Indonesian dairy farm in Central Java. (Photo: The Insider Stories)

JAKARTA (TheInsiderStories) – Indonesian dairy industry is set for exponential growth this year due to significant shifts in how Indonesian consumers view health and lifestyle.

Indonesia’s dairy industry and dairy products industry is undergoing a boom with market demand rising by over 10 per cent on an annual basis for the past ten years due to changing consumer habits and population growth, according to Nielsen.

The development of milk processing industry in the country in the future is still quite prospective since it relates to the fulfillment of primary human needs. In fact, this sub-sector also contributes significantly to the significant growth in the food and beverage industry.

Indonesia’s estimated per capita milk consumption is only 11.7 liters per annum which is significantly lower than 22 liters in the Philippines and 31 liters per capita in Thailand.

Higher disposable income, greater awareness of health and quality issues, and a growing middle class eager to define itself in society are all factors driving change in consumer habits.

Minister of Industrial Airlangga Hartarto expects the development of dairy farms can reduce the dependence of imported milk raw materials so as to save foreign exchange.

Reliance on imports, mainly from Australia and New Zealand, is a concern given the country’s vast availability of land and labor for cattle farming. Only 23 per cent of the raw materials for milk supply is produced locally with 77 per cent coming from foreign imports to a total value of US$1.8 billion in 2016.

This is presenting exciting opportunities for the private sector in both the upstream and downstream segments to make up the shortfall in milk supply as well to introduce new products that appeal to the growing health consciousness of the market.

Recently, Australian-Indonesia dairy firm Greenfield built a Rp612 billion (US$44.5 million) dairy farm in Wlingi, Blitar, East Java as an expansion effort after the first dairy farm development in Babadan, Malang.

Partnering with 250 local farmers, this farm can accommodate more than 10,000 dairy cows in a land area of 172 hectares, claimed to be the largest farm in Indonesia.

By the end of the year 2020, the farm is targeted to reach a maximum capacity of 10,000 dairy cows that produce as much as 50 million liters of fresh milk annually.

The second Greenfields farm uses the latest technology, including automatic milking technology with a rotating system, enclosed enclosure using a hybrid fan system, as well as a long-day lighting system to maximize the productivity of cow’s milk.

Edgar Collins, CEO of AustAsia Dairy Group predicted the Indonesian dairy industry is set for exponential growth due to significant shifts in how Indonesian consumers view health and lifestyle.

He said that through the operation of this second farm, there will be a significant increase in domestic fresh milk production. The dairy farm will also strengthen the position of Greenfields as the number one producer of fresh milk in Indonesia.

“We also want to introduce modern dairy farming practices as a model to improve the productivity and quality of fresh milk domestically,” he explained.

He added that the company is building a Greenfields Dairy Institute Foundation that will train more than 800 dairy farmers annually to improve their skills to increase productivity. “This will certainly increase their income,” he added.

Since 2000, Greenfields has been a major exporter of fresh milk products from Indonesia. Currently, around 20 percent of its production is exported to countries such as Hong Kong, Singapore, Malaysia, Brunei, Philippines, Myanmar, and Cambodia.

Dairy industry players are rightly focusing their investment and marketing efforts on the domestic consumer market, given the scope for growth at over 4.8 per cent annually to 2014 (IFC).

Local farmers and dairy producers must play a larger role in this trend given Indonesia’s potential in this area to limit its reliance on imports and thus insulate the industry against currency fluctuations and supply-side shocks.

Indonesia, therefore, needs to increase the number of dairy cattle, introduce more productive cattle breeds and ensure that the cooperatives play a role in the socialization of new methods of production to local farmers.