An influx of Western manufacturers in recent years with big investments into top brands has also helped drive double-digit growth.
New figures from Datamonitor show that breakfast cereals - the smallest product in both volume and value terms in the overall baked goods sector - have seen compound annual growth (CAGR) of 7.2 per cent between 1999 and 2004.
From 1999-2009, this growth rate is expected to be around 3.4 per cent, compared with a mere 0.9% in the mature, and much bigger, UK market.
But crackers, or savoury biscuits, are seeing even faster growth, with a CAGR of 11.4 per cent during the five years to 2004. Sales of crackers reached IDR449.7bn (€41m) in nominal prices that year, and they are forecast to see compound annual growth of 10.3 per cent to 2009, reaching IDR734 billion.
Many of the country's baked goods are still imported or made by foreign multinationals who see Indonesia as a springboard to other Asia Pacific markets such as China.
"Several Western companies stuck out the economic crisis in the late 90's and the rising spending power of Indonesians in recent years and successful investment in local brands and marketing has seen strong growth for many of these firms," Nick Beevors, associate analyst at Datamonitor, told AP-Foodtechnology.com.
Cookies or sweet biscuits are also performing well in Indonesia. One manufacturer seeing tremendous growth is Australia-based Arnott's.
"Arnott's has been very successful in its investment in the Tim Tam biscuit brand," said Beevors.
The country's leading biscuit maker Khong guan has also benefited, increasing its market share to 11.5 per cent in 2004 from 11.4 the previous year, while Mayora, Danone and Kraft also edged up a percentage point.
Artisanal producers are losing share as a result, falling from 30.5 per cent of the market's value in 2003 to 30.3 per cent in 2004.
Beevors added that fears of economic downturn led to manufacturers promoting their products in more remote parts of Indonesia and helped them to expand their market.
New distribution methods such as Unilever selling bottled Lipton iced tea from motorcycle saddlebags in villages where the lanes are too narrow for cars have allowed them to reach new customers.
Western companies such as The Campbell's Soup Company (Arnott's) and Unilever have also moved manufacturing capabilities to Indonesia in recent years to produce the low-margin, high-volume goods locally.
"Imported share in morning goods and cakes and pastries is therefore likely to fall as producers follow the example of the biscuit and crackers manufacturers who largely produce their products in Indonesia," predicts Beevors.