Full Report: Indonesia FMCG Outlook 2023
Indonesian consumers buying less and downtrading to cope with inflationary pressures
Inflation in Indonesia is at highest level for many years and consumers are feeling the pinch. Despite inflationary pressures, Indonesia’s FMCG market continued to grow in 2022, with value growth of 9%, up from 5% the year before. Unit sales grew more modestly at 2%.
Although price inflation of 7% across FMCG categoriesaffected consumer confidence, shoppersstarted to change their shopping habits to help manage household expenditure – cutting back on non-essentials, reducing the size of their baskets, and, in some cases, trading down to cheaper brands.
With more disposable income, upper-class consumers coped better with price rises, buying in volume and bigger packs. Middle- and lower-class consumers bought cheaper products, with lower-class consumers more likely to drop some categories from their baskets.
Consumers are also changing where they shop with growth in omnichannel shopping, a continuation of the trend that Kantar saw in 2021. Minimarkets have expanded outside of Java, and specialtystores the go-to for some categories. But the biggest changes have been in digital commerce, which continued to expand across secondary cities and rural areas.
FMCG category trends
Food categories were most affected by price rises, but there were pockets of growth. Shoppers were less likely to compromise on pantry essentials, such as canned and frozen food, which saw volume growth. On-the-go snacking also picked up following a post-pandemic slowdown thanks to greater mobility and opportunities for new occasions.
Home Care rose by 4% despite shoppers buying less volume and shopping less often, and Personal Care was heavily influenced by individual needs and preferences. Growing by 5%, the Baby categories remained buoyant, but saw shoppers trading down in some areas, including diapers, to save money.
The Beverages market was driven by faster growth in out of home, especially among younger cohorts who were the biggest spenders. Beverage brands were able to tap into new opportunities for functional drinks and RTD teas and juicesfor different times of the day.
2023 growth opportunities
FMCG growth in 2023 is predicted to be lower than last year, with slower growth expected across FMCG categories, including food as the main sector.
As shopping habits continue to change and consumers are forced to further rationalise their purchases, FMCG brands will have to work harder for share of wallet.
They will need to deliver a seamless strategy for online and offline channels, optimising the different price-points and touchpoints to engage with different shopper segments.
Innovation will be the main differentiator in recruiting new shoppers, with new flavours, occasions, pack sizes, and functionality.Smaller pack sizes and the efficacy of products will attract repeat buyers, as well as optimising assortment and on the go occasions.
Affluent shoppers looking for health and wellbeing in food are prepared to spend more, while Indonesians who typically love eating out are experimenting more at home and want products that will elevate dishes.
These constantly shifting purchasing behaviours make it essential for FMCG brands to keep up to date with the trends in the market.
To read our comprehensive FMCG Outlook Indonesia 2023report covering the FMCG industry and theFood, Baby, Home Care, Personal Care, and Beverages sectors, please complete go to this link.