Dairy processing company PT Indolakto, which is affiliated with PT Indofood CBP Sukses Makmur (ICBP:JKT), held a topping out ceremony of its fifth plant in East Java last week. The new plant, whose construction started in March last year, is expected to begin operations in the second quarter of 2013.

Indolakto’s Vice CEO Irsan Yazid said that the fifth plant will be the company’s largest, and is expected to boost the company’s production capacity by 40 percent. The new plant costs an estimated investment of US$130 million and will produce sweetened condensed milk (SCM), ultra high temperature milk and sterilized bottled milk to complement the company’s four existing facilities in Jakarta, West Java and East Java.

Indolakto is a member of the Indonesian Association of Milk Processors (AIPS), whose six members effectively control the Indonesian market for processed dairy products. The company was founded in 1967 as a joint venture called PT Australia Indonesian Milk Industry, and is majority owned by ICBP after it was acquired in 2008 for US$350 million.

According to a study by the IFC, Indolakto is a major player in the SCM and LM (liquid milk) segments of the Indonesian dairy market and has a significant share in the PM (powdered milk) segment. In the SCM segment, Indolakto’s brands IndomilkCap Enak and Tiga Sapi compete with Frisian Flag’s market-leading brand Susu Bendera, and together the two companies control more than 80 percent market share of the segment. The top four brands in the LM segment are Ultra Milk, Bear Brand, Indomilk and Frisian Flag owned by PT Ultra Jaya, Nestlé, Indolakto and Frisian Flag, respectively.

Growing demands for dairy products, coupled with significant growth opportunities presented by low per capita milk consumption in Indonesia relative to neighboring countries, have attracted investments in the sector. In September last year, Nestlé announced it was investing US$200 million in a new milk processing plant in Karawang, West Java, which it expected to begin production in early 2013.

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