Overview

Emerging from challenging year stronger and leaner

In some senses, 2015 was a year to forget for businesses in Indonesia. While posting strong growth by world standards, GDP growth in Indonesia slowed to its lowest rate since the 2009 crisis, and rising inflation put the squeeze on consumer spending power. Kantar Worldpanel reported that the value growth of fast-moving consumer goods dipped to just 1 percent, and the average number of annual shopping trips made by consumers here fell by about 10 percent.

But many Indonesian businesses are now looking ahead with renewed, if cautious, optimism. Growth forecasts are still lower than in the past five years, but most businesses and observers expect to see a recovery during 2016. The International Monetary Fund in early 2016 described Indonesia as “one of the best performing emerging market economies” and says good economic management and timely reforms will help the country “take its economic success to the next level … finding new sources of economic growth”. The IMF says that not only is Indonesia well placed to cope with a challenging external environment, planned government reforms to improve infrastructure, boost the business environment and open up trade will help deliver sustained, strong growth.

Indonesia’s people share this optimism. The Consumer Confidence Index (CCI) measures consumers’ expectations for their income, employment and spending power, as well as the economy in general. In January 2016, the Central Bank of Indonesia reported that the CCI had recovered by 5.1 points – a level that has been sustained through Q1.

President Joko Widodo pledged at the ASEAN conference this year that he would “continue to simplify, continue to open up, continue to modernize our rules and regulations”. And the formation of the ASEAN single market community is making regional expansion a more achievable aim for powerful Indonesian brands. At the same time, this presents new opportunities for businesses in neighboring markets to establish themselves in Indonesia.

Now is therefore an exciting time to build brands in this market. Indonesia has only just embarked on a new stage in its development, and one that is transforming the business and consumer landscape. Consumers are fast becoming more discerning, and are forming their opinions based on an ever-wider range of influences.

They are also making spending decisions faced with a greater range of choice than ever before. In the past year, many FMCG categories have seen shrinking volume sales for the first time in recent memory, but not all brands and sectors have been hit in the same way.

Changing shopping habits and the need to prioritize spending mean the stampede of shoppers towards the fast-growing modern retail trade has slowed, though it continues; a gradual shift towards bigger pack sizes has turned into a hunt for smaller, more affordable packs and portions at the lower end of the income scale. And there is a significant low end here, which represents a long-term opportunity for brands.

GDP per capita has grown from US$790 in 2000 to $3,347 in 2015, one of the strongest rates of growth in the world, World Bank figures show. But beyond the general trend that these averages describe, there is both tremendous wealth, mainly in the country’s busy capital, and many thousands of people who live in poverty or close to it. There are opulent five-star hotels and designer boutiques; there are fishing villages little changed in half a century, and everything in between. The Indonesian middle and affluent classes, who now number about 90 million, are expected to expand to between 130 and 140 million by 2030.

The prevalence of smartphones and social media is proving a powerful catalyst for this change. There are 80 million social media users here, and that figure is climbing. The value of e-commerce is rising fast – doubling in the past two years alone – and it is forecast to go from being 0.8 percent of all retail sales now to 8 percent within a decade.

The digitization of shopping – indeed, the digitization of life in Indonesia – has nurtured a fresh crop of new and disruptive brands that are not just altering markets but consumer expectations across all categories.

These challenger brands and challenger business models are quickly establishing strong connections with consumers. They are also underlining the need for successful, valuable brands to be innovative and build meaningful relationships with today’s consumers – and those people who cannot yet afford to buy but who will join the consumer classes in the coming decade.

Brand building here until recently was all about awareness – getting the biggest presence on television. But trying to out-shout the competition is no longer effective. Now, successful brand-building requires not just a strong presence but also a strong sense of brand purpose, and a message that resonates emotionally with consumers who are seeking the best of the modern world – without compromising on beliefs and tradition.

The strongest brands tell stories that reach across the diversity of modern Indonesia, and help them manage the tensions they face as their world changes. They relate these stories using a carefully managed balance of online and offline media; ‘old media’ is far from dying, in fact some of the biggest-spending advertisers on Indonesian TV are among the new breed of digital disruptors.

This focus will not just help unlock long-term growth in Indonesia but will equip those local brands with regional aspirations to explore opportunities opened up by the ASEAN agreement on free trade. Indonesia’s leading names are ready to expand, and take Brand Indonesia to the world.

BrandZ Indonesia Top 50 2016

BrandZ Indonesian 2016 Report Top 50 Report

Top 50 Chart

Top 50 Infographic


Methodology and valuation by Millward Brown

Share