FMCG Outlook

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Indonesia FMCG
Outlook 2024
Unveiling the trends and
the forecast for growth

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Welcome to
Indonesia FMCG
Outlook 2024

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01
The shape of
Indonesia’s FMCG
landscape
Anticipating the trend and aligning
brands’ growth strategy

5. Indonesia has posted steady year-on-year GDP
growth of around 5% over the past five
quarters, while inflation has been coming down
and settling at 2-3%. The economy is showing
resilience, making gradual progress rather than
any significant improvement. The consumer
confidence index has slightly improved over the
past year, stabilising at around 120.
However, the increasing cost of living post-
pandemic is challenging consumers’ purchasing
power. To manage their household budget they
are prioritising primary needs such as transport
and utilities, and holding back spend on
secondary needs like travel, fashion, and
durable goods. This trend is similar across all
consumer groups, from upper class to lower
class.
Households continue to allocate most of their
overall budget to FMCG and fresh food, but
within that they are adjusting their spending
differently from one individual sector to another.
A stable macroeconomic situation

6. Zooming into FMCG spending, consumer
behaviour varies from one sector to another.
For in-home purchases, downsizing and
downtrading are the key trends in the Home
Care and Personal Care sectors, but shoppers
are willing to spend more in the Beauty sector
which brings an opportunity for
premiumisation. When it comes to the pantry
essentials that meet shoppers’ basic needs,
value growth is only coming from price
increases as shoppers cope with inflation. In the
Baby Care sector there is a trend for upsizing,
as shoppers balance higher prices by
purchasing a bigger pack size to maintain value
for money.
As consumers rationalise their spending by
managing priorities within FMCG categories,
brands need to develop a more appropriate
strategy to win share of wallet. Brands that
improve affordability might benefit from the
situation, but a cheaper price is not the only
way to win shoppers. Those that communicate
way to win shoppers. Those that communicate
a clear justification, deliver product quality, and
offer optimal usage benefits can earn a more
premium price.
In addition, shoppers are now being challenged
with an overwhelming choice of available
options for new products. Innovation is one way
to grow, but it’s vital to accommodate
consumers' needs and wants. Brands that
The rationalising of spend

7. consumers' needs and wants. Brands that
deliver relevant innovations are likely to grow
their buyer base faster than others. For example,
a beauty brand can ride the trend of higher
demand for sunscreen and offer extended
benefits of protecting and moisturising.
For out-of-home (OOH) purchases, volume
growth is being driven by both snacks and
beverages, mainly non-dairy beverages. This is
likely to be due to higher post-pandemic
mobility and school activity. To recruit shoppers
for OOH occasions, products need to find a
good fit. Some brands achieve this by launching
relevant innovations that offer both affordability
and practicality. Above all, high availability is
the most crucial factor, given the impulse
purchase behaviour exhibited by consumers.

8. Although population growth in Indonesia is
slowing, Next-Gen (millennials and GenZ)
consumers are gaining importance as decision-
makers within households. They are driving
FMCG growth beyond the price increase which
can also grow volume, and they behave
differently from the older generations. They are
more open to novelty and willing to try new
more open to novelty and willing to try new
products, which can be a great opportunity for
brands to promote their innovations. Kantar
Insights’ study on Generation 360 found that
Gen Z consumers are striving for a better
quality of life, and around 78% of them want to
spend time with their family, which suggests a
willingness to spend more on high quality
willingness to spend more on high quality
products that support this goal.
To reach this group of shoppers, brands and
manufacturers should be able to accommodate
different needs in different regions. Next-Gen
shoppers in key cities might demand more
convenience and strong availability across
Embracing Next-Gen shoppers

9. convenience and strong availability across
channels, including online and specialty
channels. Meanwhile, shoppers in rural areas
might be more open to product innovations.
For instance, in the Pantry Essentials sector,
shoppers in rural areas have more Cooking Aids
categories in their shopping baskets, showing
their willingness to experiment.
In addition, Next-Gen shoppers are more
digitally savvy than the older generations.
Reaching them through digital media has
become fundamental. Making relevant noise in
digital media is important, but optimising the
right touchpoints to recruit new buyers is
another challenge. Almost 90% of Next-Gen
shoppers use YouTube as their main digital
touchpoint, and more than half of FMCG
shoppers from this group use TikTok. Finding
the right balance to reach target groups and
convert their awareness to sales is now the
main homework for brands and manufacturers.

10. With the upcoming election in 2024,
Indonesia’s macroeconomic situation will
become pivotal to consumer spending. Since
the last election year in 2019, the government
has maintained the inflation rate and GDP
growth to keep the macroeconomic scenario
steady. The excitement surrounding the
election, combined with greater political
stability, might drive households to feel more
optimistic about the economy and overall cost
of living, and increase consumer confidence.
Overall, we project a modest 5% value growth
for Indonesia’s FMCG industry this year
compared to 2023, in alignment with the
expected GDP increase – assuming status quo
in the market’s economic condition. Growth
across sectors is likely to be slower in 2024 – in
particular Pantry Essentials – except for Baby
Care, which is projected to fare slightly better.
FMCG outlook for 2024

11. Whatstrategiesshouldbrandsand
manufacturersadoptfor2024?
Provide value for money
Due to economic pressures across all cohorts, shoppers need to rationalise their spending.
This means manufacturers must emphasise the value for money of their products to better
compete in today’s market, which includes offering affordability, or justifying the price
through strong propositions.
Leverage the mobility comeback
For out-of-home consumption, the opportunity lies in the return of mobility following the
pandemic, and the higher need for practicality and availability. Consumers are exhibiting
impulse purchase behaviour, making it important for brands to be present mentally in the
moment, and physically in the store.
Engage with Next-Gen shoppers
The younger generations hold strong growth potential in today’s market, due to their desire to
explore new purchases that will help them achieve a better quality of life for themselves and
their families. Securing future shoppers’ interest today through understanding their media
preferences will help to unlock growth in the long run.

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02
FMCG Sector
Dynamic and
Shoppers’
Response
De-aggregating brands’ strategy in
each sector

13. The declining birth rate in Indonesia presents a
daunting challenge for Baby Care categories,
strongly signalling a need to adapt to shifting
demographic trends. In the face of this
challenge, manufacturers find themselves at a
crossroads, with an urgent requirement to
reassess their approaches to cater to a
changing consumer landscape. The diminishing
number of births poses potential hurdle;
however, within this challenge, an intriguing
however, within this challenge, an intriguing
opportunity is presenting itself.
Households with babies (0-6 years old) have
emerged as resilient shoppers for Baby Care
categories. They display a distinct inclination to
prioritise baby goods over other FMCG
products, underlining the enduring importance
of these categories in their basket. Despite the
broader demographic challenge, the growth
rate for baby categories within these
households outpaces the overall FMCG market
by a substantial 2%. This resilience suggests
that, while the market may be contracting,
there remains a steadfast demand for Baby
Care categories within this specific
demographic segment.
As we dissect the households based on the age
of the baby, a compelling trend reveals itself.
While the relevance of baby categories
gradually diminishes as the child grows older,
the early stages of a baby's life wield
substantial influence, driving households to
allocate a larger share of their budget to baby-
related products. These not only constitute a
sizable proportion of the FMCG basket, but also

14. sizable proportion of the FMCG basket, but also
grow consistently year after year.
Manufacturers keen on capitalising on this
trend must comprehend how needs and
preferences evolve throughout the baby's
journey.
Understanding behaviour and preferences
during each life stage is paramount. For
instance, the popularity of Baby Cologne
among households with babies younger than
three years old sharply contrasts with the
preference for Baby Shower Gel among older
infants. Identifying such nuances allows
infants. Identifying such nuances allows
manufacturers to tailor their strategies, aligning
with the changing demands of each life stage
and ensuring sustained growth.

16. The Personal Care sector in Indonesia unfolds into
two distinct segments: Personal Care and
Beauty. Each has its own unique trajectory within
the FMCG landscape.
In recent years, Beauty has taken centre stage,
emerging as the darling of FMCG with a robust
growth curve boasting a compound annual
growth rate (CAGR) of 2% in penetration over the
past three years. This surge is testament to the
sector's resilience, and its ability to capture the
imagination of consumers. In contrast, the
Personal Care segment faces a different set of
challenges, primarily the need to contend with
saturated price competition that has driven
affordability to the forefront. The overarching
trend can be summarised as a dichotomy: while
the key trend in Beauty is premiumisation,
Personal Care emphasises prioritisation in the
consumer basket.
The channel landscape is evolving, presenting
both challenges and opportunities. Traditional
channels like general trade (GT) and minis
continue to dominate, but the real growth
narrative can be found in digital commerce and
health and beauty apothecaries (HABA). Over

17. health and beauty apothecaries (HABA). Over
the past five years, HABA has achieved a
remarkable CAGR of 18%, underscoring its
emergence as a formidable player. Digital
commerce reached a CAGR of 64% over the
same period, signalling a paradigm shift in
consumer shopping behaviour.
A deeper dive into the HABA segment reveals a
strong premiumisation trend, which is reshaping
specific Personal Care categories. This is
particularly pronounced in Shampoo, Toothpaste,
and Body Care, where consumers are increasingly
gravitating towards more sophisticated and
higher-quality products.
Not only that, but the trend also represents a
shift in consumer attitudes towards self-care
and a desire for products that align with their
individual lifestyles. As consumers become
more discerning and prioritise quality, retailers
in the HABA space have a unique opportunity
to differentiate themselves by offering products
that not only meet functional needs but also
elevate the overall personal care experience.

19. Diving into the Home Care sector unveils a
dichotomy between two pivotal segments:
Clothing and Home. The Clothing segment
predominantly encompasses Laundry Care
categories, while the Home segment boasts a
diverse mix of Home Cleaners, Insecticides, Air
Fresheners, and more.
Reflecting broader trends witnessed in overall
FMCG shopping behaviour, consumers within
the Home Care sector are adept at adjusting
and rationalising their purchases of household
necessities, as they navigate the shifting
economic landscape.
Despite this, the rate of value growth is closely
aligned, with FMCG at 5% and Home Care at
4%, primarily propelled by incremental price
increases within the sector.
A noteworthy parallel behaviour can be seen
within both the Clothing and Home segments,
which share value growth of 4%. Consumers
exhibit a higher inclination towards prolonging
the use of products, indicated by a steady
frequency of purchase trips within both
segments. This consumer suggests a deliberate

20. segments. This consumer suggests a deliberate
effort to maximise value and make informed
choices, contributing to the sustained growth in
spending.
However, the coping mechanisms within each
segment diverge. In Clothing, consumers have
a tendency to buy more units by prioritising
smaller packs. This approach allows them to
manage budget constraints without
compromising on essential laundry care.
Conversely, within the Home segment,
consumers adopt a more selective approach,
emphasising affordability by prioritising
cheaper brands or alternative formats.

22. Venturing into the Pantry Essentials sector, a
diverse dynamic unfolds, with three primary
categories shaping the kitchens of Indonesian
households: Staples, Quick Process, and
Cooking Aids. Each plays a unique role, catering
to the varied tastes and preferences that are
reflected on plates across the country every day.
Staples emerges as a cornerstone, led by Instant
Noodle, found in the pantries of the majority of
Indonesian households. Complementing this is
the Quick Process segment, comprising
categories requiring minimal processing, such as
Frozen Food, Instant Soup, Canned Items, and
Frozen Food, Instant Soup, Canned Items, and
Ready-To-Eat Sausages. Finally, Cooking Aids
encompasses an array of Seasonings, Dressings,
and Dippings – a variety of products that elevate
dishes to new heights.
Growth in the Pantry Essentials sector has
largely been propelled by price increases.
However, while volume growth has remained
stagnant across the segments, the effect of
inflation has had divergent impacts. For the
Staples segment, this effect has been negative,
which has hindered its growth. In contrast, both
Quick Process and Cooking Aids have

23. Quick Process and Cooking Aids have
demonstrated resilience, achieving organic
growth. Notably, there are hints of a
premiumisation trend in the Quick Process
segment, as consumer mobility is higher
compared to previous years.
Instant Noodle has achieved almost full
penetration across Indonesian households.
However, its growth trajectory is now being
dragged down as household consumption levels
decrease, a result of rising prices. Consumers are
pushed to undergo an adjustment period, aligning
with the new price baseline and potentially
revitalizing consumption to previous levels.
Within the Quick Process segment, Frozen Food
emerges as dominant, accounting for 73% of the
total market value. This category not only
registers the highest growth rate among Pantry
Essentials but also boasts substantial growth
potential. Although it has the highest penetration
within the segment, at less than 60% this still
leaves ample room for expansion. Canned Food
and Ready-To-Eat Sausages follow, contributing
to the sector's robust growth.

24. In the Cooking Aids segment, a nuanced
picture emerges when we categorise by
penetration and frequency levels. Three distinct
groups form: primary categories with over 80%
penetration and high purchase frequency,
secondary categories with 50-80% penetration
and lower frequency, and tertiary categories
and lower frequency, and tertiary categories
with penetration below 50%. This provides
insights into the maturity stage of each
category, guiding strategies to either expand
the shopper base or increase purchase
frequency.

26. The Out-of-Home (OOH) sector stands as a
distinct group within FMCG, not only due to its
substantial share of value within related
categories compared to in-home, but also
marked by Worldpanel Indonesia's innovative
approach to capturing purchases. This
enhanced methodology now encompasses
both pre-packaged and freshly prepared items,
extending its scope to include on-premise
consumption experiences.
The unique journey of the OOH sector is vividly
reflected in its organic year-on-year growth,
which is four times higher than for in-home
purchases. This momentum is not a statistical
anomaly; but a reflection of the increasing
levels of mobility in today's post-pandemic
scenario. Sustaining this growth has become
paramount, especially considering that
shoppers exhibit a willingness to invest over
10% more on products purchased OOH
compared to their in-home counterparts.
+11% spend per buyer growth on
OOH purchase while IH are coping
more with price increase

27. To comprehensively understand and sustain this
growth momentum, delving into the dynamics
of Indonesia’s shoppers is imperative. Taking an
age-centric perspective offers a clear lens,
shining a light on preferences and daily OOH
consumption patterns.
Each age group presents a unique set of
behaviours. While Kids lead in the number of
trips, it's the Adults who contribute the most
spend on each trip. However, the story shifts
spend on each trip. However, the story shifts
with Teens and Young Adults, making it
necessary for OOH category brands to build a
thorough understanding of their preferences
and characteristics to inform strategic
decisions.
Zooming further in on each age group,
dissecting their habits by usage or time of
consumption provides invaluable insights. For
Teens and Young Adults, OOH categories are
Teens and Young Adults, OOH categories are
predominantly purchased during break: over
lunch, or after school or work during the
journey home. Aligning product availability
with their surroundings, be it schools,
workplaces, or commuting hubs, becomes
crucial. Additionally, tailoring product portfolios
to resonate with their preferences ensures
relevance and engagement.

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Food for
thought

30. FMCG Outlook 2023
Report
Food for thought
ID Beauty Trend
Report
ID Home cooking
Report
ID Festive 2023
Report

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Indonesia FMCG Outlook 2024
Contact the author:
Corina Fajriyani
Senior Marketing Manager
corina.fajriyani@kantar.com
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