Indonesia Specialty Fats and Oils Market

Indonesia Specialty Fats and Oils Market Outlook (2023 to 2033)

The Indonesia specialty fats and oils market is valued at US$ 1.3 billion in 2023 and is projected to reach a size of US$ 2.22 billion by the end of 2033, expanding at a CAGR of 5.5% over the next ten years.

Specialty oils are commodity oils that have unique dietary or functional properties. These oils are widely used in the specialized nutrition, food, and cosmetics industries. Specialty fats are a unique category of fats that represent substitutes for common fats such as cocoa butter, and milk fats, among others.

Several manufacturers in the country are aiming at strengthening their distribution networks to increase the export of specialty oils and fats to different countries. They are focusing on strengthening their business processes, ultimately paving the way for new market growth opportunities.

Specialty fats and oils are highly utilized in the foodservice sector. Growing preference for plant-based alternatives to butter and clean-label food products is driving product sales in the country.

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What are the Key Trends in the Indonesian Market for Specialty Fats and Oils?

“Bakery & Confectionery Manufacturers’ Focus on Mass Production Boosting Demand for Specialty Fats and Oils”

Demand for artisan-style baked products, such as cakes, bread, and other confectionery items, is growing in Indonesia. Manufacturers are focusing on the appearance and texture of baked products by creating products that appear handcrafted using traditional artisanal baking techniques. Artisanal bakers use specialty ingredients such as toppings, frostings, and glazes to enhance the appeal of their final baked products.

Leading manufacturers in the bakery and confectionery industries are supporting mass production and innovation by producing artisan-style bread and other baked goods. Some manufacturers have established product decoration units (PDUs) to apply patterns on the surface of baked products, regardless of their weight and shape.

Technological advancements are also helping the baking sector by providing various solutions at different stages of the baking process. Artisanal bakeries are therefore becoming a promising area of application for specialty ingredients such as margarine.

“Growing Demand for Packaged Food Driving Utilization of Edible Oils for Improved Flavor & Aroma”

Market dynamics have always been influenced by the unpredictable behavior of consumers. The trend of health consciousness among consumers has resulted in a preference for clean and naturally sourced edible oils in their food products. Edible oil is an essential ingredient in any kitchen, and consumers now prefer oils that are extracted and stored without the use of chemicals, preservatives, or additives.

With increasing demand for convenience and packaged food due to busy lifestyles, industries are using a wide range of edible oils to create unique flavors and aromas in food products while also ensuring a longer shelf life. These factors are expected to drive the sales of specialty fats and oils in the near future.

“Cost-effectiveness of Palm Oil Pushing Its Consumption in South Asia & Pacific”

The specialty fats and oils market in the South Asia and Pacific region is witnessing steady growth and is highly dependent on economical oils such as palm oil. Palm oil is widely available in the region, especially in Indonesia as it is the largest producer of this oil variety. Consumption of palm oil in the region is expected to increase in the coming years.

Exports of specialty oils to countries like the U.S., India, and Europe are increasing. Indonesia's specialty fats and oils market also presents an opportunity for businesses to expand and increase product penetration due to the relatively low competition.

“Demand for Non-PHO Alternatives Increasing in Baking Industry”

Growing need for improved functionality and diversity in product offerings is fueling up the demand for non-partially hydrogenated oil (PHO). This demand is particularly evident in the bakery industry, which is experiencing significant growth across Indonesia. There is a need for fats that offer enhanced taste and texture and extended stability, especially when replacing frying oils with non-PHO alternatives.

Because baked goods undergo a complex process to achieve their final structures, flavors, and textures, PHO alternatives must be effective in processing and capable of performing the desired procedures. This factor is driving the use of non-PHO fats in the baking industry.

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What are the Hindrances to the Adoption of Specialty Fats and Oils?

“Wide Availability of Trans-fat-free Substitutes in the Country”

The fats and oils market is characterized by a crowded landscape with numerous options, which can create challenges and competition among different products. In the specialty fats market, there are substitutes available that resemble margarine, much like how margarine itself serves as a substitute for butter. Butter, lard, vegetable oil spread, ricotta cheese, avocado oil, cream cheese, cocoa butter, and olive oil spread are among the most common alternatives to margarine.

These alternatives frequently provide almost identical properties as margarine in a variety of finished products, particularly baked goods. One of the factors hindering the growth of the Indonesia specialty fats market is the fact that margarine may contain trans fats while its substitutes do not.

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Category-wise Insights

Which Type of Specialty Fat Accounts for High Sales?

“Cocoa Butter Equivalents’ Effectiveness in Improving Flavor Profile of Confectionery Products Fueling Their Sales”

The cocoa butter equivalents (CBE) segment is expected to hold 13% share of the Indonesian market in 2023.

Increasing utilization of confectionery products is prompting producers to use cocoa butter equivalents fats as an ingredient to improve the flavor profile of their products. Growing demand for healthy fat products along with the rising number of food companies seeking better fat ingredients are propelling sales of specialty fats.

Which End-use Industry is Expected to Hold a Leading Market Share?

“Consumption of Specialty Fats and Oils in Retail/Household Sector Increasing Significantly”

Based on end use, the Indonesia specialty fats and oils market is segregated into food and beverages, foodservice (HoReCa), personal care and cosmetics industry, retail/household, and others. In 2023, the retail/household segment is expected to generate a revenue of US$ 428 million.

Consumers are growing more health-conscious and are looking for alternatives to traditional cooking fats such as regular vegetable oils and butter. This is expected to lead to increased demand for specialty fats and oils from the retail and household sector in Indonesia during the forecast period.

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Leading manufacturers of specialty fats and oils in Indonesia are carrying out collaborations and partnerships to gain synergy benefits and enhance their production capacity for a larger market share. Prominent players are directing their offerings toward the foodservice industry.

• In December 2021, Apical Group collaborated with Singapore Agri-Food Innovation Lab (SAIL) established by Nanyang Technological University (NTU Singapore). This collaboration will help the company advance innovation and sustainability in the agri-food sector through seed partnerships across the food chain.
• In 2021, Cargill established its new palm oil refinery in Lampung, Indonesia with an investment of US$ 200 million. This facility will help the company accelerate the development of a sustainable palm oil supply chain to provide customers with a range of deforestation-free and verified products.
• PT Landkrone Indo Nutri has obtained several quality certifications to prove the versatility of its products in different regions. The company has obtained ISO 22000:2005 and Halal certifications from reputable certification agencies worldwide.
• In 2019, Sinar Meadow participated in conferences & expos in Indonesia. The company showcased its offerings at the esteemed Sial Interfood, the largest food and beverages exhibition, which took place at Arena JIExpo Kemayoran, Indonesia. During these events, local experts from Sinar Meadow interacted with customers, discussing the latest trends and opportunities.

Indonesia Specialty Fats and Oils Industry Report Scope

Indonesia Specialty Fats and Oils Industry Segmentation

By Product Type:

• Specialty Oils
  • Palm Oil
  • Soya Oil
  • Coconut Oil
  • Peanut Oil
  • Rapeseed Oil
  • Sunflower Oil
  • Olive Oil
  • Others
• Specialty Fats
  • Cocoa Butter Replacers (CBR)
  • Cocoa Butter Substitutes (CBS)
  • Cocoa Butter Equivalents (CBE)
  • Lauric Fats
  • Creaming Fats
  • Anhydrous Milk Fats
  • Butter
  • Margarine

By End Use:

• Food & Beverages Industry
  • Bakery & Confectionery
  • Dairy and Ice cream
  • Snacks and Savories
  • Infant Formulae
  • Specialized Nutrition
  • Others Processed Products
• Foodservice Industry (HoReCa)
• Personal Care & Cosmetics Industry
• Retail/Household
• Other Industrial End Uses

By Distribution Channel:

• Business to Business
• Business to Consumer
  • Hypermarkets/Supermarkets
  • Convenience Stores
  • Specialty Stores
  • Online Retail