THE MILK OF LIFE

Indonesia 2018 | AGRICULTURE | INTERVIEW

TBY talks to Maurits Klavert, President Director of PT Frisian Flag Indonesia, on educating consumers on the benefits of milk consumption, taming the logistical beast, and adjusting to local tastes.

Maurits Klavert
BIOGRAPHY
Maurits Klavert has vast experience in the FMCG sector in Indonesia and abroad. He joined Frisian Flag Indonesia in 2007 as the Sales and Trade Marketing Director, after which he served as Managing Director of FrieslandCampina in the Middle East. In 2015, he was appointed President Director in Indonesia. Prior to Frisian Flag, he served in progressive roles in other FMCG companies such as Nestlé and Gillette and as Head of Marketing & Public Affairs at HSBC Indonesia.

What are the specifics of the Indonesian market in terms of dairy consumption?

The dairy market in Indonesia is not yet a powerhouse. Consumption per capita stands at around 12 or 13 liters per year. From a regional perspective, for example in Malaysia or the Philippines, this figure is 30 liters per capita. In the Middle East, consumption is 70 liters while in Europe it is over 100 liters per capita. Solely focusing on the region, Indonesia may catch up in terms of consumption, doubling the market at least. Having said that, a great deal of investment is required to educate consumers on the benefits of milk consumption. Looking at habits, consumption levels are high at the toddler age; however, around school age, levels drop again. Teenagers practically do not consume dairy, with a slight increase for adults. We want to boost demand by educating the public on the health benefits, while on the supply side we want to produce and market products that cater to the Indonesian palates, tastes, and format. Overall, the market has grown in the past six years, with a slight slowdown recently. Aside from education, distribution presents a great challenge in a country, with nearly 17,000 islands and three time zones. The retail landscape has around 2.8 million outlets and dairy is typically available in about 65% of the outlets. As we are benchmarked against, for example, instant noodles, with 80-90% availability, there is still room for growth.

How do you tailor your product line to the Indonesian palates and tastes?

The fastest growing category is ready-to-drink milk, which is probably the fastest-growing segment within the whole of dairy. There are carton packs and bottles that come in plain dairy and flavors. Indonesians are typically not used to the taste of milk. We launched a new product called Coconut Delight in 2016 designed to mimic more familiar tastes. We also are in flavored and milk powder, as well as the infant and toddler business. That area has been relatively flat because fresh milk has been growing fast. Due to infrastructural challenges, we must distinguish between refrigerated and non-refrigerated product lines. Compared to other markets, Indonesia's refrigerated business is still small due to the difficulties in distribution. This keeps the business of pasteurized milk, yogurt, and drinks small, though sweet and condensed milk is a huge part of our business.

From a sourcing perspective, how is the milk quality in Indonesia?

At the moment, Indonesia imports 80% of its milk requirements and local farmers only account for 20%. This means a large dependency on imports from mostly New Zealand and Australia, with additional imports from Europe and the US. The government seeks to double local production to 40% and has issued a new regulation to incentivize local, fresh milk production. We source about 20% of our requirements locally and work closely with dairy farmers in Java through cooperatives to improve the quality and productivity to source locally. The Dutch government also participates in this with support and funds. Our parent company Royal FrieslandCampina is a cooperative owned by 20,000 dairy farmers with whom we work closely. We bring dairy farmers from the Netherlands here to teach local dairy farmers about best dairy farming practices, while also sending Indonesian farmers to the Netherlands. Another challenge we face is encouraging the younger generation to stay with farming. It is hard work, the financial rewards are not highly perceived, and scalability is also an issue. The majority of dairy farmers in Indonesia only have small pieces of land with two or three cows. Currently, working together with a local cooperative, we are trying to pilot a model of a dairy village. Where we secure a plot of land and place cows together to create a colony. This allows us to invest together in milking machines and other necessary equipment.