JAKARTA – The sheer number of Chinese food and beverage (F&B) outlets surrounding Indonesia is threatening the existence of local micro, small, and medium enterprises (MSMEs).
The public is surely aware that in recent years, Chinese F&B outlets have flooded Indonesia. One such outlet is the Mixue beverage and ice cream chain, which has been expanding rapidly in Indonesia.
The growth of Mixue outlets is so massive that there's a joke that goes, "Look at a shophouse, and tomorrow it'll be Mixue."
Mixue has been present in Indonesia since 2020. Despite the COVID-19 pandemic, Mixue has continued to open outlets throughout the country.
The number of Mixue outlets has indeed decreased. However, their absence has been replaced by other Chinese F&B outlets. Brands like Heytea, Wedrink, and most recently, Chagee continue to pop up in shopping centers and busy city centers.
Executive Director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira, acknowledged that the massive expansion of Chinese F&B outlets could be detrimental to local MSMEs.
China's Domestic Business Sluggish
Chinese F&B outlets have flooded Indonesia since the COVID-19 pandemic. At the same time, local food and beverage MSMEs have been hit hard.
The Central Statistics Agency (BPS) recorded that in 2019, the number of food and beverage MSMEs reached 3.9 million. However, the same data a year later showed this number had dropped to 1.51 million.
Food and beverage MSMEs have indeed begun to increase, but their numbers have yet to reach pre-pandemic levels, reaching 1.7 million in 2024.
Momentum Works, a Singapore-based research institute, reported that from 2022 to mid-2024, more than 6,100 Chinese F&B outlets operated in Southeast Asia.
Two-thirds of these, or around 4,000 outlets, are concentrated in two countries: Indonesia and Vietnam. In other words, the Indonesian market is a prime target for expansion.
This expansion is not without reason. Competition in the F&B business in China is currently sluggish. During the first half of 2024 alone, more than one million F&B businesses in China collapsed, a 70 percent increase compared to the previous year.
Furthermore, China is also facing a price war trend between local players such as Luckin Coffee, Cotti, and its affiliate, Mixue (Lucky Cup), which is exacerbating the situation. A cup of coffee can even be sold for as little as 6.6 yuan, equivalent to Rp15,000, far below the international market average.
On the other hand, Southeast Asia offers opportunities, with stable economic growth, rising consumption levels, and less intense market competition.
The Middle Class is the Target
CELIOS economist Bhima Yudhistira believes the government has opened the door too wide for foreign businesses, especially after the Job Creation Law was passed in 2020.
According to Bhima, business licensing in Indonesia as a whole is still complicated, but the F&B sector is more relaxed than other business sectors. Furthermore, certification in Indonesia is much easier than in neighboring countries, Bhima said.
Bhima explained that to be able to sell in Indonesia, local and foreign F&B businesses must obtain certification from the Food and Drug Monitoring Agency (BPOM) and halal certification from the Indonesian Ulema Council (MUI).
"It's multi-layered, but it's not as complicated as in other countries where even health certification can be multi-layered, making costs more expensive," Bhima said.
Furthermore, Indonesia's growing middle class is also a major draw for foreign investors. The number of middle class people in Indonesia has indeed declined from 57.33 million in 2019 to 47.85 million in 2024, according to BPS data. However, this figure is still larger than the middle class in neighboring countries.
"If the middle class has extra money, they will eat out. This is a prime target for foreign F&B businesses," said Bhima.
"This large middle class should be an opportunity for local MSMEs, but it seems that now local MSMEs will be eroded by the wave of foreign F&B businesses, especially from China," he continued.
Double Impact
The Chairperson of the Indonesian Franchise and Licensing Association (WALI), Levita G. Supit, sees two sides to the entry of Chinese F&B players. According to Levita, this phenomenon has a dual impact on local players.
On the positive side, the entry of Chinese F&B players can encourage local players to be more innovative. However, on the other hand, intense competition can actually kill small businesses that cannot survive.
"Local F&B businesses are becoming more creative with their products to compete with existing Chinese F&B businesses. Local businesses can learn from the success of Chinese F&B businesses, including superior Chinese F&B products," said Levita.
"The negative side is that the F&B market share is becoming more divided, with more competitors entering, resulting in some being unable to survive," she explained.
Bhima Yudhistira from CELIOS explained that this situation would be dangerous if MSMEs died while foreign F&B businesses dominated Indonesia. The existence of MSMEs is crucial for directly supporting the community. The money generated by MSMEs circulates in the surrounding area.
"Their income is channeled back to purchasing raw materials and supporting families in the local area," he explained.
Meanwhile, Chinese F&B revenues will be transferred directly to their country of origin.
"This has major implications for the country's foreign exchange reserves and the stability of the rupiah exchange rate in the long term. So, MSMEs are dying, and the rupiah exchange rate is threatened," he said.
However, Levita emphasized that the many business closures in the local market are not solely due to the presence of Chinese F&B.
"Many factors have caused the closure of many F&B businesses, including MSMEs. So, it's not just the influx of Chinese F&B," she concluded.
The English, Chinese, Japanese, Arabic, and French versions are automatically generated by the AI. So there may still be inaccuracies in translating, please always see Indonesian as our main language. (system supported by DigitalSiber.id)
