02.
What are the trends and opportunities?
Dig into each segment in pantry essentials
Staples have a market penetration of almost 100% and are found on the shelves of almost all households in Indonesia. The categories include cooking oil and instant noodles. The rising prices of staples has forced shoppers to adjust their spending and make fewer shopping trips rather than reduce what they buy across these two categories.
Cooking oil accounts for 9-10% value in FMCG and the price has been very volatile in recent years. The government was forced to take action to control the high price inflation. In early 2023, a new brand - Minyak Kita - was launched to boost supply and helped to slow down the price increases. The brand’s price is controlled by the government and retailers can only sell it at a fixed price. The strategy worked - the average price of cooking oil reduced.
However, the price has not fallen to the pre-price-rise levels of 2021, so purchase frequency still remains low. When prices were higher in 2022 you could find a wider range of brands in shoppers’ baskets indicating they might opt for the most affordable options regardless the brands to maintain the overall spending.
Instant noodles is the number two staple category within the pantry essentials sector. With a category penetration of almost 100%, almost all households have been impacted by the rising price of instant noodles, which is being driven by the soaring price of raw materials.
The story for instant noodles is similar to other cupboard staples – shoppers bought instant noodles less often and this pattern played out across all social classes. Big mainstream brands are able to weather the storm thanks to their strong brand equity and good availability.
But staple category brands should not rest on their laurels. Although they will keep their space in shopping baskets, it’s still important for manufacturers to balance price with the affordability of their core buyers. Staples are big business – just 1% of the market is worth billions. Reaching 1% penetration can lead to around IDR 500 billion for both categories. The opportunities are huge.
Cooking Aid is the main category for in-home cooking and has shown a modest 2% volume growth year on year. This resilience – even in the more mobile post-pandemic world – underlines the segment’s continued relevance in households.
Looking more closely at the regions, we see faster growth in secondary cities and rural areas with volume growth of 2% and 4%, respectively. Meanwhile, volume growth in urban areas is more limited because it is mainly driven by price increases. Urban remains important and contributes more than half the volume for the segment, while rural can grow faster than urban. This signal that rural shoppers are adopting more
When we deep dive into each of the categories, we see that some have grown faster than the segment. The faster growth shows shoppers are keen to experiment more with cooking aids. If we look at rural shoppers, sauces categories - such as oyster and tomato sauce - are growing faster as people look to try out more ingredients in their cooking.
Meanwhile, the meal maker category , which offers practicality and convenience is growing faster in urban areas where there is higher mobility and more demand for convenience. Ayam Goreng and Nasi Goreng have the highest numbers of repeat purchases, while Bumbu Rendang is the most frequently bought item.
There are many opportunities for cooking aids brands to start expanding in secondary cities and rural areas and strengthen their presence in urban areas.
With the domination of sachet packs in the market as in 30 – 40 % share in the overall landscape, it becomes essential to understand the shopper behavior in general trade and fit into the cash outlay of the consumers in the secondary cities and rural areas. Brands can win shoppers by offering an effective price and pack strategy.
In today’s increasingly busy and mobile world, the need for simplicity is a big trend for in-home cooking across Indonesia. The processed food sub-segment has benefitted from this and enjoyed robust growth over the past two years, even in the face of escalating prices.
This highlights just how important simplicity is in the Pantry Essentials market and reflects changing consumer preferences and lifestyles. The growth of processed foods is mainly being driven by double digit growth in frozen food, while the growth of canned food and instant soup are below 10%.
Now, let’s take a closer look at Frozen Food, the category with the fastest growth. It’s booming in rural areas, gaining over two million households. People are not only buying Frozen Food more often, but it’s also increasing in basket size. This surge is partly thanks to an increase in the number of General Trade stores with chillers and freezers and has led to 14% growth in this channel compared to last year. This offers more opportunities for Frozen Food brands to reach consumers in different areas and through strong availability across channels, including General Trade.
Another interesting insight is that we see smaller brands playing a key role in driving category growth in a scattered market. The combination of these smaller brands drives the growth with their strong availability in general trade, which offer better proximity. With the increased availability of chillers/freezers in general trade, these brands are offering buyers affordable prices without compromising on product quality.
At the other end of the scale, large brands are also growing and recruiting new shoppers. One of the premium brands, Kanzler, has a price point 60% higher than average, yet it still managed to recruit over 1.8 million new shoppers in General Trade.
They key is to offering a clear price distinction to stand out from the competitors. The opportunities for frozen food manufacturers are to offer better proximity and affordability, and justify the premium price with a clear proposition to differentiate their brand.
