By Ronnie S. Natawidjaja, Elly Rasmikayati, Kusnandar, Dian Purwanto 

Indonesian food market restructuring has, in a way, run parallel to the international trend in terms of both patterns and determinants (compared with the trends noted in Reardon and Timmer 2007).  The retail and processing "symbiosis" is a key part of food market restructuring.  Rapid growth of the supermarket sector (triggered by removal of foreign direct investment restrictions in 1998) was complemented by food industry development and the expansion of urban populations.

There were three distinct stages of supermarket development in Indonesia (World Bank 2007).  The first and second stages were in a general period that can be termed the "pre-takeoff domestic cycle period" (before 1998).  From roughly 1970 to 1983, the supermarket sector in Indonesia was a tiny niche serving expatriates and upper-class Indonesians, mainly in Jakarta.  Supermarket diffusion became rapid from this very tiny base starting in 1983; it then peaked in the early 1990s and finally declined by the 1997.  (This second stage was fuelled by overall growth translating into rapid growth in upper-class incomes in Java.  The second stage growth spurt of supermarkets was nevertheless almost exclusively restricted to domestic capital retail and was still focused on the upper income segments - mainly in Jakarta and a few other large cities on Java where the "new order" growth was concentrated.)  The third stage was a veritable "takeoff period" for supermarkets post-1998, when the sector moved from a tiny niche to a large sector; this looks set to grow quickly for some time to come.