The food and beverage (F&B) industry facilitates sales of food and drinks, both locally and for export. Countries’ economies cannot survive in the world today without an active and thriving F&B industry. Governments, therefore, take a close interest in this industry for economic growth as well as regulation. Such has also been the case in Indonesia.

The Indonesian National Agency of Drug and Food Control oversees all activities in the F&B industry. Preventing prohibited food sales and regulating the business environment for local and foreign F&B businesses is necessary.

Thus, the Indonesian F&B industry is full of regulations which have been put in place by the Indonesian government; however, all of these regulations are generally well-planned and necessary.

Current Condition of the F&B Industry in Indonesia

The restaurant business is one of the most lucrative industries in Indonesia. It rivals the manufacturing and agricultural industries for this position. In 2021, it contributed to approximately 38% of Indonesia’s Gross Domestic Product (GDP) under the non-oil and gas processing industry.

The management of restaurants in Indonesia is conducted by Indonesia’s Ministry of Culture and Tourism. This ministry outlines regulations which are used to govern the Indonesian food and drink market. Setting up a restaurant in Indonesia requires a business license along with other documents. The details of setting up a restaurant in Indonesia will be discussed in this article later.

Before diving into those pointers, here are some reasons why setting up an F&B company or restaurant in Indonesia might be a good option:

Large consumer population

Indonesia’s population of approximately 271 million is one of the largest in the world. This fact works in the favour of all who choose to start an F&B business in Indonesia because it proves that there is a potential market for food products. Most of this population are part of the growing middle class and spend large amounts of money on food every day.

Rising incomes

The average income of the typical Indonesian consumer has risen in recent years. This has thus led to increased spending from such people. This increase in the income of the Indonesian middle class has in turn caused their spending on food and food-related items to increase. Thus, F&B businesses entering the Indonesian market will benefit from these favourable economic conditions.

Growth of retail

The increasing prevalence of malls, supermarkets, and online food stores across Indonesia presents many opportunities for suppliers of food and beverages to increase their impact in the Indonesian market. Instead of joining the F&B supply chain at its end, new entrants to the industry could consider playing an intermediary role in serving customers across Indonesia. Annual growth rates of the F&B industry in Indonesia have been growing every year and are expected to continue doing so for the foreseeable future.

Halal food

Specialisation is one way of gaining an added advantage in the business world. Businesses usually choose to specialise in certain products in order to maximise their profits. Because 87% of the population is Muslim, specialisation within the Indonesian F&B industry is not difficult; the market for halal foods is therefore extremely large.

The Indonesian government has introduced the halal food certification which dictates the standards to be fulfilled during the preparation, packaging, handling, and distribution of halal foods. Current F&B businesses are to comply with the halal food certification. Failure to do so will render their products non-halal and therefore unable to be consumed by Muslims, thus causing them to miss their window of opportunity to cater to the Muslim populace in Indonesia by producing food products which comply with halal certifications.

How to Start an F&B Company & Restaurant in Indonesia

Setting up a restaurant in Indonesia follows the same procedure as that of starting a business; however, the method of investment is different. Foreign investors may struggle to set up and operate a restaurant without support from a local partner.

Local business owners must register as a direct investment or limited liability company to set up a restaurant. This therefore shows that the process is similar to that of registering a company in Indonesia.

The Process on how to set up an F&B Company & Restaurant in Indonesia

The process is more complex for prospective restaurant owners who are foreigners since they are required to not only partner with local partners but also present a work permit and valid visa to prove their legal stay in the country. A foreign investor is required to set up a Perseroan Terbatas – Penanaman Modal Asing (PT PMA), which is a foreign-owned limited liability company. Indonesia’s company law states that a foreigner can own up to 51% of the total shares in a PT PMA.

Alternatively, a foreign owner could appoint a local shareholder and oversee this shareholder. This would therefore allow the foreigner to have complete control of the restaurant.

An F&B business in Indonesia cannot begin its operations before receiving approval for the food products it intends to sell. The National Agency of Drug and Food Control is responsible for assessing the sources, quality, and usage of both raw materials and finished food products before presenting the F&B business in question with an ML number.

However, restaurant owners do not have to obtain licenses for ingredients which are to be used to make finished products which will subsequently be sold in restaurants. The restaurant owners must, however, obtain a license for the finished food products. License approval typically takes six months to one year to complete all compliance regulations at the location premises.

Licenses Related to Indonesian F&B Companies

Unlike other industries, the F&B industry in Indonesia demands that business owners own many business licenses before the company can be fully registered. There are many licensing requirements which have been imposed by the National Agency for Drug and Food Control. Required licenses before registering an F&B company in Indonesia include, but are not limited to:

• Certificate of Free Sales from the country of origin
• HACCP validation, a certificate of Analysis of Finished Products
• Certificate of Analysis of Raw Materials and Ingredients
• Halal certification
• Company registration license
• Import licenses for externally sourced raw materials
• Alcoholic Beverage Trading License
• Licenses from recording labels

If you are seeking any assistance regarding licensing or any other compliance regulations of your company, we at Paul Hype Page & Co can be of assistance. We will work with you to ensure that all of your compliance-related requirements have been fulfilled. We will also help you contact any relevant government authorities in Indonesia, should you require their input.

Legal Requirements for Setting up a Restaurant in Indonesia

The most important legal requirement in Indonesia is that of company registration. An investor must follow the legal guidelines of company registration which include the following: providing a list of directors, naming of shareholders, and defining the nature of the company’s business. This process is overseen by government authorities that receive, verify, and approve applications for company registration.

Investors must provide a building permit for permission to expand, modify, or build a restaurant location. A restaurant owner should also provide a nuisance law permit that shows that the location of the business does not disrupt public peace and safety.

The investor must also be a registered taxpayer with proof of tax compliance before obtaining an operating license for the restaurant business.

The investor must also provide an environmental impact analysis. This analysis shows the effects of the restaurant’s operation on the environment. It should include a waste disposal strategy and an evaluation of the waste’s toxic nature from the restaurant.

The restaurant owner must obtain a food safety and health certification from Indonesia’s Ministry of Health. The Ministry of Health also demands a health certification for every employee of the restaurant. This should demonstrate that the restaurant staff can safely handle food and drinks without risking infection.