Beer firms eye Muslim consumers

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.