1. Coffee processing industry fails to attract new investors despite potential exports. (Industry).
PT Asal Jaya in Malang, East Java, planned to invest Rp2.98 billion in a coffee processing factory with an annual capacity of 36,000 tons. The company hopes to start operation in February next year. PT Benteng Mas Sejahtera in Lampung wanted to build a new factory to produce powdered coffee with annual capacity of 12,000 tons. It hopes to complete its project in November in 2003.
New investors have been discouraged from venturing in coffee processing industry as the domestic market is already dominated by large producers Some small and medium scale producers have even been forced to stop operation because of the tight market competition.
The role of small and medium enterprises, however, remain substantial in the industry as they could developed strong market foothold in certain areas. They manage to survive as they could offer a lower price to maintain their market segments. Small producers produce powdered coffee in simple packaging enabling them to offer cheaper prices. Medium scale producers operate in wider areas in the regency level.
Large scale producers also have their own market segments and loyal consumers such as Tugu Luwak which has been well known in Central Java. It once dominated 50% of the market in Semarang. Central Java also has Kapal Api, which has gained wide popularity not only in that province but also in Jakarta. Other brands produced in Central Java include Glatik, Singa Tugu Buaya, Kapal Tanker and Kopi Alami. In West Java there are Torabika, Gunung Salak and ABC and also Kapal Api.
Kapal Api the largest
In 2001, no less than 90 producers of powdered coffee operating in the country with more than 100 brands. The number includes small or cottage industries.
PT Santos Jaya Abadi with its Kapal Api brand is one of large scale producers of powdered coffee. The company, which is based in Surabaya has an annual capacity of 19,650 tons. The company also produces other powdered coffee products with the brands of ABC, Santos, Bintang and coffee beans ready for grinding with a brand name of Exelco.
The company started business as a cottage industry in 1927 by Goesoe Loet. In 1979 the owner of the cottage industry established PT Santos Abadi to produce powdered coffee with the brand of Kapal Api and Kapten. The business flourished and it produced ABC and Exelco. In 1993, the company introduced a new product dip coffee with a brand name of Santos.
Kapal Api major competitors in the market are Nescafe, Torabika, Indocafe and Ayam Merak. In 1998, when the price of coffee shot up 300%, Kapal Api price rose 100% to Rp 120,000 per box containing 50 sachets of 65 gram. Meanwhile, Ayam Merak put up a price of only Rp 75,000 per box of equal size. The effect of the cheaper price offered by Ayam Merak was felt by Kapal Api forcing to lower its price to Rp 89,000 per box to maintain its market domination.
The success of Kapal Api, Torabika and Nescafe in developing strong market foothold is attributable to their ability to suit the taste of consumers in the regions. They spent quite a long time to make themselves accepted in the market. Now Kapal Api is almost unchallenged in various regions not only in Java, but also in Sumatra and Kalimantan.
Specifications of powdered coffee
The mushrooming producers of powdered coffee lately requires the revision of the National Industrial Standard (SNI) to protect consumers and producers that maintain good quality for exports.
Exports of powdered coffee
In addition to coffee beans, Indonesia exports in small quantity powdered coffee. In 2000, exports of powdered coffee totaled 1,601 tons valued at US$ 6.67 million and exports of coffee beans (robusta and arabica) totaled 335,725 tons valued at US$ 310.3 million).
Powdered coffee, however, has a much higher added value. In 2000, the price of powdered coffee averaged US$ 4,168.64 per tons as against US$ 939.76 for coffee bean.
Foreign exchange earning from coffee exports down
Coffee export earning rose in the first year of the crisis, but lately the price opf that commodity dropped in international market resulting in a decline in the export earning. In 2000, exports were valued only at US$ 317 million down from US$ 584.24 million.
Japan was the largest buyer of coffee from Indonesia in 2000. Exports of robusta to that country totaled 59,241 tons valued at US$ 57.87 million, followed by the United states to which exports totaled 23,137 tons valued at US$ 27.29 million and Poland 24,596 tons valued at US$ 15.49 million. Arabica exports were mainly to the United States to which exports totaled 9,872 tons valued at US$ 23.35 million in the same year.
Quality and Price Low
Last year Indonesia rejected call from other coffee producing countries to destroy 5% of its low quality coffee in a bid to lift the price. AEKI said Indonesia and Vietnam would be the only countries to suffer by destroying part of their coffee production and robusta is lower in quality than arabica. The destruction call was proposed after the 20% retention scheme failed as not all of the ACPC members complied with the scheme.
Indonesian coffee farmers will be facing new problem after the International Coffee Organization (ICO) announced a new standardization for coffee quality. An ICO session in London recently approved a resolution No. 407 on Quality Improvement Program to start October 1, 2002.
Under the program of standard quality, defect may not be found in more than 86 per 300 grams of sample of arabica coffee based on the quality standard of Brazil/New York and 150 per 300 grams of robusta based on the quality standards of Indonesia/Vietnam. In addition water content may not be more than 12.5% based on the ISO 6673 method.
Meanwhile, Indonesian producers said they are ready to withhold up to 100,000 tons of their coffee beans from going to international market under a retention scheme with other robusta producers Vietnam and India. Vietnam has pledged to withhold up to 300,000 tons. India has not announced its position in the program.
The Indonesian retention plan will cost around Rp 300 billion and the government said it will seek fund from three banks--Bank Ekspor Indonesia, Bank Rakyat Indonesia and Bank Central Asia--to finance the plan.
Industry and Trade Minister Rini MS Soewandi said a tripartite cooperation such as the one between three largest natural rubber producers--Thailand, Indonesia and Malaysia--should be introduced between the three largest robusta producers. Rini said through cooperation between the three robusta producers the price of that commodity could be pushed up to US$ 1 per kg next year from around US$ 0.42 now.
Table--1 New investment in coffee processing industry, 2000-June 2002 Company Status Location Capacity (Tons/year) PT Asal Jaya PMDN Malang, 36,000 East Java PT Benteng Mas PMDN Lampung 12,000 Sejahtera Company Investment Initial of (Rp'mill.) operation PT Asal Jaya 2,975 Feb'2003 PT Benteng Mas 18,035 Nov'2003 Sejahtera Source: Investment Coordinating Board/Data Consult Table--2 Several producers of powdered coffee and capacity, 2002 Company Location Capacity of plant (Tons/year) PT Santos Jaya Abadi Surabaya 19,650 PT Ayam Merak Jakarta 10,100 PT Torabika Eka Semesta Tangerang 7,300 PT Artha Nugraha Mandiri Semarang 3,000 PT Megah Agung Surya Palembang 3,000 PT Indonesia Brazil Coffe Tanserang 2,400 PT Rapih Selaras Tangerang 1,800 PT Cita Rasa Kopi Indonesia Medan 1,500 CV Netto AAA Jambi 1,500 PT Jeng Gwan Surabaya 1,500 PT Tri Manggola Dento Sidoarjo 1,500 PT Indra Coffe Surabaya 1,000 PT Gunung Mas Jakarta 750 Company Brand PT Santos Jaya Abadi ABC, Santos, Exelco, Kapal Api, Bintang PT Ayam Merak Ayam Merak PT Torabika Eka Semesta Torabika PT Artha Nugraha Mandiri Tugu Lawak, Cafela PT Megah Agung Surya B8B, Bari PT Indonesia Brazil Coffe Bali Dancer PT Rapih Selaras Samba PT Cita Rasa Kopi Indonesia Salam CV Netto AAA Nefo, AAA PT Jeng Gwan Singa PT Tri Manggola Dento Glatik, Surya PT Indra Coffe Tugu Buaya, Rasa Sayang, Kapal Tanker PT Gunung Mas Gunung Salak Source: Data Consult Table--3 Quality standards of powdered coffee Based on SII 0008-80-94 and SNI 01-3542-1994 Test criteria Unit Standards I II Description: - Smell -- Normal Normal - Taste -- Normal Normal - Color -- Normal Normal Water: % b/b Max. 7 Max. 7 Dust: % b/b Max. 5 Max. 5 Dust alkali level: mix N.NaOH/100 g 5 - 67 Min. 35 Coffee essence: % b/b 20 - 36 Max. 60 Metal pollution: - Plumbum (Pb) mg/kg Max. 2,0 Max. 2,0 - Copper (Cu) mg/kg Max. 30,0 Max. 30,0 - Zinc (Zn) mg/kg Max. 40,0 Max.. 40,0 - Tin mg/kg Max. 40,0 Max. 40,0 (250,0)*) (250,0)*) - Quicksilver (Hg) mg/kg Max. 0,03 Max. 0,03 Arsenic (AS) pollution: mg/kg Max. 1,0 Max. (0,03) Microbe pollution: - Total plate figure Colony/gram Max. 106 Max. 106 - Mildew Colony/gram Max. 104 Max. 104 *) To be packed in tin can Source: Data Consult Table--4 Exports of powdered coffee, 1996-2001 Year Volume Value (tons) (US$'000) 1996 131 356 1997 157 627 1998 646 3,186 1999 1,715 7,686 2000 1,601 6,674 2001 -- -- Source: CBS/Data Consult Table--5 Coffee exports, 1996-2001 Tons (US$'000) Year Arabica Robusta Other Total Growth (%) 1996 10,803 331,517 24,282 366,602 59.3 28,280 512,479 54,509 595,268 -0.2 1997 18,547 285,794 8,777 313,118 -14.6 62,645 431,768 16,907 511,320 -14.1 1998 21,957 329,567 6,026 357,550 14.2 59,988 514,419 9,836 584,243 14.3 1999 23,523 320,916 8,323 352,762 -1.3 52,335 396,569 8,128 457,032 -21.8 2000 27,278 307,061 2,987 337,326 -4.4 58,468 249,229 9,309 317,006 -30.6 2001 -- -- -- -- -- Source: CBS/Data Consult
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|Comment:||1. Coffee processing industry fails to attract new investors despite potential exports. (Industry).|
|Publication:||Indonesian Commercial Newsletter|
|Date:||Aug 13, 2002|
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