RAPID CHANGES
IN TURBULENT TIMES
This year’s Ramadhan festival in Indonesia saw the biggest Mudik – or homecoming – ever.
Almost half of the population returned to visit their hometowns following years of restrictions on mobility due to the pandemic. Despite the post-pandemic positivity in the market, the usual uplift in FMCG sales was more muted than in previous years, as shoppers took a more prudent approach to celebrating.
70% of buyers claim they spend more in Ramadhan than any other month of the year
Kantar Panel Home Festive Survey 2023
Indonesian shoppers’ behavior is being shaped by global factors, including inflation, as well as local factors such as changing demographics and household priorities. In this report, we explore the impact this had on the FMCG market during 2023’s festive season (22 March to 20 April), and explain what manufacturers and retailers can learn from this going forward into 2024.
After a short-term decline in GDP when COVID hit in 2020, Indonesia’s economy is heading in the right direction once again, with growth of 5.3% in 2022 – higher than it was before the pandemic.
However, the rate of inflation nearly doubled between March 2021 and March 2022, and now stands at almost 5%. There is evidence that this is influencing how Indonesians prioritise their FMCG expenditure.
Shoppers’ household FMCG expenditure is 1.3% lower than last year, as they hold back amid financial pressures. This restraint was reflected during the festive season. While there was still an uplift in spend, the rise in value during the pre-festive period was slower than in 2022, dropping from 12% to 10%. There was also a less pronounced peak, with a jump of 2% compared to 7% last year.
What’s more, this is not organic growth driven by shoppers purchasing more products. There was only a 0.1% rise in volume purchased compared with 2022, with the additional value largely coming from higher prices. This creates a challenging environment for all FMCG brands.
Surprisingly, the categories that did see increased purchase volumes were those that are not traditionally ‘festive’: personal care and home care. This suggests there is an opportunity for brands in non-festive categories to help drive the uplift in the future. In food and beverages, on the other hand, Indonesian consumers bought less than they did last year.
The uplift in spend was also lower for key festive categories, including cordials where 40% of sales are made in just two months of the year. While demand continued to increase, the value uplift in 2023 was just IDR 461 billion, compared with IDR 684 billion in 2022, a pattern that is also seen in biscuits, condensed milk, and ready-to-drink tea. Brands in these categories should pay attention to boosting more occasions outside the festive season to sustain growth.
While Food and Beverages categories remain the core of Festive consumption and gifting, we see that among the younger consumers there is an inclination for personal care and beauty categories where the uplift in sales during this year’s celebrations was notable.
Source: Worldpanel in Home FMCG Data
Presenting friends and family with gifts during the festive season is a cherished tradition in Indonesia. Overall, 80% of households continued the tradition in 2023, with cash and FMCG remaining the top choices for gifting. FMCG gifting penetration remains high with more than 35% of households receiving gifting this year, despite the number being 4% lower than last year.
Consumers are also diversifying more and more into products outside the FMCG realm, choosing artisanal goods such as home-made cookies or tableware, as they are perceived as more personal.
Within FMCG, the top gifting categories are a combination of staple goods – for example cooking oil and noodles, and indulgent products such as soft drinks, biscuits and cordial.
Gifting baskets differ depending on consumers’ socio-economic groups. Mid-to-low income consumers – who are the biggest gift-givers – tend to select basic necessities, while upper class baskets skew more towards non-essential, ready-to-eat or drink treats.
Traditional trade still dominates in Indonesia, contributing the biggest share of festive FMCG value – 70% – due to its convenience and proximity to shoppers. The channel remains important for manufacturers to recruit shoppers during the festive.
On the other hand, growth in modern trade is significantly faster this year for both hypermarkets and minimarkets. The channels also manage to attract more shoppers as penetration increases, which might be an impact of a higher volume of products being offered on promotion. This suggests that promotion in modern trade during the festive period becomes attractive for shoppers in coping with the price increase and finding ways to shop with better value for money.
In addition, shoppers’ spending patterns have also shifted. In previous years, they began their festive shopping earlier, to take full advantage of promotions. Before and during the pandemic, this led to higher FMCG volume sales in the two months prior to the festive season. This year – even though manufacturers still offered promotions – shoppers held back spend until closer to Ramadan itself, especially in those categories which rely heavily on festive sales. If this ‘last minute’ demand trend continues, there could be fierce competition to get shoppers’ attention during Ramadan.
