This progress also supported by the stable inflation and exchange rate; an increase on export rate; along the unemployment rate which continuously shows a declining figure. Those positive figures are reflected in the increase of consumer confidence index.
This state, along with the ever increasing price, has driven the growth of FMCG expenditure, where Indonesia displays the highest growth in South East Asian countries, rising by 8,3 percent compared to last year.
FMCG and fresh food remains the highest expenditure segment for the Indonesian household. However, some consumer’s priorities have changed, for instance, growing expenses of savings and investments. Consumers find it is essential to stay reasonable in managing the spending by opting for value packs products in larger format that resulting in lower purchase frequency.
With all being said, Indonesia remains as promising as ever. As mentioned by Venu Madhav, General Manager of Kantar Worldpanel Indonesia, in order to win in the Indonesian market in the final months of 2017, we need to tap in the right opportunities underlying in these 6 essential trends:
1. Relevance of health, convenience and happiness
Most of the successful products in the FMCG industry are riding on three mega trends - health, convenience and happiness.
Rising health awareness encourage consumers to adapt healthier lifestyle by opting for products with natural ingredients or offer health benefits. Exposure to environmental issues also moves consumers to protect themselves from the effect, leading to preference of products with anti-pollution benefits and recycled packaging materials. Consumers are looking for products to make their life healthier, driving the growth of healthy categories e.g. cold cereal and cheese.
High mobility level among consumer, especially in urban areas, pushes everyone to get everything done in short time. Being loaded with informations and to adapt to the fast development is forcing consumers to look for ways to make life simpler and easier.
Happiness is key to make life even more meaningful, a factor which also plays an important role in driving consumer to share higher purpose in life through the goods they’re consuming on daily basis. Economic slow down still have an effect to stress level and consumers are aspired to relieve the tension by opting for products that adds up some spice to their life. Ice cream and snacks are two growing categories which rides on this trend.
2. Catering to new occasions to expand user portfolio as frequency declines
Economic tensions and price increase force consumer to be wiser in managing their spending, leading to lower purchase frequency. This phenomenon is also seen in other Asian countries. In Indonesia alone, consumers have decreased their purchase frequency by 5% as against last year and it’s not foreseen to fully recover in near future. Wider product range in the market created greater competition at the point of purchase. In order to ensure sustainable growth, brands need to work on how to attract as many consumers while staying relevant in many occasions.
3. The rise of the lower class who are getting more aspirational
Amidst economic slowdown, consumers across different demographics are adapting differently to the situation. Sustained efforts on infrastructure development by the government leading to lower unemployment rate. This has benefited the lower class consumer who is showing an increased spends of FMCG products. Affordable versions of FMCG products being widely available allows the lower SES consumer to keep up with the latest products, which drives repertoire expansion and premiumization by the lower SES.
4. Growth of secondary cities
Increasing commodity prices and the governments focus on secondary cities has led to the consumers having more disposable income. And this is seen in their increased FMCG spends. Modern trade retailers have grabbed this opportunity by expanding its presence in these areas by opening new outlets in key secondary cities and growing faster.
5. Evolution of multi channel modern trade
General trade remains the most important trade channel for the Indonesian consumer, dominating total FMCG value share at 75 percent. On average, people shop 22 times a month in traditional trade. At the same time, other convenient format, especially minimarkets are increasing their presence in secondary cities and even up to rural areas.
Extensive consumer promotions is another factor driving the trip size, especially through weekend promotional programs which allow consumer to enjoy huge price cuts on basic necessities, most times even lower price than hyper and super market. Added to it, the ease to find minimarket in every corner of the city, in residental and business areas and longer opening hours, allow buyers to shop more conveniently anytime. The growth of mini market has also led to the higher SES consumer to shop there for their top-up as well as attracting the middle and lower SES consumer for their monthly shopping needs.
6. Rise of Online shopping
FMCG purchase through online portal does not account to a significant amount in total spend yet. However with the changing lifestyle where time is a decreasing commodity, more and more consumers will move to online shopping for the convenience it offers and that the consumer can avoid the mundane task of shopping. This is further fueled by the rapid increase of smartphone penetration, urbanization and growing disposable income, contribution of e-commerce towards FMCG spends is expected to reach double-digits levels from the current 1 percent in the near future.
Fanny Murhayati, New Business Development Director of Kantar Worldpanel Indonesia, summarized the implications following these 6 essential trends.
"First, FMCG players need to innovate in providing the relevant products that following the health, convenience and happiness trend. Second, brands need to work on how to attract as many consumers while staying relevant in many occasions. Third, provide products relevant to various needs of their target market. Ensure best quality product for the upper class consumer, helping urban consumer to keep up with its fast paced lifestyle by providing speed, and maintain affordability for lower SES. Fourth, increasing availability of their products in secondary cities and rural areas and fifth, ensure strong understanding of the role of each channel format to maximize opportunities among omni-channel shoppers whilst driving instrumentality," she said.