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.
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.
