The food and beverage industry in Indonesia is grappling with significant challenges as the rupiah continues to weaken against the US dollar. The Chairman of the Indonesian Food and Beverage Producers Association (GAPMMI), Adhi S. Lukman, highlighted the severe impact of this depreciation on production costs, given the industry’s reliance on imported raw materials.
Speaking at the Ministry of Industry in Jakarta on Tuesday, June 25, 2024, Adhi explained that the 6.5% depreciation of the rupiah against the dollar has translated into a substantial financial burden. He noted that the current exchange rate, as reported by Refinitiv, stands at Rp16,370/US$, a slight improvement of 0.12% from the previous day. However, this marginal gain does little to alleviate the strain caused by the overall depreciation.
The dependency on imports for essential commodities such as wheat, milk, salt, and sugar exacerbates the situation. According to Adhi, the total import value of these four key commodities is around USD 9 billion. The 6.5% depreciation means an additional cost of approximately Rp5 to Rp6 trillion for the industry. This figure underscores the significant financial pressure facing food and beverage producers, particularly those with limited financial resilience.
Large-scale industries can withstand the depreciation for a few months due to their financial buffers. Adhi stated that these businesses are striving to absorb the increased costs without immediately passing them on to consumers, recognizing the potential impact on purchasing power. “We are not directly increasing our selling prices. We aim to endure by reducing margins to maintain sales,” he explained.
However, small and medium enterprises (SMEs) face a more dire situation. With limited stockpiling capabilities and daily or weekly inventory cycles, SMEs are compelled to adjust prices promptly to cover rising production costs. Adhi emphasized the vulnerability of these smaller businesses, noting their lower resilience to currency fluctuations.
Adhi urged the government to intervene and stabilize the rupiah to prevent it from breaching the Rp16,500/US$ threshold. He stressed that surpassing this level would significantly increase the industry’s financial burden, potentially jeopardizing many businesses. “We hope the government will continue its intervention efforts to keep the exchange rate below Rp16,500/US$. Exceeding this level would impose an unsustainable burden on the industry,” he concluded.
The weakening rupiah poses a critical challenge to Indonesia’s food and beverage industry, highlighting the need for government intervention to stabilize the currency. While large enterprises may weather the storm for a short period, SMEs are at a higher risk due to their limited financial buffers. Immediate and sustained efforts are necessary to mitigate the adverse effects of currency depreciation on this vital sector.
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