Indonesia’s Dairy Industry Hits Rp100 Trillion, Yet 80% Relies on Imports
Every time a glass of UHT milk is poured onto the dining table, there is a long supply chain behind it that rarely comes into view: smallholder farmers in the highlands of East Java, cooperatives collecting fresh milk every morning, and tanker ships carrying skim milk powder from New Zealand to Tanjung Priok Port.
Indonesia consumes far less milk than its ASEAN neighbors, yet it has emerged as one of the most fiercely contested dairy markets among global investors today.
So, how wide is the gap between local farmers’ production and national demand, and where exactly is Indonesia’s dairy industry headed amid the government’s push for self-sufficiency?
Domestic Fresh Milk Production Volume
Statistics Indonesia (BPS) recorded national fresh milk production at 808.35 thousand tonnes in 2024, down 3.44% from 837.22 thousand tonnes in 2023. The figure had yet to return to the 2017–2021 historical average of around 900 thousand tonnes per year, following the outbreak of Foot-and-Mouth Disease (FMD), which sharply reduced production to 824 thousand tonnes in 2022. In 2025, production improved slightly to 821 thousand tonnes, although the recovery remained slow.
Production comes almost entirely from three provinces on Java: East Java contributed 475.4 thousand tonnes (58%), West Java 251.9 thousand tonnes (31%), and Central Java 75.3 thousand tonnes (9%). As many as 21 of Indonesia’s 38 provinces, mostly in the eastern part of the country, produce no fresh milk at all. The root of the problem is structural: Indonesia’s dairy cattle population has actually declined in recent years, from around 582,000 head in 2021 to only around 486,000–507,000 head in 2022–2024 following the impact of FMD. Only around 40–45% are actively in lactation, far below the scale of modern industrial dairy farming.
How Wide Is the Gap with National Demand?
This is where the real problem begins. National milk demand in 2024 stood at around 4.7 million tonnes per year. With the rollout of the Free Nutritious Meals Program (MBG), experts from the National Nutrition Agency’s dairy team estimate that demand could surge to more than 8 million tonnes per year. The Ministry of Agriculture recorded a milk deficit of around 6.72 million tonnes in 2025, equivalent to 81% of total national demand, and projects that demand could reach 8.5 million tonnes by 2029.
This means domestic production currently covers only around 19–23% of national milk demand. Such a large gap is not filled by importing liquid fresh milk, which is physically inefficient to transport over long distances, but rather through milk powder and cream products such as skim milk powder, whole milk powder, and anhydrous milk fat, which are more stable to store and can be reprocessed by the industry.
From January to October 2024, milk imports reached 257.3 thousand tonnes, up 7.07% from the previous year. The value of imports from January to November 2024 reached US$803.4 million, or approximately Rp12.85 trillion. New Zealand was the largest supplier, accounting for 49.3% of import volume, followed by the United States at 17.6%, Australia at 14.8%, and Belgium at 5.9%.
Low domestic consumption reveals another side of the problem. This is not only about market opportunities, but also about unmet nutritional needs. Indonesia’s per-capita milk consumption stands at around 16–18 kg, far below the 30 kg per capita per year threshold used by the Food and Agriculture Organization (FAO) as an indicator of low milk consumption, and also below neighboring countries such as Vietnam and Malaysia, let alone the estimated global average of around 100 kg.
For the government, this figure represents substantial room for long-term demand growth. From a public health perspective, however, the same figure also signals that the nutritional needs provided by milk, as a source of protein and calcium, remain far from being fully met for a large portion of the population.
Market Leader in the Dairy Industry
Indonesia’s dairy products market was estimated to be worth US$6.83 billion in 2024, with average value growth of 4.7% annually since 2019. The country’s dairy processing industry remains concentrated among a handful of major players, including Frisian Flag, Nestlé, Danone/Sarihusada, Ultrajaya, and Indolakto, out of more than 30 registered milk-processing companies.
Three companies listed on the Indonesia Stock Exchange provide exposure to the sector, although only two are primarily focused on the dairy business: PT Ultrajaya Milk Industry & Trading Tbk. (ULTJ) and PT Cisarua Mountain Dairy Tbk. (CMRY). PT Indofood CBP Sukses Makmur Tbk. (ICBP) offers indirect exposure through its subsidiary Indolakto, where dairy products account for only a small portion of ICBP’s overall business, which is dominated by instant noodles.
ULTJ recorded net sales of Rp8.87 trillion in FY2024, an increase of around 7%, with a gross margin of 33.7%. However, net profit declined by around 2.6–3% to approximately Rp1.14–1.15 trillion due to higher promotional expenses. CMRY recorded the highest gross margin among listed dairy companies at 45.2%, while FY2024 net profit grew 22.4% to Rp1.52 trillion. Indolakto itself recorded revenue of Rp9.13 trillion in FY2023.
Where Is New Investment Flowing?
The government is opening the door to investment in an effort to close the deficit. The current framework allows private-sector players to gradually import up to 2 million dairy cattle and breeding cows between 2025 and 2029. Incentives include import-duty exemptions for livestock and equipment, competitive-interest financing schemes, and livestock business insurance.
However, first-year implementation fell significantly short of the target. By mid-2025, only around 9,700 dairy cattle had been imported against an initial target of 200,000 head. The 2025 target was subsequently lowered to 150,000 head, indicating that the process may take considerably longer than originally anticipated.
One concrete example is PT Global Dairi Bersama, which is developing an integrated dairy farm in Brebes, Central Java, on 710 hectares of land, with capacity for up to 30,000 dairy cattle. The project is targeted to produce 180,000 tonnes of fresh milk annually, equivalent to around 18% of current national fresh milk production.
The Ministry of Agriculture has stated that Indonesia ideally needs around 20 modern farms of a similar scale to achieve self-sufficiency. Foreign investor interest is also emerging, including a proposed investment by Qatar-based Baladna to produce up to 2 million tonnes of cow’s milk. However, farmer associations have warned that 90% of Indonesia’s dairy farmers operate on a micro or small scale, meaning that the tangible impact of large-scale investments of this kind may only become visible over the next three to four years.
On the demand side, the Free Nutritious Meals Program (Makan Bergizi Gratis/MBG) is creating a tangible demand multiplier. Milk requirements for MBG in 2026 are estimated at 4.8 billion packages, while national processing capacity currently stands at only 2.39 billion packages, or 49.7% of estimated demand. The Ministry of Industry has responded with an industrial restructuring program that provides reimbursement of up to 35% of investment costs for products with high domestic content.
Is Dairy Self-Sufficiency a Realistic Target?
Several factors make the target ambitious while also creating risks of delays. First, historical production growth has been limited to around 0.65–1% per year, while demand, once MBG is fully implemented, is projected to grow substantially toward 8.5 million tonnes by 2029. Second, dependence on imported raw materials leaves industry margins sensitive to fluctuations in the Indonesian Rupiah and global dairy commodity prices. Third, animal-health risks have already demonstrated their potential impact: the 2022 FMD outbreak sharply reduced domestic production, and the subsequent recovery took years, while also shrinking the dairy cattle population itself.
Social risks also remain unresolved. In November 2024, fresh milk was reportedly discarded by farmers in Boyolali because processors were unable to absorb the entirety of local production. The incident triggered discussions over policies that would require milk-processing companies to absorb domestic farmers’ output.
The new raw-material quality standard, SNI 3141:2024 on Raw Cow’s Milk, is also still voluntary rather than mandatory. As a result, the competitiveness of locally produced fresh milk against imported raw materials will ultimately depend on implementation in the field, rather than regulation on paper alone.
The combination of a persistent production gap, strong policy support through MBG and the self-sufficiency roadmap, and per-capita consumption that remains well below neighboring countries clearly creates substantial long-term growth potential for the sector. Opportunities exist across the value chain: upstream in modern dairy farming, midstream in processing capacity and packaging facilities, and downstream in cold-chain infrastructure and distribution beyond Java.
The question is, how quickly businesses and the government can convert this structural gap into tangible production capacity on the ground.
Disclaimer: This content is created for educational purposes or service promotion, and does not constitute a recommendation to buy or sell any specific Securities. Any risks arising from investment decisions made based on the information in this publication are the sole responsibility of the respective audience. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (Otoritas Jasa Keuangan / OJK).
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