Indonesia 2016 | Brand Building | Re-igniting growth in a slowing economy
Five tips for winning with FMCG
Insight Director, Kantar Worldpanel Indonesia
Headlines about the Indonesian economy always used to be about stratospheric growth. Now, they’re about the headwinds. As the national economy decelerates, real growth rates in gross per capita income – and spending levels – continue to slow, and that is having a knock-on effect on the market for consumer goods.
Despite this slowdown, however, the sheer size of the consumer goods market in Indonesia still makes it highly attractive, and a must-win market for many companies in search of growth. The challenge is to adapt and react to the new business environment.
A new view of shoppers
To help consumer goods companies position themselves for growth in these changing conditions, we need to look closely at how consumer behavior has changed.
Economic crises hit consumers psychologically as well as economically. Here are some of the ways people adjust their buying behavior to adapt to the changing economic conditions:
Buying from fewer categories. Consumers are simplifying their purchasing, focusing more on essentials than indulgences. In the past two years, the number of FMCG categories being purchased has, on average, decreased from 48 to 46, with impulse buys most affected.
Returning to smaller packs. Although Indonesian consumers have traditionally preferred smaller pack sizes compared to consumers in developed markets, there has, until recently, been a strong trend towards upsizing. That trend has now slowed, with fewer categories seeing bigger pack sales, because smaller sizes tend to be more affordable. In the past year, 41 percent of FMCG categories have enjoyed upsizing, a significant decline from 53 percent a year earlier.
Abandoning premium products. Across categories, we see declining sales of premium products and brands as consumers make price a higher consideration and look for products that deliver efficacy and durability at the right price. Even for ‘high-involvement’ categories such as baby milk powder, we see premium brands struggling as consumers opt for more affordable alternatives.
Searching for specials. In order to get the best value for their reduced disposable income, consumers are looking for bargains. Looking at three years of data, we see a significant upsurge in shopping on promotions, from 15 percent of all modern-trade purchases to 18 percent in 2016.
Shopping less often. As they work to manage their budgets, consumers are making fewer trips to the shops – 351 trips a year in the 12 months to the end of Q1 2016, down from 359 trips a year earlier. Large-format modern trade channels such as hypermarkets are the worst affected, while small-format modern trade stores continue to grow, as consumers are drawn by convenience, accessibility and value for money.
Ways to win in a tough market
- Continue to innovate - New segments will emerge from changes in consumption behavior, and consumer needs will continue to evolve. Stain removers, for example, are a relatively new and innovative home care product in the Indonesian market; they continue to grow because they meet the consumer need for convenience and help extend the life of the things they own.
- Be More Proactive – Difficult times are the time for brands to think outside the box, be creative, and make a greater effort to get in front of consumers. The bottled water brand AQUA has created a memorable and engaging campaign around the product’s benefits that has helped build brand equity. This is also a good time to rethink the product mix to suit changing demand. The ready-to-drink tea brand Teh Gelas recently launched plastic bottles, delivering incremental sales by providing extra convenience for on-the-go consumers.
- Stay close to your consumers – At a time when customers are redefining what good value means to them in different product categories, it is more important than ever to be close to them and to understand what they are thinking. Investigate changes in habits and sentiment, especially around value in a given category. Are they postponing purchases, trading down, or buying less?
- Focus on buyer recruitment – Recruiting new buyers can mean the difference between survival and the scrapheap in the harshest of economic conditions. Make relevance a high priority; non-essentials are being hard-hit, so show consumers that your brand is one that can’t be crossed off their shopping list. Price is undoubtedly a major driver of trial, but it is not the only one; brand equity plays an important role.
- Stay Positive - Know that good times will come again, and remember: strong brands outgrow the market in tough times.