International partnerships, investment in ingredient infrastructure and sustainability-led innovation are the keys to translating trends into tangible food and beverage concepts for Southeast Asian markets.
Each market in Southeast Asia has its own political regime and regulatory requirements, which, when overlaid with geographical, cultural and demographic differences, make it a complex region to navigate. But companies who embrace this heterogeneity are rewarded with a wealth of opportunities.
The Southeast Asian food and beverage market is valued at US$ 666.20bn in revenue terms and is expected to register annual growth of 6.64% (CAGR) for the next five years[1]. This robust growth is being driven by a burgeoning middle class, a growing population and rapid urbanisation.
All of the ASEAN’s member markets are experiencing a healthy rate of growth, but the dynamics and forces at large are very different. A quick comparison of the two largest markets – Indonesia and Thailand – demonstrates this diversity and the challenges and opportunities it presents for food and beverage operators.
Indonesia: youthful population shapes future
With a population of over 275 million, Indonesia is home to the largest food and beverage market in Southeast Asia, and over half of its inhabitants are aged between 18 and 39 years old, spanning both Millennial and Gen Z generations. The country’s young demographic is a receptive audience for trends-led innovation; consumers are looking for ways of making the world a better place, and that translates to demand for products that offer transparency and sustainability. They are also seeking out higher quality products that are free from artificial ingredients and chemicals and benefit their health, and with rising disposable incomes, affordability is far less of an issue than it used to be.
Thailand: seniors drive interest in healthy ageing
In contrast, Thailand is among the fastest ageing countries in the world. Of its 67 million inhabitants, 12 million are elderly, and this figure is expected to increase in the next decades. This demographic shift is creating an opportunity for products that support healthy ageing and manage physical health concerns. Mintel research found that nearly half (47%) of Thai seniors believe food and drink products with added health benefits are better for their health than conventional products. Older Thai consumers are also seeking out products that are specifically tailored to their age group – according to Mintel, over two-thirds (61%) wish there were more varieties of food and drinks specifically designed for seniors[2].
Limiting factors
There is a huge opportunity for food and beverage brands to leverage these trends and to address the varying needs and preferences of consumers in these markets. However, the region’s food and beverage industry – dominated by small and micro enterprises – lacks the formulation expertise, processing technology and ingredient resource to fully capitalise on this potential.
Southeast Asia is one of the world’s largest producers of coconuts, coffee, cocoa, soybeans, sugarcane, corn, peanuts, fish and of course, rice, exporting its production surpluses abroad. But the region does not have the capabilities and infrastructure to valorise these commodities into ingredients that processors can work with and to develop and manufacture the ingredients that the industry needs to leverage these trends.
Plant-based potential
Take plant-based food. Asian consumers are very open to plant-based meat and seafood alternatives. In Thailand, for example, they have embraced the ‘Wen Day on Wednesday’ campaign that encourages people to eat meat-free one day a week.
There are plenty of indigenous raw materials that could form the basis of plant-based concepts, including mung bean and mushrooms. The regulatory climate in Southeast Asia also allows for the use of insect protein in human foods, giving the industry another avenue for alternative protein innovation.
However, the development of the plant-based category is being stymied by the cost of production – in many cases it is currently too high to be viable, mainly because the majority of ingredients have to be imported.
Extracting value from botanicals
It is a similar story in other trending categories. The functional food and beverage space is a prolific user of botanical extracts. Many of these, from ginger and galangal, to ginseng, curcumin, tulsi and ashwagandha, are native to Southeast Asia, but there is a massive technology and capacity gap when it comes to extracting the active components from these botanicals and formulating supplements or functional products.
Investment from both public and private stakeholders is helping to address this situation; governments are pursuing policies to attract foreign direct investment and technology transfer in a bid to reduce reliance on imports and strengthen the food and beverage sector. International collaborations and partnerships are also facilitating access to ingredients and technologies.
Advancing the sustainability agenda
Another area in which the region is aware it needs to make progress is on sustainability. Commodity suppliers are working to align their models with the new EU carbon border tax and Deforestation Regulation. Post-harvest losses are also a major issue for growers and processors, and the industry as a whole is very receptive to technologies that can help reduce waste, maximise resource efficiency and lower carbon emissions.
The forthcoming Fi Asia event in Indonesia (4-6 September 2024) offers the ideal opportunity for food and beverage manufacturers, ingredient suppliers, technology and service providers, traders and investors to come together and explore synergies and mutually beneficial solutions.
The focal point is a showfloor populated by over 700 exhibitors, of which more than 60% are from overseas, giving food and beverage professionals from the region access to an international pool of ingredients and expertise. As well as being a forum for ingredient sourcing, Fi Asia is an invaluable knowledge platform. Over three days, more than 50 conference sessions will provide a unique window into the workings of this dynamic and complex market.
