Indonesian cocoa production shrinks as farmers switch crops

Indonesian cocoa production shrinks as farmers switch crops


Jakarta — Asia’s biggest cocoa producer has a chocolate problem. Cocoa production in the 130-year old industry in Indonesia is set to shrink for the third straight year as farmers switch to other crops and annual consumption of chocolate languishes at just 11 ounces (300 grams) – half the rate of Malaysia, according to Euromonitor International. That might just be about to change, though, thanks to a Millennial re-imagining of chocolate-malt drink Milo – one of the region’s favorite treats – into Es Kepal Milo, which translated as “Milo on round ice.” The craze for Es Kepal Milo – a mixture of Milo poured over crushed ice to make a kind of chocolaty snow cone – has spawned more than 17,000 “how to make” videos from Indonesia alone, with millions of hits on YouTube. It’s created a new retail empire for entrepreneurs such as Emanuel Agung, the 34-year-old owner of Es Kepal Milo Viral. As well as helping sales for Milo maker Nestle SA, it might lift overall chocolate confectionery sales in Indonesia and the fortunes of PT Mayora Indah, the country’s second largest food company, which makes Choki Choki chocolate sticks, as well as PT Kaldu Sari Nabati Indonesia, which makes Richoco wafers. “Demand is incredibly high,” said Agung, who buys 1 ton of Milo a day to supply his 150 Milo Es Kepal stalls. Nestle was overwhelmed with our orders in the first few weeks of sales, but now supply is stable.” Agung, who learnt how to make icy treat in Malaysia, opened his first outlet in Jakarta in March and the franchise is now in several cities, selling about 300,000 cups a day. That is good for Nestle, based in the Swiss city of Vevey, which has recently started selling frozen ice creams such as Kit Kat, Crunch and Milo in Indonesia. “We are excited to learn that people have found creative ways in creating recipes using our products,” Debora Tjandrakusuma, Nestle’s director of legal and corporate affairs in Indonesia, said in an email response to questions. Nestle noted that while most of the cocoa it gets from Indonesia goes to its international market, it does sell some products made from locally sourced cocoa. The challenge for growers is to turn that demand for chocolate into cocoa demand. Indonesia’s cocoa production is set to drop to 275,000 tons this year from 290,000 tons in 2017 because of aging trees and as farmers switched to more profitable crops such as oil palm, according to Indonesia Cocoa Association in February. The slump has turned the world’s third largest grower into net importer. While per capita consumption is still low, demand for chocolate confectionery grew by 10 percent, thanks to wide distribution, aggressive marketing and promotional strategies, according to Euromonitor. For a developing country such as Indonesia, where the market was worth about $1 billion in sales last year, affordability is still top-of-mind for many households when purchasing indulgence products. Millions of Indonesians survive on less than $2 per day and traditional snacks such as banana fritters and coconut cookies are their first choices to indulgence their sweet tooth. Chocolate is considered a luxurious food, according to Sony Satari, chairman of Indonesia Cocoa and Chocolate Industry Association. Indonesians prefer cheaper chocolate that contain vegetable oil rather than more expensive varieties made from cocoa butter, he said. “Paying 25,000 rupiah ($1.70) for a chocolate bar is expensive for many Indonesians,” Satari said. For Es Kepal’s Agung, who has more than three years experience in the culinary business, good quality food and brand are the main factors to lure buyers, not the price. He says he sells Es Kepal Milo for as much as 20,000 rupiah a cup mainly to millennials age between 14 to 26.