Beer firms eye Muslim consumers
Tony Hotland, Jakarta
The fact that Indonesia has the largest Muslim population in the world was not, and perhaps is still not, a major deterrent for alcoholic drink producers here in marketing their products.
But add that to excessive taxes and slipping consumer purchasing power, and the only logical thing left for them to do is to turn to producing nonalcoholic beverages instead.
The recent launch of nonalcoholic malt drink Bintang Zero by PT Multi Bintang Indonesia is fresh evidence of the decline in the market of beer and other alcoholic drinks here.
"We're used to the fact that we have many Muslims here. But the high tax and excise rates, combined with the slow economic recovery, have made people focus more on their basic needs and beer is not one of them. We've got to improvise," Bintang president director Mike Egeler told The Jakarta Post recently.
Bintang launched in April the nonalcoholic Fit&Fun to complement its nonalcoholic Green Sands and its main product, the alcoholic Bir Bintang. Bintang also imports Heineken Beer.
Egeler shared that the various taxes imposed on Bir Bintang accounted for 53 percent of the beer's price.
Alcoholic drinks are subject to excise, value-added tax, luxury sales tax, income tax, and import duty (for imported ones).
The luxury sales tax is 40 percent of the retail price for drinks with an alcohol content below 26 percent and 75 percent for those with an alcohol content over 26 percent.
The excise rates range from Rp 1,300 (14 U.S. cents) for drinks with an alcohol content below 1 percent to Rp 50,000 for imported drinks with an alcohol content of more than 20 percent.
Meanwhile, consumer spending power has dropped due to the financial crisis in the late 1990s, and the effect still prevails.
The alcoholic drink industry is also under strict control and limitations since such drinks are considered haram or forbidden under the Islamic teaching.
"The activities of fanatic religious and social groups, who frequently come and wreck havoc in places that sell such drinks, put us in a negative light," said chairman of the Association of Alcoholic Drink Producers Hatta Arpan.
It is not surprising given the above conditions that there has been a gradual decline in the beer market and decreasing consumption.
"Indonesia's current per capita beer consumption is very low at around 0.6 liters per year. Even Malaysia's is about 20 liters despite the fact that it's also a Muslim country. The taxes there are more affordable than here," said Egeler.
He added that beer production had gone down 21 percent from 2000 to 2003 to less than 1.2 million hectaliters.
PT Delta Djakarta corporate secretary Willy A. Adipradhana said beer companies should take the initiative by diversifying products and expanding markets.
"We're eyeing the eastern parts of Indonesia as there are many expatriates there who work in mining companies, for instance. We've also turned to nonalcoholic drinks and plan to create more flavors for those drinks," Willy said.
Delta sells Anker Bir, Anker Stout, Carlsberg Beer, San Miguel Beer, and the nonalcoholic Sodaku and Soda Ice.
Both Bintang and Delta, the country's two largest beer producers, nevertheless still have faith that they will continue producing beer and other alcoholic drinks.
"Things will be better in the long term as our economic condition is improving and the purchasing power will be restored," said Egeler.
After all, a better economy and spending power are all they can bank on since they definitely cannot change religious teachings nor meddle with the government's regulation on taxes.