FMCG Outlook Indonesia 2022 - p
In Q3 2021, the mobility of consumers has been recovered to pre-Covid level. Although the mobility level has gone back up, consumers are still...
FMCG Outlook Indonesia 2022
Kantar Indonesia’s Worldpanel Division invites you to ponder over what to expect in 2022. With first class insights, we serve you a comprehensive outlook to help you establish the future-proof for your brands.
FMCG Outlook 2022: Expect the unexpected
The resilience of the FMCG industry in Indonesia has been rock-solid throughout the pandemic. Now that the circumstances are evolving, the growth can be more expansive.
In Q3 2021, the mobility of consumers has been recovered to pre-Covid level. Although the mobility level has gone back up, consumers are still concerned about the situation related to the pandemic which results in their spending priorities. A rising is seen in the budget allocation for housing, healthcare, and gatherings while the budget allocation for fresh food and FMCG remain as priority among the consumers.
FMCG Highlights
The road for FMCG industry in 2021 is not always smooth; depends on constant shift in situation and regulation that affect consumers’ behaviour. In this section, we will explore the highlight into two buckets: What Stayed and What Changed.
1. Shoppers were increasing their basket size in 2021 up to 6% at the expense of lesser trips. The growing mode of basket size happen in the overall FMCG industry and across sectors. The number of trips is significantly lower by -2% due to the mobility restrictions.
More shoppers prefer bigger pack sizes that offer a better pricing, especially when it comes to Personal Care and Beverages categories. The growth of spend per trip for Personal Care has reached 4% while in Beverages at 6%.
2. The Food sector continued to be the main driver of the overall FMCG growth despite having slower growth compared to last year.
Food sector growth is influenced by volume and price, while the frequency is stable. The driving categories in this sector are Cooking Aids and Instant Food which implies that shoppers are getting adjusted with home cooking.
3. Liquid Dairy lead the Dairy sector growth by increasing 18% and followed by Powder Dairy with 3% growth. Leading brands in Liquid Dairy are seen to have unique values to offer such as health benefits, variety of flavours, and nutrition for kids. One of the rising brand has been successfully gained more than 21 million new buyers by pitching the nutrition for kids as a proposition value to their consumers.
4. General Trade stood still as the key channel even during the restricted mobility period. This channel has been the largest channel with around 70% contribution; hence manufacturers cannot neglect the importance of General Trade in Indonesia.
Contrasting with General Trade, Online channel perform brilliant growth at 92% which almost three times bigger than the year before despite the smallest shares. This performance provides huge opportunities for brands to tap into.
5. Secondary cities grow faster than key cities. The growth in secondary cities is happening across channels. In this growing geography, brands should ensure their distribution can fulfil consumers’ appetite especially those who live outside the key cities.
1. Lower class consumers have faster growth in 2021. The growth in lower class is mainly driven by higher spending and bigger basket size, suggesting the needs for FMCG remain as priorities for this cohort. On the other hand, upper- and middle-class growth is slower in 2021 as they might re-allocate their spending for FMCG with other expenses beyond the basic.
2. Stagnant growth for Minimarket while rapid growth for Online channels. The stagnation of minimarket growth can be driven by two factors: the restricted opening hours and consumers are more comfortable to go to toko/warung as their proximity options.
The accelerating mode of Online channel, especially during the pandemic, is hard to be overlooked. Penetration has gone up to 17% which grow by 6% from 2020. Shoppers also grow their basket size from two categories in 2019 to more than three in 2021, implying a promising future for FMCG brands in improving their online presence.
3. Prioritization on Essential Items is getting stronger. It is seen that less category can attract more buyers or increase consumption. With the same amount of category bought, each category has a tougher competition to be present in shopping basket. In short, consumers prefer to purchase on the basic needs and less experimenting to extend their basket with new categories.
4. Higher trust for local brands in Personal Care sector. It applies for the three segments in Personal Care: Beauty, General Care, and Baby Care. The winning brands in Beauty and General Care segments can gain up to 3 million new buyers while the winning brand in Baby segment was able to gain more than 8 million new buyers. This provides an opportunity for local brands and a momentum for non-local brands to ride the success.
5. On-the-go Beverage consumption is seen to be recovered. As mobility restriction has been lowered and the new normal period began, outside activities create more occasion for on-the-go beverages. Mineral water and Isotonic drinks manage to lead the recovery with improving contribution in 2021, while others are picking up.
The FMCG Industry in Indonesia is expected to grow by 4.7% by the end of 2021 and 5.6% in 2022.
The forecast for mid-upper class consumers is to grow faster in 2022 while the lower class consumers will be growing slower in 2022. Across sectors, Dairy is projected to be the driver in 2022 while Beverages and Home Care will be bouncing back from its dip in 2021. However, important to keep in mind that different growth scenarios are still possible depending on COVID-19 situation and level of mobility.
To accelerate the growth in 2022, here are the three keys to hold:
Product Portfolio
- Although people are spending more, they are not buying more categories. Build a strong presence to win limited shopping trip.
- Brands keep innovating as shoppers are having many more choices. Offer the needed product and communicate the best value.
De-aggregate
- Do not generalize the market. Key cities are important especially when mobility back to normal.
- Leverage the growth of secondary cities and reach the wider population (e.g. in Rural areas)
- Deep-dive into demography, and segmentation is important for brands to properly map risk and opportunity.
Channel Accessibility
- Proximity channel will still be important for shoppers to fulfil their needs. Having the optimal pack-price strategy is key to win in traditional trade.
- Start building capabilities in online channel to address consumers shopping mission: accessibility, affordability, and convenience.
Cherish the right moment in Baby Industry
The Baby industry undergoes a healthy growth throughout 2021. Parents are putting their babies’ needs into their priority among other household needs.
The growth in the Baby market is slower in 2021, similar with overall FMCG. Even though slowing down, baby needs remain as a priority among households with baby even during the challenging times.
Baby categories are essential to households with kids, especially households with Newborn who have the highest spend per buyers. The importance of Baby categories will slow down as the kids get older, hence seize the winning opportunity among moms with Newborn is critical for industry players.
To answer the question of “How to Cherish the Right Moments in Baby Industry” there are four keys to leverage for brands in the Baby market.
1. Understand preference of your target buyers
2. Extend presence to specialty store and online
3. Win over a slim window of opportunity in newborn stage
4. Justify value to win share of wallet in toddler stage
1. Understand preference of your target buyers
It comes as no surprise that the upper class hold the highest spending in the Baby categories although modest growth in 2021. On the other hand, the middle and lower class manage to post significant growth at 7% and 16% with spend per buyer ranging between 1.45 million rupiah to 1.96 million rupiah. Additionally, the lower-class buyers are seeking access to buy new categories as there are 14 categories (out of 18) that able to attract more buyers from this group. With limited cash outlay among lower class, pitching the right pack size and the right price for them is essential so they can enter the category and buy your brand.
2. Extend presence to specialty store and online
General Trade and Minimarket remain as the key channels for Baby categories; General Trade is accounted for 60% and 28% for Minimarket occasion share in 2021. From the penetration point of view, minimarket is stabilized in 2021 while Specialty Store and Online are gaining new buyers.
Buyers in Specialty Store and Online have a high interest for basic Baby necessities such as Dairy, Diaper, and Telon Oil. The profile of the buyers in these two channels is dominated by middle-upper class.
In terms of age, Specialty Store is more relevant to young moms (up to 25 years old) as they still need assistance from the salesperson to get knowledge about baby products. As for the Online, more experienced moms from the millennial generation dominate this channel as they spend the highest.
3. Win over a slim window of opportunity in newborn stage
To maximize the slim window of opportunity, focusing on the necessities is the ultimate way as these categories are considered as irreplaceable. The first irreplaceable category is Diaper with a high relevancy among the households with kids below 1YO, as seen with almost 100% penetration. The next irreplaceable category are Telon Oil and baby wash that are used mostly since new-born up to 3yo.
On top of keeping the necessities during the new-born stage, moms also aspire to give the best at this stage. Although moms prefer to breastfeed their babies, especially during the stay-at-home period, whenever they are not able to do so, they look for the best-in-class alternatives for their babies. Super-premium/ultra-premium baby formula milk has been proven to have higher spending value compared to the mainstream ones, showing that moms profoundly want the best for their baby.
4. Justify value to win share of wallet in toddler stage
Usually when the kids reach toddler stage (1-6 YO), households will reprioritize their spending. As a result, they will opt for more affordable brands as they adjust the overall household spending budget. One example coming from the Infant Milk Formula and Growing Up Milk where the value share of the mainstream brands is significantly increased when the kid reached 1 YO milestone. Similar trend is also observed in baby personal care where the overall spend is lower as the kids is getting older.
Grow beyond the basics in home and personal care
Home and Personal Care sector are forecasted to experience growth in 2022. There are key factors that brands can adopt to secure the growth by being adaptive to the dynamic shoppers’ mobility and new level of hygiene-related needs.
Home Care: Bringing Relevant Innovation
After seeing a 6% growth throughout 2020 in the Home Care sector due to people spend more time at home, in 2021 both segments in the sector—Clothing and Home—are starting to stabilize as people start to get mobile.
The pattern in 2021 shows that consumers spend more on necessity categories such as Detergent, Dish Wash, and Insecticides. With this visible pattern, other smaller categories are more challenged to perform growth.
The growth of this sector is influenced by the lower-class consumers who are compensating lesser trips through bigger basket size. The lower-class consumers manage to contribute 3% growth while the higher class was only able to maintain the growth.
In terms of channel, the Home Care sector is more GT-centric compared to the overall FMCG industry. Both Home and Clothing segments are heavy on GT channel with 77% and 72% value contribution, respectively. Online channel, the rising star in all FMCG sector, also cannot be neglected in Home Care sector as the growth in 2021 reach over 50% despite small base.
1. Detergent
The growth of Detergent is driven by liquid format with its double-digit growth. The popularity of liquid detergent is highly dominated by sachet packs which contributes to 70% of its value.
2. Dish Wash
There are three main trends in Dish Wash categories; the first is slowing down growth from 13% in 2020 to 4% in 2021, the second one is upsizing trend which can be seen across leading brands that can gain new buyers from their big pack, and the third one is preference of value for money since the growth from affordable brands is higher than other brands.
3. Insecticides
Home Insecticide value growth in 2021 is relatively stable with higher spend per buyer, but challenge is coming from penetration decline. The uplift in Jan-21 and Jul-21 is not as high as previous years as consumers focus is divided into Covid-19 and Dengue Fever.
Disinfect Everything
2020 was all about disinfecting our hands from germs and virus; in 2021, the trend expands to disinfect everything in various Home Care formats. For example, some laundry brands have launched a disinfectant innovation in form of fabric spray, Floor Cleaner brands have launched their wipe formats promoting better hygiene, and Detergent brands infuse antiseptic values to their products.
Islamic Value
Various brands are starting to promote relevance with Islamic values. Some manufacturers create a new brand to deliver this value, and some brands acknowledge this value by adding new variant to their existing line-up. However, that additional value offered is also combined with good pricing and proposition to cover the needs of majority household in Indonesia.
Basic Home Care sector is expected to grow by 3.5% in 2022 with a consideration upon the Covid situation and level of Mobility.
Winning share of wallet across demographic group
Since consumers re-prioritize the needs for home care and prefer to opt for the basic, it is important to win over the share of wallet by focusing on core variant as well as offering a better value for money thru bigger pack.
Optimize price-pack strategy in General Trade
General trade as the most prominent channel cannot be overlooked to optimize pack-price strategy to win in traditional trade and ride the growth in online channel.
Work on Relevant Innovation
During these uncertain times, brands can leverage the needs for hygiene-related innovation to stay relevant and enlarge buyer base.
General Care: Beyond the Offline Store and Value for Money
In 2021, total Personal Care sector can grow in a slower rate than 2020. The bigger picture of General Care trend shows that the highest uplift happened in 2021 following the pandemic situation. The winning categories are facial tissue, shower gel, adult diaper, and hand sanitizer with double to triple digit growth.
Despite the slower growth in 2021, the growth in General Care is seen across all socio demographic classes, where upper class are downgrading while lower class manage to compensate their lower frequency through bigger baskets.
What did general care shoppers do differently this year?
1. Omnichannel Behaviour
Shoppers are open to shop in more than one channel. Growth is seen in GT as proximity channel as well as Specialty Store and Online that manage to recruit new shoppers. Specifically in Online channel, the penetration growth is almost double from 3.6% to 6.1%. The key drivers on this growing penetration are Liquid Soap, Shampoo, Facial Tissue, Bar Soap, and Toothpaste.
2. Upsizing Movement
Growth is seen across medium and big pack size in basic hygiene categories like Liquid Soap, Toothpaste, and Shampoo. Double digit growth and up to 2.5 million new buyers from the three categories are proof that upsizing trends is happening in basic General Care.
3. Higher Trust for Local Brands
Faster growth is scored by several brands in General Care segments coming from Liquid Soap and Shampoo categories with various price points. Several leading local brands are operating in premium price-tiers; showing that lower price does not always guarantee to get new buyers. In fact, buyers are willing to spend more for products that can justify the value for their brands.
General Care is forecasted to grow by 4.6% in 2022, including a consideration upon the Covid situation and level of Mobility.
Leverage Channel Opportunity
Presence in GT and minimarket become a significant factor, but specialty store and online can be an opportunity to grow faster and extend shoppers’ recruitment. Accelerate digital transformation and embrace social commerce.
Optimize Pack & Price Strategy
As General Care shoppers tend to purchase larger size products, having an optimal pack-price strategy is essential. But creating access through small pack size is also important to reach mid-lower-class shoppers.
Communicate your brand value
Shoppers are evolving with more expectations, offering value for money as well as communicate and justify your value become the key to win shoppers.
Spice it up to the next level: Pantry essentials and Snack 2022
The food sector can maintain its growth this year despite the slower pace from last year. With the rising mobility of the consumers, it is natural to see a slowdown of home cooking occasion and its impact to the Food sector.
Being the most growing sector in the FMCG industry, Food sector is standing still as the main contributor of the industry. The growth in 2021 was driven by Pantry categories with double digit growth, higher that its counterpart, Snacking categories.
Cooking Aids and Instant Food segments manage to grow driven by both price and volume, indicating relevancy of both segments remains high among the consumers. Besides, bigger basket size shows an upsizing trend in the categories.
The driving categories in Cooking Aids segment are Chili Sauce, Cooking Oil, and Coconut Milk. Meanwhile for Instant Food segment, the drivers are Canned Food, Instant Soup, and Frozen Food. All driving categories grow in double digit mode, leaving a terrific opportunity to be leveraged further.
From consumers’ social class perspective, in 2021, growth is seen across all social classes. Upper class, who naturally have more purchasing power, expand their category selection. While the lower class, on the other hand, enter new categories as more brands are opening the access for this group.
General Trade remain as the backbone for Pantry Essentials categories as the channel become an extended pantry for consumers. They can reach out the store easily if running out. General Trade is scored at double digit (12%), higher than Modern Trade that can only grow at one digit pace. Online channels, despite its small contribution, show a rapid growth that cannot be ignored.
The Trends
1. Experimenting In-Home Cooking
Although the mobility is recovering and people have started to go out, in-home cooking is still relevant. It is reflected by the increasing number of average categories bought from the previous year. On top of it, the trend among Cooking Aids keeps increasing throughout 2021 compared to Instant Food that goes more stable after the Festive period.
Consumers are also looking for products that can elevate their home-cook meals such as Seasoning Sauce and Meal Maker. For example, one of Seasoning Brands gain more than 30% penetration in last year only. As for the Meal Maker, the One-Step types including Fried Dish, Stir Fried, Soup/Soto, and Special Dish are growing, driven by special local dish like rendang, rawon, and opor ayam.
The in-home cooking occasion trend is relevant across shoppers’ age. Spend per buyer growth is seen in shoppers aged 36 and above. For younger age group, higher spend is also seen but frequency is only maintaining, hence an opportunity to reach them and prolong their purchase.
2. Continuous Stocking up for Cooking Needs
Some key categories in cooking aids show growth in medium and big pack, such as Chili Sauce (medium bottle), Soy sauce (big pouch), and Stock soup (Big Pack). These three categories gain almost 3 million new buyers throughout 2021 alone.
3. Expanding Taste Palate and Dish Options
Trendy foods that come around during the pandemic offer new taste and delicacy for consumers and it has been well welcome. This means that consumers are willing to expand their palate and their dish options even during the stay-at-home period. This is a calling for brands to stay ahead of ever-changing trends to capture consumers’ flavour interests. Some brands from Instant Noodle category have adapted to this trend through unique Flavors like spaghetti, rendang, and Singaporean laksa and the innovation has been well received; seen from good recruitment to enlarge overall brand buyers.
4. The Need for Healthier Options in Cooking
Aligned with the overall lifestyle trend that arises during the pandemic, more buyers are looking for healthier options on top of their current cooking repertoire. For instance, healthier options are now available in Instant Noodle and Seasoning categories. For Instant Noodle, a brand with healthier option perception has been well received by the consumers that able to recruit over 20 million buyers. Some brands in other categories like Canned Fish, Seasoning Flour, and Cooking Oil utilize their communication platform to spread the health and functional benefit of their products.
5. The need for more practical options
The robust growth of Frozen and Canned Food in the past 2 years is seen across consumers groups; indicating a high relevancy of this category. The driver in Frozen Food category is sausage and meatball, while in Canned Food is Canned Fish and RTE Sausages.
In addition, an interesting trend happens in RTE Sausages in 2021. Typically, RTE Sausages category is skewed to mid-lower-class families with young kids. However, a premium brand manages to provide an option for their core buyers to have RTE sausage and become the first in premium market. The innovation is promoted alongside the relevant message of simpler way of cooking and easier meal prep. As a result, the brand can reach the core buyer of upper class as well as both young and older consumer groups.
To The Next Level
Based on Kantar’s forecast, the growth of Food sector in 2022 will be at 6.3%, similar with 2021. This is with the assumption of mobility to continue at the current pace and the economy as well.
So how to take the growth of the Food sector, especially in Pantry Essentials, to the next level?
1. Offer the Needed Products
- Offer the right product portfolio / format that is relevant to the new normal situation, such as offer practicality or healthier option.
- Leverage the expanded taste palate with relevant flavour innovation.
- Optimize product availability to cater the needs across consumer group.
2. Stay close with Consumers’ heart
- Stay ahead of what consumers are after and offering the right combination of ‘newness’ and familiarity.
3. De-aggregate
- Maximize presence in accommodating core buyers and extend presence with the right pack to enlarge recruitment.
The consumption of snacking categories, according to Kantar Worldpanel data, is divided into two big sections: in-home consumption and on-the-go consumption.
As people mobility evolving, in-home consumption for snacking is higher in 2021 compared to last year which is reflected in higher growth than on-the-go consumption. However, on-the-go consumption stands as the main occasion for snacking. School age kids also become the main buyer group for snacking on-the-go. With school from home regulation remain in place, less occasion for on-the-go consumption slows down the growth in the category. As a result, higher in-home occasion for snacking is spotted.
The Trends
1. Preference for In-Home Family Pack
With more in-home occasion, family pack seems to be relevant for the occasion. Besides, the pack offers better value for money, hence this pack size can grow well throughout the higher occasion for in-home snacking. Some key brands manage to recruit new buyers from their big pack and adding thousand new buyers.
2. Importance of Innovation
Innovation in Snacking categories is important to ignite excitement in the market and to expand buyer base. The innovation is not limited to new flavours only, but also in new segment, new packaging, and new communication. One of the successful innovations come from a biscuit brand that taps into the Flat Wafer segment and gains more than 5 million new buyers within one year of launch in 2021.
Another successful innovation comes from the flavour side, where some brands adopt local and unique flavours like pandan, balado, and butter caramel. The buyer base of brands that take part in this flavour innovation reaches up to 1.7 million new buyers.
3. Festive is Back
In 2020, Snacking categories’ uplift during Festive period is limited as consumers focus more on basic staple needs. In 2021, penetration of gifting on Biscuit category has been gradually improved as people start to indulge themselves like pre-Covid time. So, it is expected to see the bigger bounce of the gifting occasion in Biscuit category during Festive 2022.
To The Next Level
A slightly lower growth of 6.1% is forecasted for snacking in 2022 with a note of consideration in mobility level and Covid cases. Here are the three future-proof strategies for manufacturers to take Snacking to the next level in 2022.
1. Winning Both In-Home and On-the-go
- In-Home occasion shows positive trend during stay at home but On-the-purchase start to recover.
- Be relevant on both occasion with optimum portfolio availability.
- Communicate with applicable message in the new normal and evolving situation.
2. De-aggregating
- Reaching different consumer groups by identify the needs in each and accommodate with optimum pricing strategy to be align with different level of affordability.
3. Understand Consumers with Innovation
- Understand the preference and keep up with the trend to bring excitement in snacking.
Quench the thirst for growth
As lessen mobility restriction hence more activity outside home in 2021, the beverage and dairy sectors trend has been dynamic with various activities across consumers' age.
In this section, we will explore on the Non-Alcoholic Ready to Drink (NARTD) Beverages, divided into Dairy and Non-Dairy categories.
Beverage is one of the most challenged sectors in the pandemic time due to its high dependency upon impulse and on-the-go purchase. Limited mobility and stay-at-home period are impacting some categories’ slower growth.
The health benefit in Dairy Beverage segment become the key factor for its survival during the pandemic. The other supporting factor is more planned trips or take-home occasions in the categories. While on the other hand, tougher circumstances happen among Non-Dairy Beverage categories due to its higher dependency upon the on-the-go purchases. In 2021, a recovery trend is seen in Non-Dairy Beverage categories when the mobility restrictions are loosening.
There are four key learnings in NARTD sector in preparing growth in 2022.
1. Road to recovery especially among adults
2. Proximity is highly relevant, General Trade is showing faster recovery
3. Higher value for money and shifting occasions
4. Festive is back for beverages
1.Road to recovery especially among adults
As one of the countries with largest informal work force in the world, the adult age group in Indonesia will gradually increase their mobility and outside home daily activities. With the rising mobility, the recovery for impulse purchase in NARTD is expected. Adult age group is also the driver for 2021’s NARTD growth, as they cover the static growth among younger age groups.
2. Proximity is highly relevant, General Trade is showing faster recovery
When it comes to impulse purchase, proximity is a particularly important factor for consumers. When they are thirsty, they will not walk for another half kilometre finding another store, instead they will look for the closest store to get their drink. As such, important to have strong availability in proximity channels.
3.Higher value for money and shifting occasions
The popularity of bigger pack sizes is driven by the better value for money and more people are enjoying the beverages at home with family. The key categories for this bigger pack size trend are RTD Tea and Carbonated Soda Drink with double digit growth.
4. Festive is back for beverages
The festive uplift in 2021 has been recovered and back to pre-covid level across categories like CSD (Carbonated soft drinks), RTD Tea, and Mineral Waters. This recovery is a good sign for brands to gain back the momentum to optimise the festive peak sales.
Disrupting with Innovation
There are several notable innovations that are seen in the NARTD market that has been a disruptive movement due to the impacts brought to the category.
In the Yogurt category, the leading brands are consistently bringing innovations in packaging, format, and flavour aspects. By the innovations applied, these brands can expand their buyer base by gaining close to 9 million new buyers and extend the occasion beyond its functional use as nutrition source.
The other inspiring case comes from Liquid Milk category. There is one dark horse brand coming into the market that able to recruit 11 million buyers. The key driver for the rise is leveraging affordability to grow penetration among mid-to-lower class consumers. Besides, price point is far below the Liquid Milk average price which naturally accepted by wider group of consumers.
Optimism is an ally for brands in the coming years with recovering trends from on-the-go purchases. The early sign of recovery is seen across regions and is expected to retain following the increase mobility due to higher vaccination rate and less anxiety among consumers.
With the current situation, the NARTD market is expected to grow in both segments. Dairy Beverages is projected to grow at 7% in 2022 while Non-Dairy Beverages is at 6%. This healthy growth is exceptionally depended on the Covid situation in the coming year.
However, brands should prepare for growth through these two pivotal points.
De-aggregate
- Understand each consumer group and areas opportunities to tap into.
- Leveraging opportunities outside Jakarta that is showing faster growth.
- Adult age group is the key focus for the time being as demand from this age group remains strong. While kids & teens are starting to come to school, be moderate in expecting recovery as some level of parents’ concern might influence the snacking habit
Drive for Relevancy
- Optimising opportunity beyond the major beverages like Tea, Water, Juice, and Milk as other categories serve less than half of Indonesia population
- Understand consumers’ barrier to entry and drive to consume
- Work on innovations around access creation, differentiation, and occasion extension – depending on the maturity stage of your brand and your respective categories
Food for thought
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