(Photo: PT Coca-Cola Amatil Indonesia)

JAKARTA (TheInsiderStories)Food and beverage industry sees its production cost rising by 3-5 percent due to rupiah depreciation against US dollar, said Chairman of Indonesian Food and Beverage Association Adhi S. Lukman on Thursday (9/8).

Adhi said that the food and beverages industry raw materials are mostly imported which will be negatively affected by weak rupiah. According to him, the rupiah depreciation reduces the food and beverages industry’s profit margin by 5 percent.

The industries have no option but to reduce the profit margin because increasing the selling price will affect the sales figures. “People’s purchasing power is already weak and usually a price increase will affect sales,” he added, as quoted by CNBC Indonesia.

However, Adhi said food and beverage companies unable to reduce profit for too long. Therefore, he expected government and Bank Indonesia would try harder to stabilize rupiah against US dollar.

Rupiah weakened 6.8 percent (year to date/ytd) against the US dollar by August 4, 2018, the weakest in Asia,  according to the Asian Development Bank (ADB) data. Against the US dollar, Philippine Peso weakened 5.9 percent, Korean Won weakened 5.5 percent, and China Yuan depreciated 5.2 percent.

Rupiah strengthened 0.10 percent at Rp14.415 per US$1 in the trading spot today (9/8) at 15.00 WIB. Rupiah appreciated 0.11 percent at Rp14.422 per US$1 today in Jakarta Interbank Spot Dollar Rate (Jisdor) from Rp14.439 per US$1 in the previous day.

In addition to rupiah depreciation, Lukman earlier said that the food and beverages industry is recalculating the distribution cost as the government began to take a strict action against overload logistic truck.

He admitted that food and beverages business players have always maximized the vehicle’s carrying capacity, even slightly exceed its capacity to 10-30 percent.

“Of course we have to adjust if there are changes from the distribution cost calculation,” he added.

He estimated the cost distribution recalculation could increase other costs up to 30 percent.

Food and beverage industry contributes significantly to Indonesia’s gross domestic product (GDP). The industry grew 9.23 percent in 2017 from 8.46 percent in the previous year. It contributed to 34.33 percent of GDP in 2017.

Food and beverages industry also have a big contribution to the export at US$31.7 billion including palm oil in 2017. It recorded Rp38.54 trillion in domestic direct investment and US$1.97 billion in foreign direct investment in 2017.

Email: fauzulmuna@theinsiderstories.com