After Brazil, Vietnam, and Colombia, Indonesia is the world’s fourth largest coffee producer and exporter. But until recently, the domestic coffee consumption was generally low, since, historically, consumers in Indonesia preferred to drink tea and tea-based drinks rather coffee. With the growing popularity of the café culture, influenced by changing consumption patterns of the younger generations, this has changed.
Most of the coffee grown in Indonesia – approximately 60% - comes from smallholder estates primarily scattered around the main coffee-growing islands of Sumatra, Java, Sulawesi, Flores, and Bali. These smallholder coffee plantations (also referred to as ‘coffee gardens’) are generally farms with an average size of 1-2 hectares (2.5 – 5 acres).
In Northern Sumatra and the mountainous area of Java^, the cultivation of Arabica coffee variety (Coffea Arabica) dominates, while the Robusta variety (Coffea Canephora), which has a lower market value than Arabica beans* and is known for its strong aftertaste, is generally grown in Southern Sumatra and lower lands of Java. Hence, robusta coffee, which includes nearly 70% of all coffees grown in the country, is mainly used in instant coffee production, as well as in espresso (especially for someone looking for a rich express experience with a layer of crema), and select coffee blends (of Arabica and robusta).^*^
Find more statistics at Statista
According to a recent report published by the USDA’s Foreign Agricultural Service, excessive rain, and strong winds in Indonesia during the important cherry development stage of both Arabica and Robusta Coffee, caused sub-optimal conditions for pollination in the lowland areas of Southern Sumatra and Java, where approximately 75% of countries coffees plantations are located. Increased humidity also affected bean quality.
Based on these adverse conditions, the USDA’s Foreign Agricultural Service predicts that the total, combined coffee harvest in Indonesia will be down by 2.2 million bags (each bag weighs 60 kilograms or 132.23 pounds) to 9.7 million bags, a decrease from 10.5 million bags or 18% compared to 2022/23.
In their forecast, the USDA’s Foreign Agricultural Service expects that the production of Robusta will drop 2.1 million bags (approximately 20%) to bags to 8.4 million, while Arabica production is expected to slightly dip 1.3 million bags. Interestingly, estimates for 2022/23 Robusta bean production are revised up by 5% to 10.5 million bags. This is the result of a higher-than expected “fly crop,” a typically low-volume harvest period that, in Southern Sumatera, precedes the main harvest period.
As a result of the reduced coffee harvest, Indonesia’s green bean exports are forecast to plummet 2.5 million bags (32%) to 5.2 million from the previous year. However, according to the USDA’s Foreign Agricultural Service higher output in Brazil and Vietnam is expected to more than offset reduced coffee production in Indonesia.
According to the latest data from the Indonesian Ministry of Agriculture (MOA), in West Java, Arabica coffee areas are likely to expand. One reason is that state-owned companies controlling forest lands continue to provide expansion support under the government’s agroforestry initiative. This initiative allows growers to grow coffee on state-owned and company-controlled lands as long as they keep existing trees on this land intact.
Overall, the country’s coffee crop area remains stable at 1.2 million hectares (2.97 acres). However, in 2023/24 Indonesia’s total coffee crop area is expected to increase of 3,000 hectares (7,413 acres) to 1.3 million hectares (3.21 acres) nationwide.
With the Indonesia economy continued recovery from the COVID-19 pandemic, the USDA’s Foreign Agricultural Service report forecasts a growing domestic coffee consumption to approximately 20,000 bags to 4.79 million bags.
This increase can, in part, be attributed to the growing café culture. With increased affluence, as well as to international coffee consumption trends, younger Indonesians are really embracing this new café / coffee culture. Generally, locally sourced, artisan specialty quality coffee, as well as iced milk coffee sweetened with palm sugar (known as “es kopi susu”), as well as a wide variety of other flavors are among the most popular and trendy drinks (other tending flavors include cookies & cream, avocado, and matcha).
With a Muslim-majority population sharing Islamic dietary laws that prohibit alcoholic beverages, coffee shops became the go-to hangout spot instead of bars. In the past few years, local coffee chains have slowly overtaken global brands in terms of market presence. **
This growth is, in part, based on the fact that coffee outlets in the country are now mostly operating at normal working hours. Another key factor is that local coffee chains are primarily targeting middle-income consumers in residential areas and suburbs with a focus on a ‘grab-and-go’ model, while, in contrast, international chains like Starbucks are focusing on high-income consumers. For example, in 2019 Starbucks opened the luxurious Dewata Coffee Sanctuary in Seminyak, Bali, which is, with 20,000 sq ft, the company’s largest store in Southeast Asia. ^^
During the COVID-19 pandemic domestic coffee chains demonstrated that they were able to better meet the challenges by being more innovative than chains like Starbucks, especially since most customers were working from home, rather than in large, inner-city, business centers.
The success gained during the COVID-19 pandemic was also the result of affordable price combined with vigorous social media promotion. For example, the price of es kopi susu generally starts between IDR 18,000 (US $ 1.26) to IDR 22,000 (US $ 1.53). In contrast, places like Starbucks sell their iced lattes at a cost that averages between 2 and 2.5 times higher than the local chains.
Import and Export
The majority of coffee grown in Indonesia, estimated in 2021 at 7,746,000 metric ton, has, historically, been exported. However, growing domestic consumption (in 2021 estimated a 4.80 million bags), has impacted the export of coffee (in 2021 estimated at 6.6 million bags), slowly outstripping the country’s supply, leading to fears of a global shortage of coffee.
According to the USDA’s Foreign Agricultural Service, the demand growth for Robusta is likely stronger than for Arabica. One reason is that the Robusta price traded 2% higher between January and March 2023, compared to the same period in 2022. In contrast, in early 2023 Arabica prices continued to decline, decreasing by 24% from peak prices in February 2022.
In addition, the USDA’s Foreign Agricultural Service’s post forecasts green bean exports for 2023/24 are expected to decrease by 32% to 5.2 million bags, compared to 2022/23 exports of 7.7 million bags. Furthermore, green bean imports for 2023/24 are projected to reach 1.44 million bags, up 7%, in part due to domestic green coffee supply shortages.
Today, the United States remains the largest export market for Indonesian green beans, followed by Europe, India and the Middle East. Furthermore, a spike in shipments to the United Arab Emirates (UAE) greatly compensated the combined decrease in shipments to the United States, Egypt, and Malaysia in 2022/23.
In 2022/23 shipments to Japan decreased by 42%. According to Japanese authorities, this was, in part, due to residual chemical contamination from pesticides detected in several green bean shipments.
^ Indonesia us the fourth-largest Arabica coffee growing region in the world.
* The Arabica coffee variety is more expensive, selling for US $ 2.93 per kilogram in 2018 and projected to increase in price to US $ 4.60 per kilogram in 2024. In 2018, the robusta coffee variety, which can grow at a wider range of altitudes and temperatures, sold for US $ 1.87, and is projected to sell at US $ 2.25 per kilogram in 2024. (Average prices for Arabica and robusta coffee worldwide from 2014 to 2024, Statistica. Online. Last accessed on June 28, 2023.
^*^ In addition to Arabica and robusta, other coffee varieties are grown in Indonesia, albeit in limited quantities. These varieties include Liberica (Coffea liberica) and Excelsa (Coffea liberica var. dewevrei). Liberica has a distinctively large size and is irregular in shape. This coffee variety offers a bold and smoky flavor profile, often described as having hints of dark chocolate and floral notes. Excelsa coffee is an even lesser-known variety. Although it is closely related to Liberica and is also cultivated on Java (and to a lesser degree on Sumatra), it has a complex and intriguing blend of elements with its tart and fruity flavors, featuring notes of dark cherry, grapefruit, and a hint of smokiness. Since 2018, both Liberia and Excelas have seen a re-emergence in growth volume and popularity. (Davis AP, Kiwuka C, Faruk A, Walubiri MJ, Kalema J. The re-emergence of Liberica coffee as a major crop plant. Nat Plants. 2022 Dec;8(12):1322-1328. doi: 10.1038/s41477-022-01309-5. PMID: 36522448.
** In 2020, the Jiwa Group, which includes the Janji Jiwa Coffee outlets, a neighborhood grab-and-go coffee chain that adopts a fresh-to-cup concept, Jiwa Toast, which offers a variety of affordable, toast-based light meals, tailored to local tastes, and Jiwa Tea, which offers a menu of the best quality teas from Indonesia, had the largest number of coffee shop outlets in Indonesia with over 900 locations in total. Within two years after it was founded, the Janji Jiwa outlets has overtaken Starbucks (which, in October 2022 had 523 licensed stores; in contrast, in October Starbucks had 9,265 company operated stores and 6,608 licensed stores in the United States), becoming the leading coffee chain in Indonesia. Other local leading coffee chains, include companies like Hofland Coffee Brew & Eatery/Hofland Café and Resto, Kopi Kenangan, Fore Coffee, and Kedai Kopi Kulo, some of which were launched in the last decade, help grow this trend.
^^ In contrast to the traditional Starbucks coffee store, the Dewata Coffee Sanctuary bears an original logo – a lotus flower – that represents Balinese philosophy and is inspired by Bali’s double ikat weaving technique. The store’s façade, created with locally-made red bricks in the shape of half circles, was designed to mirror iconic, crystal blue waters of Bali’s beaches, while an Arabica coffee-tree farm spanning 1,000 sq ft on the premise allows visitors experience what it’s like to de-pulp and wash coffee beans during the harvest season or wash, dry and rake green coffee beans. Visitors to the Dewata Coffee Sanctuary will, without a doubt, see a 9.1-meter (30-foot)-tall, hand-carved wooden mural that depicts the history of coffee in Indonesia, which was commissioned by Starbucks and created to honor to local coffee farmers. And finally, the store includes the Starbucks Reserve bar which offers visitors a taste of the company’s small-batch coffees. And finally, the store features a 13-meter teak bar, inspired by flora from the region and Bali’s terraced rural landscapes, where customers can enjoy Starbucks’ signature beverages.