Market of supplement drinks gradually reviving. (Industry Profile).
Amid the intensive marketing drive for bottled supplement drinks, PT Bintang Toejoe, a 40-year old pharmaceutical company, produced a supplement drink with more or less the same composition of content but in different form--in power packed in sachets.
The product popularly known as Extra Joss is designed for middle to low segments of the market, which is previously seen as the monopoly of traditional herbal drug. Extra Joss, however, proved that it could established a strong foothold for its self in the market segment.
If Lipovitan as the pioneer for supplement drink industry in the country needed years since 1985 to make itself known in the market, and Kratingdaeng has to spend billions of rupiahs in advertisement, Extra Joss needed only one year to secure a comfortable place on the domestic market although also with massive advertisements. Inn 1998, Bintang Toejoe spent Rp 15.1 billion on mass media advertisements and the amount rose to Rp 34.6 billion in 2000..
The magnitude of the advertisement cost for Extra Joss was proportional with the total amount of Rp 128.45 billion spent on the advertisement on supplement drinks in 2000. Assuming that advertisement spending is 10% of production cost, the turnover of supplement drink in the country was no less than Rp 1.4 trillion in the same year. For illustration, former distributor of Extra Joss PT Wicaksana Overseas International said in 2001 the turnover of Extra Joss averaged Rp 50 billion a month.
The crisis in 1998, however, spared no supplement drinks. A number of brands of supplement drink, which were quite aggressive before, could no longer finance expensive promotional campaigns. As a result many of them have almost disappeared from the market Though the people have not fully regained their buying power, demand for supplement drinks has increased steadily--from 38.9 million liters in 11998 to 84.3 million liters in 2001 or level with the demand in pre crisis year of 1997. The success of Extra Joss has inspired a number of companies to design product for the middle to low market segment to come face to face with Extra Joss.
Description of Product
The government through the directorate general of food and drug supervision (POM) of the health ministry has not made a definition of "health drink" or isotonic drinks or supplement drinks. A definition has been made only for bottled drinks (AMDK), soft drinks, lemon drinks, syrup and alcoholic drinks. Therefore unlike other types of drinks which have been given a definition, the SNI (Indonesian National Standard) for supplement drinks is not yet issued. However, what people see as isotonic drinks are supplement drinks or energy drink to keep the body fit.
In accordance with its label, or from the indications promoted by producers, supplement drinks are often called as energy drinks, as often said in the mass media. What makes this type of drink different from herbal drinks or vitality pill is the fact that herbal drinks are directly processed from local plants whereas the entire basic materials of supplement drinks are extracts imported from other countries. The difference between soft drinks is that soft drinks serve mainly to quench thirst and the taste. By using caffeine as a basic material, consumers will be addicted to isotonic drink that will eventually become a supplement drink taken routinely for the consumers.
Noteworthy about supplement drinks is that they are consumed before or when an activity is taking place such as when exercising or working hard. Traditional herbs both liquid and pills serve as a refresher by consumers after hard working or activities. Therefore, the consumers of isotonic drinks were mainly urban people, who need additional energy for exercise, hard work or routine work. Consuming isotonic drinks is easier as they do not need boiling and mixing such as with eggs and honey as is in the case of traditional herbal drinks. Herbal drinks or pills could not be used as substitute for isotonic drinks which also serve to quench thirst like other soft drinks.
Components of basic materials
The components of isotonic drinks are the same for those made available in powder packed in sachets or in the form of liquid. The main nutritious components are amino acid, essentials, vitamin, ginseng extract, citric acid, sugar and honey. The elements are to increase body vitality.
Isotonic drinks processed from skim milk such as Yakult are not intended mainly to increase energy, but more to give the bacterium of lactobacillus case shirota strain, which serves to improve digestion that will help increase body vitality.
Producers of isotonic drinks
Most players in isotonic drink industry are those having backgrounds in medical or pharmaceutical industry. Isotonic drink production facilities are mainly an expansion of pharmaceutical industry. Take for example PT Konimex Pharmaceutical Laboratories, a pharmaceutical company in Solo. The company started as a producer of Fit-Up energy drink in 150 ml bottle. The company was inspired by the success of Extra Joss.
Other companies operating in this business area include PT Otsuka Indonesia, PT Triyasa Nagamas Farma, PT Hexpharm Jaya, PT Saka Farma, PT Pradja Pharmaceutical Industri (Prafa), PT Tempo Scan Pacific, PT Schering Indonesia, PT Bintang Toedjoe. Companies which operate only in food and beverage industries are PT Ultrajaya Milk Ind., PT Polari Limunisa Intl., PT Ajinomoto Calpis Beverage Indonesia, PT Gatorade Indonesia, PT Pola Sehat Industri, etc.
Lipovitan of PT Taisho Indonesia as the pioneer in supplement drink industry needs years--since 1985--to promote itself and Kratingdaeng needed intensive advertising that cost billions of rupiahs to get a substantial market share. However, Extra Joss of Bintang Toedjoe needed only a year to make itself widely known among the country's to consumers. Extra Joss also need intensive advertising. In 1998 it spent Rp 15.1 billion on advertisement on the mass media especially on TV. Since then Extra Joss ranks among the 20 largest brands in advertisement spending.
Though not different much in composition, Extra Joss uses cheap packaging that is within the buying power of middle to low income people. Extra Joss, therefore, shot far ahead of its rival products. Extra Joss sales have shot up to Rp 50 billion a month from only Rp 150 in 1993.
Kratingdaeng, M-150 and Lipovitant producers began as distributors of the foreign products in the country. PT Asiasejahtera Perdana Pharmaceutical began in 1994 as a distributor of Kratingdaeng and Kratingdaeng-S of TC Pharmaceutical Industries C. Ltd of Thailand. Earlier it was distributed by PT Arta Boga Cemerlang of the ADA Group, which failed in marketing.
Kratingdaeng was first produced in the country in 1998 by PT Asia Health Energy Beverage in Sukabumi with an annual capacity of 36 million liters. The comopany is a joint venture between PT Asiasejahtera Perdana Pharmaceutical and Biopharm Holding Limited (Thailand). Kratingdaeng leads in the market of bottled health drinks despite close competition from Hemaviton energy drink of PT Tempo Scan Pacific and M-150 of OPT Asiatic Union Perdana.
PT Saka Farma IKN Semarang produces isotonic drinks with the brand name of Saka Ginseng. The pharmaceutical company also produces another brand of isotonic drink Sakatonik Liver.
PT Praja Pharin produces one with the brand of Bacchus-D from its factory in Citeureup, Bogor. It also produces vitamin Supertin.
PT Pola Sehat Industri, a subsidiary of Vitacharm, and PT Yakult Indonesia Persada of the Salim Group, produce isotonic drink from skim milk which is fermented. The skim milk is imported from Australia and active ingredient in the form of bacterium is imported from Japan.
PT Holdiko Perkasa, a holding company for Salim Group assets pledged to IBRA, last year sold PT Berdikari Sari Utama Flour Mills and PT Yakult Indonesia (YIP). YIP was sold to its foreign partner Yakult Hosha Co. Ltd from Japan at a price of Rp 60 billion. Yakult factory in Cicurug, West Java, uses the latest technology and it has an annual production capacity of 533 million bottles with an annual production averaging 160 million bottles.
Indonesia started introducing isotonic drinks in the domestic market in the 1980s, but they began to gain popularity only in the 1990s following intensive promotional drives and large imports. Isotonic drinks gained popularity also by growing health consciousness of the people and improved buying power and the welfare of the people.
The success of Extra Joss in marketing has inspired the production of other brands of isotonic drinks like Hemaviton Jreng of Tempo Scan Pacific in sachte and Fit-Up of Konimex and in pill, followed later by Prokasa produced by PT Mergana Setwika in Bekasi. In the past two years, BKPM has recorded no new investment in isotonic drink industry.
Production up again
Since the 1990s, demand for isotonic drink began to increase but the government has not officially recognized by the government, therefore, there is no official data of its production. Based on company data, however, ICN estimates that production of isotonic drinks totaled 31.6 million liters in 1996. The production dropped to an estimated 26.8 million liters in 1997, but rose again in the following years after the operation of Kratingdaeng factory. In 2000, the production reached an estimated 47.93 million liters as shown in the following table.
Advertisements and Market segments
The competition in the market of isotonic drinks is tight. Producers seek to grab a market share through intensive advertisements on newspapers or television. Some producers also rely on special counters in golf courses, hotels and sport clubs.
Pocari Sweat offered free samples. A survey shows that consumers began to like Pocari Sweat after drinking it at least four times. Pocario Sweat is produced by PT Otsuka Indonesia since 1990. In the first years of its operation, the company set aside 15% of its production for free sample. That system of promotion was once used by Gatorade and 100 Plus. Gatorade, which is imported from the United States, offered free sample since February 1995 to athletes mainly golfers. In the, United States and Australia, Gatorade (Quaker & Oats) has a 20% share of isotonic drink market. Gatorade teamed up with PT Ades Alfindo Putra Sejati, a bottled drinking water producer to build a factory in Cikarang, West Java. Now Gatorade has almost disappears from the market after it ceased using advertisement following the crisis.
Before, the crisis, Pocari Sweat and Gatorade were aggressive in marketing promotion. Now Gatorade has disappeared. Pocari Sweat still managed to continue and still uses advertisement on television although not as aggressive as Ekstra Joss, Kratingdaeng and M-150. Lately Fit-Up tablet and Hemaviton Jreng in sachet are more aggressive in advertising themselves to follow Ekstra Joss.
With the promotion drives are similarly intensive price becomes more determinant in the competition in addition to availability or distribution systems. The fact that Ekstra Joss is much cheaper as it uses simple packaging system in sachet makes it more competitive in the middle to low class market segments.
Based on data from P3I (Media Scene) the budget for advertisement of isotonic drinks has increased rapidly from year to year, up 25% annually from Rp 63.4 billion in 1996 to Rp 128.5 billion in 2000 or the 15th largest by products.
Extra Joss has led from the beginning in the middle to low class market segments. Ekstra Joss is highly competitive in price as it uses cheap packaging. In the peak of crisis, the prices of other isotonic drinks in bottle averaged Rp 1,750 per bottle as against Ekstra Joss's price of only Rp 400-Rp 500 per unit. The quality of Ekstra Joss and bottled isotonic drinks is equal but Ekstra Joss could offers a much lower price as it is packed in sachet. Ekstra Joss needed only a year to make itself popular. Lipovitan as the pioneer in isotonic drink industry needed years.
The success of Ekstra Joss is also attributable to aggressive marketing with intensive advertisement. In 1998, its producer Bintang Toejoe spent Rp15.1 billion on its advertisements and in 2000, the figure shot up to Rp34.6 billion placing its advertisement the largest in value after Shampoo Clear Anti Ketombe, Jarum, Super, Pepsodent, Giv, Daia, Nuvo and Sunsilk.
Until 1997, supplement drinks in the country were dominated by import products. In 1997 imports totaled 66,952 tons valued at US$ 39.73 million. But in January 1998, imports shrank following the production of Kratingdaeng and Kratingdaeng-S in the country by PT Asia Health Energy Beverages Co. Ltd.
In the first 11 months of 2001, imports of isotonic drinks totaled 24,020 tons valued at US$ 10.17 million. The rupiah stability makes imported products like M-150 from Thailand more competitive facing locally produced brands like Kratingdaeng and Lipovitan. Won Ki San from South Korea, however, and Korean Ginseng are produced from high market segments with prices at Rp 13,150 and Rp 4,850 per bottle respectively.
Thailand the largest supplier
Indonesia imports supplement drinks from various countries. The largest supplier is Thailand as shown in the following table.
The growing demand on the domestic market encouraged producers to increase sales on the domestic market resulting in a decline in exports. In 1997 exports totaled 19,906 tons valued at US$ 1.99 million, but in the first 11 months of 2001, exports totaled only 8,14 tons valued at US$ 4.63 million.
The large exports in 1997 were boosted by the soaring value of the U.S. dollar against rupiah. Exports, therefore, were more profitable and attractive and Indonesian products were highly competitive in price.
Compared with the crisis peak year of 1998, the prices of supplement drinks at present are stable. In 1998, the price of Kratingdaeng surged twice higher from Rp 1,800 in 1997 to Rp 3,500 to Rp 4,000 per bottle. Now the price of Kratingdaeng in supermarkets averages Rp 2,400 and Rp 2,500 to Rp 3,000 in other retail shops. The prices of Hemaviton, Lipovitan and M-150 were not far different from that of Kratingdaeng.
Producers reduce the number of sachets of supplement drink in a box. In 1997, a biox contained 6 sachets with a total price of Rp 3,330. Now the price of a box was around Rp 3,600 but the number of sachet was reduced to 5 to prevent from having to raise the price too high. In shopping centers and small shops Extra Joss is sold at Rp 800 to Rp 11,000 per sachet.
The prices set by Extra Joss are not far different from the prices set by Hemaviton or Fit-Up. The potential market, so far dominated by Extra Joss, is now a target by Konimex and Tempo Scan Pacific as shown by the intensive advertisements of Hemaviton Jreng and Fit Up for the middle to low market segments, which have been long dominated by traditional herbal drinks, both in sachet or in pills such as Pil Kita and Strong Pass.
Apart from higher class mass media like television, magazines and radio, Fit UP also is seeking to utilize the promotion methods for the middle to low market segments such as through in-store promotion using flag chains in the comers of supermarket and mini markets and banners in public places such as railway stations in blue, red and yellow colors. The competition among the business players will be tighter as both FIT-Up sachets as well as those of Hemaviton Jreng are potential
Producers of supplement drinks generally handle the distribution of their products. Aware of the high profit gained by distributors, PT Bintang Toejoe has terminated its cooperation with its distributor PT Wicaksana Overseas International (Wico). Wico has filed a lawsuit against Bintang Toejoe for the termination of the cooperation although the contract already expired in February this year. Wico felt that it has contributed to expanding sales of Extra Joss. Around 2% of the sales of Extra Joss earned by Wico has been used to promote the brand.
The termination of the cooperation was seen by Wico as a breach of law as Bintang Toejoe is required to comply with the clean break provision as regulated in a decision of the trade and industry minister in 1982 on sole agency. Wico hopes to get a compensation form the termination.
With the termination of cooperation in the distribution of Extra Joss, Wico reduced its income target from Rp 2.2 trillion to Rp 1.6 trillion for 2001. Wico has handled the distribution of Extra Joss for 8 years when its turnout was only Rp 150 million per months until now the turnover has swelled to Rp 40 billion a month. Bintang Toejoe terminated the cooperation as it already established its own distributor.
Apart from the general system of distribution, PT Yakult Indonesia Persada, which handles the distribution of its product uses two systems of marketing--direct sales and Yakult lady system. Under direct sales system Yakult is sent directly to shops or supermarkets which make available refrigerators. Under Yakult lady system the product is sold by independent retailers.
ICN estimates that consumption of supplement drinks plunged to 38.9 million liters at the peak of the crisis in 1998 from 83.3 million liters annually in the previous years. The estimate was based on production plus import minus exports.
Extra Joss fared better during the height of the crisis as its production cost is much lower> its production cost is low and its selling price is cheaper as its does not use bottles. Kratingdaeng import was stop and it is produced domestically to cope with the problem in price.
Supplement drinks have been regularly consumed in the country, therefore they could weather the crisis until the market began to revive in 2001. In 2001 consumption of supplement drinks was estimated to reach 84.3 million liters. See the following table.
Prospects and Conclusion
It seems investors are not very interested in supplement drink industry. BKPM issued no new license for projects in supplement drink industry in the past two years. Investment has been made only by the old producers who seek to expand their capacity.
Currently beverage market in the country is 38% dominated by bottled drinking water, 40% by tea in boxes or bottle, 35% by soft drinks such as Coca Cola, Fanta, Sprite and 13% by RC Cola. The rest is split between other beverage products including supplement drinks. It is much different abroad. In South Korea and Japan, for example, supplement drinks dominate 45% of the beverage market. Therefore, the domestic market is still highly potential for supplement drink industry as the share of supplement drinks of the beverage drink market is expected to expand gradually.
Table-1 Description of supplement drink, soft drink and herbal products Type of Administration Function & Materials drink Taste Isotonic - Directly - Giving - Mostly drink consumed additional imported - Dissolved energy materials in cool water - Change (in sachet) energy - Not mixed additives material Soft drink - Directly - To quench - Partly consumed thirst imported - Dissolved in - More for cool water taste (in sachet) - Not additives Herbal drink - Swallowed - To refresh - Mostly (pill) body local mate- - Dissolved with rial from hot water - Tasting local - Needing additives bitter plants like egg, honey, therefore, rice beverage, additives rice wine are needed Source: Data Consult Table-2 Composition of supplement drinks, by brands and producers, June 2002 Producers Brands Content Composition Sachet: PT Bintang Extra Joss 4 gram. Taurine 1,000 mg Toedjoe Ginseng 20 mg Inositol 50 mg Nicotinamide 20 mg Vitamin B1 10 mg Vit.B1 Sod. Phospate 5 mg Anh. Caffeine 50 mg Honey, Sodium bicarbonat, Aspartame, Citric acid PT Tempo Hemaviton 4,5 Taurine 1,000 mg Scan gram Pacific Jreng Extract Ginseng 250 mg Nicotinamide 18 mg Royal Jelly 2 mg Asam citrat, Natrium bicarbonat, Fruit Punch flavour, Tartrazine, Aspartame, Natrium Siklamat PT Konimex Fit-Up 4 gram Taurine 1,000 mg Inositol 50 mg Nicotinamide 18 mg Vitamin B1 1.4 mg Vitamin B2 1.6 mg Vitamin B6 2 mg Kofeina 50 mg Na Carbonat, Aroma, Citrat acid, Fruktosa PT Margana Pro-Kasan Taurine 1,000 mg Satwika Ginseng 20 mg Ishi Inositol 50 mg Anh. Caffeina 50 mg Aspartame 120 mg Sod. Bhicarbont, Citric Acid Anh. Caffeine 50 mg Honey, Sodium bicarbonat, Aspartame, Citric acid Bottle: PT Taisho Lipovitan 150 ml Taurine 1,000 mg Indo- Vitamin B1 2.5 mg nesia Vitamin B2 2.8 mg Vitamin B6 3.3 mg Nicotinamide 20 mg Inositol 50 mg Anhydrous Caffeine 50 mg Royal Jelly 50 mg Extract Ginseng 10 mg liquid PT Asia Krating- 150 ml Taurine 1,000 mg Health daeng Caffeine 50 mg Energi Inosito 50 mg Beverages Nicotinamide 20 mg Pyridoxine HCL 5 mg (Vitamin B6) Dexpanthenol 5 mg Cynocobalamin 5 mcg (Vitamin B12) PT Asiatic M-150 150 ml Sucrose 25 gr Union Taurine 0.80 gr Perdana 1.3.7 Trimethyl 0.05 gr Xanthine Inositol 50 mg Niacinamide 20 mg Phantothenol 5 mg Pyridoxine HCL 5 mg Tatrazine 6 mg PT Triyasa Nagatan 125 ml Taurine 1,000 mg Nagamas Glucurono Lactone 400 mg Inositol 50 mg Lysine 50 mg Nicotinamide 20 m Pyridoxin HC1 2 mg Cyanocobolamin 3 mg PT Yakult Yakult 65 ml Sucrose, skim milk, Indonesia glukose, natural Persada taste, Baktery L. casei Shirota S. Source: Data Consult Table-3 Several producers of supplement drinks by brands and capacity Producers Location Status Capacity Brand Volume Producers Location Status Capacity Brand Volume (Liter) PT Bintang Surabaya PMDN 5,000 *) Extra Jos 4 gram Toejoe PT Konimex Solo PMDN 2,000 *) Fit-Up 4 gram sachet 10,000 Fit-Up 150 ml botol PT Tempo Scan Bekasi PMA 2,000 *) Hemaviton 4,5 gram Pacific sachet Hemaviton 150 ml botol PT Mergana Bekasi PMDN 500 *) Pro-Kasa 4 gram Satwika Aisthi PT Yakult Jakarta PMDN 34,645 Yakult 65 ml Indonesia PT Pola Sehat Jakarta PMDN 10,000 Vita- 100 ml Indonesia Charm PT Asia Sukabumi PMA 40,000 Krating- 150 ml Health daeng Energi Beverages PT Taisho Cianjur PMDN 4,000 Lipovitan 100 ml Indonesia PT Triyasa Jakarta PMDN 1,000 Nagatan 125 ml Nagamas Farma PT Budicita Jakarta PMDN 1,500 Panther 150 ml Multirasa (Sungai Budi) *) in tons Source: Data Consult Table 4 Production of supplement drinks, 1996-2000 Year Production Growth (Liters) (%) 1996 31,641,700 -- 1997 26,803,900 -15.3 1998 31,195,700 16.4 1999 33,412,200 7.1 2000 47,929,000 43.4 Average growth 12.9 Source: Data Consult Table-5 Advertisement spending for supplement drinks on mass media including television, 1996-2000 Year Ad. Spending Growth (Rp'million) (%) 1996 63,410 -- 1997 53,715 -15.3 1998 62,516 16.4 1999 66,958 7.1 2000 128,451 91.8 Average growth 25.0 Source: P3I/Data Consult Table-6 Advertisement spending for Ekstra Joss and total supplement drinks, 1998-2000 Ekstra Joss Rank in Ratio to Ratio to ads total isotonic Year (Rp'million) size ads drink ads (%) (%) 1998 15,099 15th 0.45 24.15 1999 18,989 16th 0.38 28.36 2000 34,621 8th 0.48 26.95 Source: P3I/Data Consult Table-7 Imports of supplement drinks, 1996-2001 Year Volume Value (tons) (US$'000) 1996 53,798 32,379 1997 66,952 39,725 1998 13,741 6,904 1999 20,396 10,133 2000 28,855 14,010 2001 *) 24,020 10,174 *) January-October Source: CBS/Data Consult Table-8 Imports of supplement drinks by countries of origin, 2000 Country of Volume Value origin (tons) (US$'000) Thailand 27,717 13,647 Singapore 902 188 Malaysia 117 29 China 80 25 Australia 19 30 other countries 20 91 Total 28,855 14,010 Source: CBS/Data Consult Table-9 Exports of supplement drinks, 1996-2001 Year Volume Value (tons) (US$'000) 1996 10,143 567 1997 19,906 1,990 1998 7,305 2,477 1999 6,480 4,107 2000 7,399 4,375 2001 *) 8,141 4,634 *) January-October; Source: CBS/Data Consult Table-10 Retail prices of supplement drinks and traditional herbal drinks, June 2000 Price Product/Brand (Rp) Supplement drink: Kratingdaeng 2,400/bottle Kratingdaeng Super 3,450/bottle M-150 2.450/bottle Hemaviton 2.450/botlle Hemaviton 800/sachet Lippovitan 2.500/bottle Fit-Up 2.500/bottle Fit-Up 800/sachet Extra Joss 800/sachet Prokasa 800/sachet Bugar 2.500/bottle Bee Jelly 3.350/bottle Wron Ki San 13.150/bottle Traditional herbal drinks: Jamu kumplit 1.500/sachet Strong Pass (tablet) 1.000/sachet Pil kita (tablet) 700/sachet Source: Data Consult Table-11 Consumption of supplement drinks 1997-2001 Year Consumption Growth ('000 Liter) (%) 1997 83,259 -- 1998 38,919 -53.3 1999 50,051 28.6 2000 73,676 47.2 2001 84,302 14.7 Average growth 9.3 Source: Data Consult Table-12 Projected consumption of supplement drinks 2002-2006 Year Production Growth ('000 Liter) (%) 2002 92,732,600 -- 2003 102,005,860 10.0 2004 112,206,446 10.0 2005 123,427,091 10.0 2006 135,769,800 10.0 Source: Data Consult
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|Comment:||Market of supplement drinks gradually reviving. (Industry Profile).|
|Publication:||Indonesian Commercial Newsletter|
|Article Type:||Statistical Data Included|
|Date:||Jul 9, 2002|
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