Understanding FMCG- The Indonesian Way

From sipping tea in India to brewing coffee in Indonesia over a chat, we present another edition of our round table discussion. A room full of industry leaders sharing their insights on the future of real intelligence.

We began by exploring how intelligence can enhance route-to-market (RTM) strategies and help brands flourish in new regions. The Indonesian market, with its steady year-on-year growth surpassing 5% over the past five quarters and inflation settling at 2-3%, stood out as a focal point. Increased consumer confidence has been evident, though post-pandemic challenges like rising living costs have affected purchasing power. Consumers are prioritising spending on utilities and transportation while cutting back on vacation, fashion, and durables—a trend seen across all economic classes. Households continue to spend on FMCG and fresh goods but are adjusting their spending patterns based on individual needs.

Consumer behaviour varies by sector. For in-home purchases, there's a trend towards downsizing in Home Care and Personal Care (e.g., soaps, shower gels, shampoos, deodorants, and oral hygiene products), but a willingness to spend more in Beauty Care (e.g., makeup, skincare, haircare, and fragrances), presenting opportunities for premiumisation. In Pantry Essentials, value growth stems from price increases as shoppers cope with inflation. In the Baby Care segment, shoppers are upsizing to larger pack sizes for better value.

One of the notable discussions was that brands must recognise that simply offering lower prices isn't enough. They also need to clearly communicate product benefits, deliver quality, and provide optimal usage benefits to justify premium prices. For instance, when consumers demanded sunscreen, the brand added extended benefits like protection and moisturising. This deep understanding of consumer behaviour drove their success.

Balancing innovation with consumer needs is crucial, given the plethora of market options. For Out-of-House (OOH) consumption, volume growth is driven by snacks and non-dairy beverages, thanks to increased post-pandemic mobility and school activities. Brands must offer affordability and practicality to boost consumption.

Looking ahead, brands should focus on evolving demographics to understand buying patterns. In Indonesia, a slowing population and the rising influence of Next-Gen (GenZ and Millennials) as household decision-makers open up new opportunities. Next-Gen consumers are willing to spend for a higher quality of life and want convenience and availability across channels, including online and speciality stores.

Lastly, we discussed leveraging tech and digital spaces to amplify brand awareness. With 90% of Next-Gen shoppers using YouTube and more than half of FMCG shoppers on TikTok, digital platforms present significant promotional opportunities.

As the 2024 elections approach, the Indonesian macroeconomic situation will be pivotal to consumer spending. Optimism about the economy and cost of living could boost consumer confidence, with projections indicating a modest 5% value growth for the Indonesian FMCG industry, aligning with expected GDP increases.

After formal discussions, we enjoyed an informal networking session over dinner and cocktails. The event was a great success, fostering genuine conversations and meaningful insights.

Stay tuned for our next event in another city. Check the Chai with the CPG Leaders page for details of our upcoming meet. For any queries, write to [email protected].