The impact of the global financial crisis served a big blow to the country’s manufacturing sector including instant noodles industry. The condition was worse for instant noodles industry with the soaring price of the basic material, wheat flour,   in 2008 .to follow the fuel price hike. 

In addition, the soaring prices of commodities in international market pushed up the inflation rate weakening the purchasing power of the general consumers. As a result demand for food products including instant noodles declined notably in the lower segment of the market. A number of producers of instant noodles for lower market segment were forced to suspend or stop operation with the rising price of wheat flour the main basic material of instant noodles.   

Demands for instant noodles from the middle and higher market segments also scarcely grew resulting in sharp competition. The competition, however, has remained fair and healthy. There is no more price war between the country’s largest instant noodles producers – the Indofood Group and the Wings Group like in previous three years. All producers decided to raise their selling prices to follow the rise in production cost. 

The sharp market competition  in the market of instant noodles, has resulted in cut in the market share of the Indofood Group  through  PT. Indofood Sukses Makmur with the  market control by the brand  of Indomie slashing to 77%  from  90%  earlier. This followed the appearance of a major competitor PT. Prakarsa Alam Segar (Group Wingsfood) with product of Mie Sedaap that has grabbed a substantila share  at the expense of the Indofood Group.  Currently Wingsfood  has a market share of 12%. 

In the past five years the market of instant noodles in the country has been virtually a battle ground for  Indomie (Indofood Group)  and  Mie Sedaap (Wings Group), both controlling 89% of the market in Indonesia. A number of other players split the remaining 11%. 

Despite the global crisis, the country’s instant noodles production grew 6.9%  to 1,544,072 tons  in 2008  from 1,443,686 tons  in the previous year . 

Instant noodles industry has a large market value in Indonesia, estimated at Rp15 trillion in 2008. The market value could still increase  as the  country with a 225 million population provide a highly potential market with a per capita consumption of only 63 packets a year – still below South Korea’s per capital consumption of 70 packets a year. 

The potential market in the country has attracted  investors other than the Indofood Group and  Wings Group. Other brands like Mie Gaga, Mie 100 (Mie Cepek) produced by PT. JakaranaTama, have begun to gain market foothold.  

Production capacity  up

In general, the country’s production capacity for  instant noodles in the past five years has recorded an average growth of  18.6% per year. A sharp growth of 72.6% was recorded in the production capacity to  1,691,588 tons  in 2006  from only 979,628 tons in 2004, boosted by a surge in demand for instant noodles in 2005. 

The increase in capacity  came with capacity expansion made by a number of producers  such as  the producers of ABC, Mie Gaga, Salam Mi, Alhami and  the Indofood Group  with its brands of Indomie, Supermie and  Sarimi. In  2006, there was no capacity expansion  as the existing production capacity was considered enough to meet the market demand. 

In 2007, the  production capacity grew 1%  only   to around 1,708,504 tons  per year. The  increase followed the expansion by PT. Indofood Sukses Makmur. Around Rp 400 billion of the capital spending of the company in 2007 was for expansion of production capacity by 1 billion packets of instant noodles. Until end of 2006, the company had an installed production capacity of 13.5 billion and it was raised to 14.5 billion packets in 2007. 

After the global economic slow down in mid 2008, a number of producers stopped production  especially among the producers for instant noodles for the plower segment of the market. The setback suffered by the small producers , however, had only minor   affect on  the country’s production of instant noodles. The country’s production capacity for instant noodles still grew though slightly by 0.9%  to 1,725,589 tons  per year.

          

The production capacity of instant noodles is expected  to increase in 2009 with the improving trend of the economic condition. The capacity is forecast to rise to 1,880,892 tons  in 2009  or an increase of 8.9% from last year.  The Indofood Group as the largest producer of instant noodles plans to expand its production capacity for which it plans to issue bonds.  

               

Producers and their production capacities  

Currently, the country has 20 large  and small producers of instant noodles, packed dry noodles already mixed with spices. Instant noodles industry has expanded in the country since 1969 with the pioneer PT Supermie Indonesia  which started operation that year. 

In 1979,  PT Sarimi Asli Jaya was established as a  food and  consumer product division of the Salim Group  in the wheat flour manufacturing sector.  The company which produced instant noodles with the  brand  of Sarimi made no much headway in the market in the first years of its operations. 

Instant noodles industry began rapid growth  after the Salim Group, with its subsidiary PT Sanmaru Food Manufacturers Co. Ltd. agreed on a swap share with the the Jangkar Sakti Group, the  producer of Indomie instant noodles brand. The brand began to attract  the market and gain popularity. After the take over of PT Supermi Indonesia in 1986, the Salim Group became to dominate the market of instant noodles in the country. 

A subsidiary of the Salim Group  established in 1990, PT Panganjaya Inti Kusuma, was renamed PT Indofood Sukses Makmur (ISM) early  February 1994. This company became the embryo of  the Indofood Group, which is a  sub-group of the  Salim Group.  ISM  was a meger of 18 companies  including those of the division of food manufacturing sector of the Salim Group and the subsidiaries of ISM. The 18 companies included six which  produced instant noodles PT Sanmaru, PT Pangan Jaya Abadi, PT Karyapangan Inti Sejati, PT Lambang Insan Makmur and  PT Sari¬mie Asli Jaya. A number of  instant noodles products of Indofood in the market include the brands Indomie, Supermie, Sarimie and  Pop Mie. 

In  1994,  ISM  launched initial public offering (IPO) offering 21 million units of  share valued at  Rp 21 billion that its issued capital grew from Rp742 billion  to  Rp 763 billion. The shareholders of ISM included Cab Holding Ltd (46.53%),  other (9.6%) and  the public  (43.78%)

Its installed production capacity  was 15 billion  packets  per year in 2008 , up  from 14.5 billion  packets  per year in the previous year. Its capacity utilization was 80%  in 2008.  ISM is the largest producer of instant noodlest in  Indonesia , even in Southeast Asia. 

Currently ISM  has 16 factories up from 14 units earlier located in Java, Sumatra, Kalimantan and  Sulawesi. The company also has production facilities for spices to support its instant noodles industry. The factories, all located in Java are run by PT. Indosentra Pelangi.   In addition, ISM also has two wheat procesisng factories in Jakarta and  Surabaya  - under PT ISM Bogasari and  1 factory to produce wheat flour sacks  in Citereup.

Currently, the  production capacity of Indofood with 8 units of installed production machines  is 3,500 carton boxes of  40 packets  per machine  per shift. A day is made in three shifts  that its daily production averages 3,360,000 packets.  

ISM’s net sales of  instant noodles in  2008 grew 29%  to  Rp 10.90 trillion  from Rp 8.44 trillion in the previous year. Its sales volume grew 7.3%  from 21.10 billion  packets  in  2007 to 12.98 billion  packets  in 2008.  The company exports around 2% of its instant noodles production to more than 50 countries in the world. 

PT. Nissin Mas is a foreign investment (PMA) company  established by Roda Mas and  Nissin Food Product Co. Ltd. of Japan  in  1992  with a   capacity  16,000 tons  per year and  an  investment of  US$ 10 million.  Nissin is one of the largest producers of instant noodles  in Japan.  Nissin Food of Japan is the first in the world producing instant noodles product of  cup noodles in  1971. Roda Mas is known more as a producer of sheet glass. 

PT. Nissin Mas made a new big step by producing instant noodles in bowl or  bowl noodles with the brand of  "Noodles". Noodles is also served as  one touch cook¬ing, that consumers do not need to open the sack of spices as the spices are already mixed ready for consumption. In cup noodles market, Nissin Mas competed against  ISM  with its  product of  Pop Mie. 

In July, 1996,  ISM formed a strategic alliance with Nissin Food Product Co. Ltd., the largest producer of  instant noodles in Japan and Nissho Iwai Corporation, a leading trading company in Japan. 

The three companies strengthened PT Nissin Mas in capital with Indofood to have 49% stake  and Nissin  49% and  Nissho Iwai 2%. 

PT ABC President, a PMA company, previously known as a producer of food and beverage products (sauce, ketchup, etc.). This company is a joint venture between PT Aneka Bina Cipta (62%), with Nan Gai Investment Co. Ltd. from Hong Kong (35%) and  Yeuan Yeou Enterprises Co. Ltd. from  Taiwan (3%). 

In 1993,  ABC President produced instant noodles with a production capacity of   48,000 tons  per year. Its product for the middle segment of the market  uses the brands of ABC and  Presi¬dent, and one for lower market segment is Top Rame. 

PT Jakarana Tama , which is located in Bogor  produces instant noodles  with the  brand  of Michiyo. This product succeeded in grabbing a share in the higher segment of the market not yet covered by Indomie. Later, however, the market segement was also entered by  products in various brands of   Indofood. Its marketing is helped by a distributor PT Wicaksana Overseas Internasional. This company is quite successful in launching  Gaga 100.

PT.Dellifood Sentosa Corporation produces Miduo in larger packet  containing two  packages of 102 grams  compared with the normal packet  of 75 grams . PT Nestle , which is known as a producer of powdered milk  cooperates with PT Supmi Sakti to produce instant noodles with the brand of Maggi Mi.  PT Barokah Inkopontren in Bekasi, West Java produces instant noodlest with the brand of  Barokah . The company strarted producing instant noodles in  1999, with an investment of Rp 24.9 billion   and a   capacity of  7,200 tons  per year.

The Group Wings, which is based in the East Java capital of Surabaya, is better known as a producer of laundry soap with the brand of Wings Biru. The company group expand operaiton to  the instant noodles industry as it wants to have a shar in the growing business. 

The group started business  in instant noodles industry  early 2003 through its subsidiary Wingsfood. It entered the market with a big bang launching its product of Mie Sedaap. It was a successful start. 

Wingsfood has two subsidiaries PT Karunia Alam Segar (KAS) and PT. Prakarsa Alam Segar (PAS) – with a total production capacity  of around  202,000   tons  per year.  KAS , which is located in Gresik, East Java, serves  as the production base for eastern Indonesian market and PAS in Bekasi, West Java, for the western Indonesian market. 

Wingsfood  has succeeded in challenging the domination of Indofood in instant noodles market in the country. The distribution of Mie Sedaap  is handled by PT. Sayap Mas Utama,

PT Olagafood Industri Makanan dan Minuman was established in 1997 in Medan, North Sumatra. In he beginning the company operated in the production of canned coconut milk which is exported to mainly to Taiwan. The company started expansion to instant noodles industry using the brand of Alhami in 12 taste variants, Alhami products are sold in two types Alhami regular and Alhami 100.

In 2001, Olagafood expanded by producing new variant with the brand of Santremie, Later it produced instant noodles especially for vegetarians with the brand of  Hola Hole and  Mikka. In 2006, it also produced another brand of Alimi. Olagafood diversified products by producing soybean ketchup to flavor its instant noodles products.  Its ketchup product entered the market with the brand of Gurumasak.

Olagafood has increased its production capacity to reach 57,600 tons  per year in 2009 from 36,000 tons  per year earlier. The expansion of the capacity is to meet growing market demand mainly in North Sumatra and Nanggroe Aceh Darussalam. The ccompany continued innovation by improving the quality of its products to expand its market beyond the northern part of Sumatra. 

PT. Tiga Pilar Sejahtera (TPS) was established in 1992 by the family of Tan Pia Sioe. This company operated in noodles processing industry. In the beginning in 1959, the late Tan Pia Sioe established a family business producing corn noodles under a company named Bihun Cap Cangak Ular in Sukoharjo, Central Java.

In 2002, TPS acquired PT. Asia Inti Selera which had operated in the production of instant noodles since 1985. The company has factories located in Sragen of Central Java, Jakarta and Lampung, TPS produces various types of food products including Mie Telor which is noodles mixed with eggs, instant noodles, Mie Snack, rice noodles, instant rice noodles, corn noodles, biscuit, candy, flavors, etc. In 2003, went public selling part of its shares on the Jakarta Stock Exchange now Indonesian Stock Exchange. Currently PT TPS has a production capacity of around 72,000 tons of instant noodles per year.

TPS also plans to launch rights issue hoping to raise Rp327.29 billion in fresh fund. The fund is needed to acquire three companies in a bid to expand operation to food sector other than dry noodles. 

TPS acquired PT Poly Meditra Indonesia, a producer biscuit, wafer and candies. The company acquired the company at a cost of Rp 145 billion.  It also has acquired 99.9% of  PT Bumi Raya Investindo valued at  Rp 139 billion.  PT. Bumi Raya Investindo operates in oil palm plantation  and palm oil production  in South Kalimantan Selatan, In  2010, TPS hopes to increase the processing capacity of its palm oil factory to 60 tons of fresh fruit bunches an hour.