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Japanese companies cater to beef-hungry consumers

Eateries serving beef, like this Yoshinoya restaurant in Jakarta, have become popular in Indonesia.

TOKYO/SYDNEY/JAKARTA -- As incomes rise in Indonesia, the heavily Muslim population's growing taste for beef has gotten Japanese businesses like restaurant operators and meat processors salivating.

Hearty appetites

An outpost of the Gyu-Kaku barbecue chain in the Aeon Mall shopping center outside Jakarta is consistently packed with families and couples. An all-you-can-eat option priced around 400,000 rupiah ($29.36) for adults, featuring cuts such as short ribs and beef tongue that are pricey by local standards, is particularly popular.

     Gyu-Kaku operator Colowide opened a Shabu-Shabu Onyasai hot-pot restaurant in Surabaya last fall. The eatery took in as much money in its first two weeks as it had been expected to make in a month, according to the Japanese company. Colowide plans to expand the two chains' Indonesian presence from six locations to 14 this year and is targeting 50 by 2020.

     What's for dinner is starting to change in Indonesia, whose per-capita gross domestic product exceeds $3,000. Consumer tastes in emerging markets typically shift from chicken to pork and beef as incomes grow. With pork-averse Muslims constituting 90% of the Indonesian population, interest in beef is particularly high.

     Beef consumption rose 10% to about 654,000 tons in 2015, nearly doubling over a decade, data from the Indonesian agriculture ministry shows. While this works out to around 2.6kg per person -- less than the Japanese figure of roughly 6kg -- the average is expected to reach about 4kg within 10 years. Given Indonesia's population of 250 million, its market will likely surpass Japan's.

     Some restaurants feature "wagyu" beef -- tender, marbled meat from Japanese cattle breeds. Local steakhouse chain Holycow! offers Australian wagyu for between 140,000 rupiah and 300,000 rupiah. The meat is supplied by Anzindo Gratia International, whose head, Kuswandi Wangidjaja, reported that wagyu has become so popular among wealthy and middle-class consumers that the importer cannot keep up with demand.

     Pepper Food Service, the company behind the Pepper Lunch steakhouse chain, is another Japanese eatery operator making headway in Indonesia. The company ran 43 locations there at the end of last year and aims to boost the tally to 60 by 2020. Yoshinoya Holdings' namesake beef bowl chain had 48 Indonesian restaurants at the end of 2015, having added 13 over the previous year.

Keeping up with demand

Supply is an issue. Colowide expects its beef purchases to soar more than 10-fold by volume this year.

     While Indonesia is said to have some 6 million farmers raising beef cattle, most run small operations that cannot meet swelling demand. Food companies seek to ramp up shipments from Australia and New Zealand, aiming to use these major livestock exporters to gain a foothold in the Indonesian market.

     Japanese meat processor Itoham Foods spent 3.5 billion yen (about $29 million at the time) last March to make Anzco Foods a subsidiary. The New Zealand company's seven domestic beef- and lamb-processing facilities are all certified as halal. This certification, which requires such measures as keeping pork separate from the rest of the facility, is important for doing business in Indonesia.

     Australia's fifth-largest cattle feeder, trading house Marubeni, feeds 40,000 head of cattle on 4,600 hectares of land. "Indonesia's a promising market," said the head of the Japanese company's livestock operations. "We're looking for partners with an eye toward a full-fledged entry."

     Wellard, Australia's top exporter of live cattle, is setting its sights on Indonesia and other Asian markets. It has two transport ships under construction, each able to carry 10,000 head of cattle. The company aims to capture growing Asian demand, CEO Mauro Balzarini said.

Trade barriers

Import restrictions are the chief obstacle to the growth of Indonesia's beef market. The government sets quarterly quotas to ensure greater self-sufficiency and protect local farmers.

     Some distributors reported that they could buy just one head of cattle a day in January, down from two, because of the quota. Market prices for beef climbed 5-10% that month amid tight supply, to the public's dismay.

     The government launched ships in December to ferry live cattle from outlying areas to major cities with heavier consumption. President Joko Widodo said this should lower transport costs and stabilize beef prices. But a source took a dimmer view of the move, arguing that prices will not settle down until the quotas are scrapped.

     Some fear that fully opening up imports in a country as populous as Indonesia will spark a battle for supply. U.S. beef import prices have risen 70% over the past decade amid growing demand in such emerging markets as China. Indonesia imports much of its beef from Australia, New Zealand and the U.S., competing with Japan for supply.

     If Indonesia increases its imports, the supply-demand balance for beef in Japan could be affected, according to Japan's Agriculture & Livestock Industries Corp.

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