 70% of its output.
Table - 9 Indonesia's ceramic tableware exports, by type 1992 - 1996
Type of product 1992 1993 1994 Porcelain : - Plates of all kinds of 980 342 275 porcelain or china 1,011 305 309 - Tea or Coffee cups and saucers 384 69 49 of porcelain or china 561 95 77 - Tea or coffee cups of 1,293 966 799 porcelain or china 20,566 1,669 1,668 - Tea or coffee saucers of 23 8 - porcelain or china 43 13 - Tea or coffee pots of 44 13 29 porcelain or china 118 63 42 - Bowl of size of less than 1 1 15 6" of porcelain or china 5 7 3 - Bowl of size 6" & more of 284 28 59 porcelain or china 402 80 54 - Other tableware, kitchenware 1,601 1,883 4,594 of porcelain or china 4,791 7,891 13,669 Subtotal 4,610 3,310 5,765 27,497 10,123 15,821 Pottery : - Plates of all kinds other 3,330 4,789 3,077 than of porcelain or china 2,407 2,307 1,540 - Tea or coffee cups and saucers 99 733 1,090 other than of porcelain or china 222 840 1,698 - Tea or coffee cups other than 225 568 949 of porcelain or china 369 1,076 2,072 - Tea or coffee saucers other 16 - 5 than of porcelain or china 21 2 - Tea or coffee pots other than 1 11 12 of porcelain or china 3 20 189 - Bowls, size of less than 6-other 6 20 24 than of porcelain or china 15 42 40 - Bowl of size 6" and more other 405 535 96 than of porcelain or china 322 239 73 - Other ceramic tableware, 10,599 10,155 10,235 kitchenware 14,748 16,837 16,778 Subtotal 14,681 16,811 15,488 18,107 21,361 22,392 Total 19,291 20,121 21,253 45,604 31,484 38,213 Tons US$ '000 of product 1995 1996 Porcelain : - Plates of all kinds of 162 porcelain or china 295 - Tea or Coffee cups and saucers 89 of porcelain or china 148 - Tea or coffee cups of 587 porcelain or china 668 - Tea or coffee saucers of 2 porcelain or china 4 - Tea or coffee pots of 21 porcelain or china 37 - Bowl of size of less than 18 6" of porcelain or china 65 - Bowl of size 6" & more of 76 porcelain or china 134 - Other tableware, kitchenware 7,323 of porcelain or china 26,328 Subtotal 8,276 8,028 29,018 30,296 Pottery : - Plates of all kinds other 894 than of porcelain or china 799 - Tea or coffee cups and saucers 1.183 other than of porcelain or china 1.801 - Tea or coffee cups other than 760 of porcelain or china 1.712 - Tea or coffee saucers other 16 than of porcelain or china 22 - Tea or coffee pots other than 205 of porcelain or china 435 - Bowls, size of less than 6-other 3 than of porcelain or china 3 - Bowl of size 6" and more other 139 than of porcelain or china 98 - Other ceramic tableware, 11,439 kitchenware 20,242 Subtotal 14,439 13,071 25,112 26,073 Total 22,715 21,099 54,130 56,369
Source: CBS/Data Consult
So far, the largest buyers of Indonesian ceramic tableware have been advanced countries. In 1996, for example, the United States imported 9,732 tons, which accounted for 74.5% of Indonesia's total ceramic tableware exports for the same year, France 1,455 tons (11.1% of the total), and Australia 1,253 tons (9.6% of the total).
Europe currently imposes antidumping import duties on ceramic tableware products from China. Therefore, China supplies its ceramic tableware products in large quantities to the United States, which does not impose such import duties. According to an export marketing executive of PT KOPIN, Europe is a potential market for Indonesian ceramic tableware products becauset it is no longer efficient to produce such products on a mass-production basis in this region. In Europe, many ceramic tableware producers have switched to exclusive products with some artistic value that are expensive.
Table - 10 Indonesia's 1996 ceramic tableware exports, by country of destination
Country of Volume Value destination (tons) (US$ '000) Porcelain: USA 2,636 11,873 France 1,166 3,020 Italy 552 3,584 Netherlands 462 1,319 Canada 400 1,279 Germany 322 908 Australia 310 1,078 Japan 249 1,108 Others 1,931 6,127 Subtotal 8.028 30.296 Pottery: USA 7,096 14,288 England 1,244 2,442 Australia 943 1,967 Netherlands 408 540 Italy 312 858 France 289 543 Canada 282 535 Japan 272 661 Pakistan 216 559 Others 2,037 3,680 Subtotal 13,071 26,073 Total 21,099 56,369
Source: CBS/Dam Consult
Consumption up 11.7% annually
Figures on the domestic consumption of ceramic tableware can be obtained using the following formula: consumption = production + imports - exports. With the assumption that the domestic supply Of ceramic tableware for a certain year is totally consumed in the same year, the annual growth in the domestic consumption of such products for the past five years (1992-1996) can be estimated at an average 11.7%. The highest rates of such growth were achieved in 1995 (19.2%) and 1996 (17.4%). In 1995, the domestic consumption of ceramic tableware rose to 398 million pieces from 313.9 million in 1994. In 1996, it increased to 467.1 million pieces.
One major reason for the growth in the domestic consumption of ceramic tableware is an increase in the population of middle-upper income people in urban areas. These people buy ceramic, tableware products both for practical purposes and for collection purposes. Another reason is the continued hike in the population of non-star rated hotels, star-rated hotels, and medium- and large-size restaurants.
In 1995 and 1996, the growth in the domestic consumption of ceramic tableware was especially rapid because there was a high increase in domestic supply due to the commencement of operations of several new and expansion projects.
Table - 11 Indonesia's ceramic tableware consumption, 1992 - 1996
Year Consumption Growth ('000 pcs) (%) 1992 302,528 - 1993 313,882 3.8 1994 333,845 6.4 1995 397,959 19.2 1996 467,081 17.4
Source: Data Consult
Ceramic tableware users
In addition to glassware, a growing number of middle-upper income households have started to use ceramic tableware products as household appliances. These products include coffee/tea sets, dinner sets, and coffee mugs. However, they are mostly of medium and low quality.
Ceramic tableware products for home use started to be produced in Indonesia by PT IKI Mutiara in 1974. Three years later, PT Crown Porselain Ltd. and PT Lucky Indah Keramik started to do the same. Nowadays, ceramic tableware of low quality is widely consumed by ordinary people, including food vendors. Among the more famous brands of such ceramic tableware is Lucky.
Households seldom go directly to ceramic tableware producers for purchases because they usually require such products in small quantities. In rare cases, households of upper-income levels buy ceramic plates in considerable quantities directly from the producers because the want to give them away as gifts on wedding and other occasions. Until very recently, ceramic tableware products of medium quality were widely used as gifts for presenting to wedding couples.
Besides the household sector, another user of ceramic tableware is the hotelry sector. Hotels require ceramic tableware products of high/superior quality in considerable quantities, and this is good for producers. Generally, star-rated hotels in Indonesia use such products for purposes related to room service, dinning rooms, and banquet needs.
Unlike households, which purchase such products from retailers, hotels generally procure ceramic tableware directly from certain producers on a contract basis so that it can be easy for them to replace certain parts of their ceramic tableware supply due to losses or damage.
The demand of hotels for ceramic tableware was not met by local producers until 1980, when PT Sango Ceramic Indonesia came into operations, followed by PT Indo Keramika Widya (1981), and PT Sari Koyotoki International (PT Sad Keramindo Indah). In the 1990's, PT Han Kook Ceramic Indonesia and PT Haeng Nam Sejahtera came into operations under the PMA scheme, and they also supply their products to hotels. Subsequently, PT Kedaung Oriental Porcelain--which is oriented to the middle-income market segment and to the export market--came into operations and supply its ceramic tableware products to the hotelry sector as well.
Despite the lact of accurate statistic data, restaurants certainly make up a considerable market segment for ceramic tableware as can be seen from the fact that the population of large restaurants in urban areas is high. In Data Consult's observations, the restaurants which use ceramic tableware to serve food and drinks are mostly those of large size (with 100 seat) and of medium size (with 50 seats).
Many franchised restaurants in provincial capitals such as Kentucky Fried Chicken, Texas Fried Chicken, California Fried Chicken, and Pizza Hut as well as restaurants that are part of large hotels use ceramic tableware products. In addition, a considerable number of foreign restaurants (Korean, Japanese, Chinese, and western) in Indonesia also use ceramic tableware products of high quality. These restaurants use ceramic tableware products of the same quality as those used by hotels.
Besides hotels and restaurants, another business which also uses ceramic tableware is catering services, which supply food/drinks to airline, mining, and other companies. In addition, ceramic tableware products are also used by medium-scale private companies for purposes related to promotional campaigns, office decoration, and other needs. The ceramic tableware products used by such companies for promotional purposes vary in type and quality according to the products that are being promoted and to the target audiences.
Ceramic tableware for home use is readily available at general retailers, which also sell other household appliances, and at supermarkets. Such retailers and supermarkets sell other household appliances such as kitchen utensils, brooms, and pails in addition to ceramic tableware.
Ceramic tableware products for home use are readily available in major cities and in provincial capitals. In suburban areas and in small towns, they are not easily available because people in these areas prefer to use glassware, which is more affordable to them than ceramic products.
Generally, the distribution system for ceramic tableware is the same as that for ceramic tile products: it involves both direct and indirect sale approaches. The direct sale approach is used when the producer deals with large-scale users such as hotels and restaurants. The indirect sale approach is used to serve general consumers (i.e. households), which purchase such products in small/medium quantities.
The indirect sales approach involves the use of distributors. PT Lucky Indah Keramik, for example, supplies its products through a distributor called Mediana & Co. to the traditional markets, supermarkets, and retailers/stores. The company deals with large-scale buyers (i.e. hotels and restaurants) both through its distributor and directly. Those which purchase between 1,000-3,000 pieces can determine the color of the products and have their own company logos attached to the products.
PT Sango Ceramic Indonesia sells its products directly to consumers, both institutions and individuals. The company also serves orders for minimum quantifies which it has determined. In addition, it also serves retail purchases through its showrooms, head office, and representative offices (in Jakarta, Bandung, and Semarang). Sango tableware products are also available at supermarkets and retail stores. As for hotels, they can purchase ceramic tableware products directly from the company or through its distributor, namely PT Keisi Indonesia (Toko Tian Liong), which also serves as a distributor for other ceramic tableware brands and other hotel appliances.
PT Sari Koyotoki International and PT Indo Keramik Inti Widya supply their products through general distributors, which also distribute other brands such as Sango, Queen, Indo Keramik, Crown, and Lucky. In their export marketing, these companies supply their products through trading companies as well as directly to importers.
Meanwhile, the marketing of PT Kedaung Oriental Porcelain Industry's products is handled by the company's distributor, namely PT Kedaung Trading Division. Besides handling the distribution of ceramic tableware, PT Kedaung Trading Division also distributes all the products produced by the Kedaung Group's other factories.
Generally, the retail prices of ceramic tableware products vary from one producer to another according to quality and design. The retail pricing of such products takes into account the following profit margins for the following parties: 10-20% for distributors/agents; 15-20% for retailers/stores/supermarkets. In addition, it also takes into account a 10% VAT. This means that consumers generally pay 51.8% over the base price of such products as determined by the producer.
Table - 12 Formulation of retail price of ceramic tableware
Description - Base price (producer-level) 100% - Distributor margin 15% - Agent/retailer margin (20% x 15) 23% - VAT (10% x 138) 13.8% Retail price (consumer-level) 151.8%
Source: Data Consult
Prospects and conclusions
Given that there are only one new project and one expansion project in the ceramic tableware industry until the year 2000, the growth in the production capacity of this industry is likely to be slow. In the year 2000, the production capacity of this industry will reach 650 million pieces/annum. Meanwhile, the domestic consumption of ceramic tableware products is not likely to grow rapidly either. It can be projected to grow at only 5% annually until the year 2000. Thus, in 2000, the domestic consumption of such products will reach 540 million piece.
If all the domestic demand for ceramic tableware products is locally met, the rate of production capacity utilization with this industry will reach 83% in the year 2001. Ceramic tableware producers will seek to maintain their shares of the domestic market. The problem is that the prices of such products on the domestic market are relatively low due to tight competition. Furthermore, domestic consumers mostly buy ceramic tableware products of medium/low quality. Thus, it is difficult for producers to determine high profit margins.
In fact, Indonesian ceramic tableware products still have good export opportunities, given the fact that they--especially those of medium/low quality--are quite competitive in terms of price and quality to Chinese products. In advanced countries such as those in Europe and the united States, Indonesia ceramic tableware products are quite competitive.
Besides advanced countries, Indonesia also has good opportunities to export its ceramic tableware to developing countries in Asia and Africa, given the fact that efforts to export such products to these countries have not been made to the optimum. Furthermore, Indonesia also good opportunities to export such products to Latin America and South Africa. This is so because Indonesian glassware products are already known for their competitive quality and price in Latin America, especially in Peru, Chile, and Argentina, as well as in South Africa.
One problem with exporting ceramic tableware products to these regions is that Indonesian producers still do not have access to these markets. Most of them are still oriented to the domestic market. Therefore, it is necessary for them to change their market orientation. The Kedaung Group s success in increasing its ceramic tableware exports is attributable to its efforts at establishing an export marketing network by opening representative offices in countries with a good potential to import such products. Earlier, the Kedaung Group also managed to increase its glassware exports by making similar efforts. Such efforts can also be made by other ceramic tableware producers.
Table - 13 Projections of Indonesia's ceramic tableware production capacity and consumption, 1997 - 2001
Year Production Consumption capacity 1997 630 467 1998 630 490 1999 640 514 2000 650 540 2001 650 567
Source: Data Consult