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Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Contents
Executive summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 2
The Indonesia imperative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 3
Winners take all (for now). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 3
Shopper insights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 6
1. Pay more for branded products with quality or functional benefits . . . . . . . . pg. 6
2. Are not as loyal to brands as players may think. . . . . . . . . . . . . . . . . . . . . pg. 7
3. Fill their baskets with similar products (and often brands) across the country. . . pg. 9
4. Prefer small basket and pack sizes and frequent shopping. . . . . . . . . . . . . . pg. 10
5. Embrace social media and digital marketing. . . . . . . . . . . . . . . . . . . . . . . pg. 11
Page 1
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Executive summary
Until recently, most consumer product companies
paid relatively little attention to Indonesia. Today,
many consider it a must-win market. Why? As many
emerging markets enter a period of slower growth,
Indonesia may be reaching an inflection point. Its
not only attractive in its own right, but also may be
critical to the global ambitions of many companies
in search of the next wave of international growth.
Page 2
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
1 Residents who reach the threshold of having at least US$5,000 of disposable income per year at purchase price parity.
2 Rankings based on 2005 purchase price parity. Source: Brookings Institution, The New Global Middle Class (2010).
3 Based on nominal GDP.
Page 3
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Food example
80 Dairygold
Fonterra
Ultrajaya
Orang Tua
Friesland
Campina
60
40
Nestl
Indofood
Yakult
Danone
Cheese
Top four
players 84%
share
80
60
Friesland
Campina
20
Share by company
(Retail sales US$M fixed)
Conscience Food
100%
Others
100%
Jakarana
Wings
Hershey
80
Mondelez
Indofood
Khong
Guan
Orang
Tua
60
40
Mayora
Petra
Yogurt
Condensed
milk
90%
98%
Chocolate
Top four
players 77%
share
Kao Corp.
LOral
Instant
noodles
Biscuits
94%
62%
P&G
Vitapharm
20 Kao Corp.
0
LOral
P&G
Martha Tilaar
Mondelez
0
Others
Kao Corp.
Mayora
40
Kraft
20
0
Others
Unilever
Unilever
Unilever
2003
2008
2012
Top four
players 40%
share
62%
70%
Page 4
Shelf space is scarce in the small outlets that dominate the market, which means that consumer
choice is often limited. Traditional outlets carry
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 2: Indonesias fragmented retail landscape is dominated by traditional trade and small-format outlets
Modern trade is growing fast, but traditional trade will remain dominant
Indonesia's grocery retail value
Current price, retail sales price excluding tax, 2012 US$
150B
147
100
CAGR
(20072017)
Hypermarket
Supermarket
Convenience
& minimart
100%
13%
12% 16%
23%
60
Traditional
trade
60
80
8%
95
~2M
40
Traditional
trade
(~2M)
50
20
2007
2012
2017E
~1M with
physical space
1M mobile
points of sale
(e.g., hand carts,
trays...)
Sources: Euromonitor (Sep. 2013); BIS Foodservices; Bain & Company analysis; AC Nielsen; PlanetRetail; FMCG interviews
Page 5
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Shopper insights
4 All islands included, except Western New Guinea, Maluku Islands and Lesser Sunda Islands.
Page 6
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 3: Premium brands capture a large share of the market and are growing fast; shampoo is a
good example
8.0
CAGR
(20072012)
6.6
6.0
Others
150K
Premium Brands
10%
8%
100
4.9
4.0
4.1
Premium
brands
50
11%
Unilever
Zinc
Dee Dee
Emeron
Eskulin
Lion
Lifebuoy
P&G
Cussons
Rejoice
2012
Sunsilk
2009
Head &
Shoulders
2007
Pantene
Clear
Dove
2.0
Other
Page 7
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 4: Indonesians are noticeably polarized in their loyalty and repertoire behavior
Average number of brands purchased yearly by Chinese and Indonesian households, 2012
More
Repertoire
2
More
Loyalist
0
Instant
noodles
Liquid
milk
Shampoo
Baby
diapers
Ready-to-drink
tea
Bottled
water
Fabric
detergent
Indonesia
Several factors contribute to Indonesias unique profile regarding loyalist and repertoire behavior. Loyalist
behavior may often be driven by constrained choice.
Fewer brands are available in Indonesia, many categories are highly consolidated, and shelf space is limited
in the small-format retail outlets that still dominate in
the country. Thus, many consumers may behave as if
they are loyal just because there are few options available to them.
On the other hand, high repertoire behavior may often
be driven by the proliferation of local artisanal brands
in some categories, such as biscuits. Indonesians also
prefer to shop more frequently than consumers in
many other countries, and Bain research shows that
there is a correlation between high shopping frequency and the number of brands purchased in repertoire
categories. Indeed, in line with Bain global findings,
the most frequent shoppers buy the largest variety of
brands in a given year. For example, the average Indonesian household buys seven brands of instant coffee
Facial
tissue
Infant
powder
Chocolate
Toothpaste
Toilet
tissue
Toothbrush
China
Page 8
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
80
60
40
20
Medan
Palembang
Jakarta
Bandung
and Greater Jakarta
Semarang
Sumatra
Malang
Yogyakarta
Surabaya
Sulawesi
Java
Baby milk powder
Condensed milk
Instant coffee
Family milk powder
*Top categories shown (excludes top four staples rice, instant noodles, cooking oil, and sugar)
Source: Kantar Worldpanel survey, 2012
Page 9
Biscuits
Liquid milk
Makassar
Mineral/distilled water
Other
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 5b: However, there can be variation in the baskets of brands that shoppers are buying
Example of homogenous category at brand level: shampoo
Palembang
Jakarta and
Greater Jakarta
Bandung
Malang
Surabaya
TOTAL
Medan
Palembang
Bandung
Malang
Surabaya
Jakarta and
Greater Jakarta
Medan
TOTAL
Pantene
Teh Botol
Sunsilk
Teh Kotak
Lifebuoy
Clear
Dove
Teh Pucuk
Harum
which creates consistent demand for similar products in categories ranging from food and beverage
to personal and household care. And, although cuisines vary by region, Indonesians often have similar
tastes and diets. Variation is more significant on the
outer islands; although markets in these areas are
growing, they are relatively small today.
Page 10
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 6: Indonesians put less in their shopping baskets and buy more often than Chinese shoppers
Indonesians have a smaller shopping basket
Annual purchase
frequency, 2012
110
50
25
Liquid
milk
Fabric
Shampoo
Infant
Chocolate
detergent
powder
Juice
Ready-to-drink
Toothpaste
Instant
tea
noodles
Indonesia
Instant
noodles
Shampoo
Fabric
detergent
Ready-to-drink
tea
Liquid
milk
Indonesia
China
Toothpaste
Infant
powder
Chocolate
Juice
China
Page 11
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Homogeneity
Indonesia
China
Page 12
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Category dynamics. How established is the category? Whats the level of competitive intensity in
the category? What dynamics define competition
in the category?
Page 13
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Leaders in established categories typically focus on growing the category and developing or strengthening premium offerings while protecting their share and extending
their advantage. Unilever, which has been present in
Indonesia since 1933, generally takes this approach. The
company drove results through innovation, adapting
products from other markets and developing new ones to
suit Indonesian consumers. But M&A was also critical
for Unilever, a serial acquirer that has frequently filled
portfolio and capability gaps by purchasing local brands.
For example, the company bought the vitality-drink brand
Buavita from Ultrajaya in 2008.
Many companies have also used M&A to develop scale
and gain access to the market (see Figure 7). Danone
used M&A to acquire its way into Indonesiafor example, it became the top player in the soft drinks category
through its 1998 purchase of a majority stake in Aqua,
the bottled water brand. It repeated the strategy in 2007,
acquiring the baby formula brands Numico and Sari
Husada (as part of a global acquisition of Numico) to
become a category leader in baby nutrition.
History suggests that those willing to pay top dollar for
promising brands will benefit. Philip Morris' purchase
of Sampoerna is a great example of an acquisition that
seemed expensive at the time but has proven to be an
excellent investment.
Other companies have pursued different strategies to
reach the winners circle. For instance, brands such as
Pocari Sweat forged a path to leadership through category creation (see the sidebar Category creation: Pocari Sweat brings isotonics to Indonesia for more details
on page 16).
Page 14
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 7: Leaders have achieved leadership through M&A, while others others have used acquisitions
to get market access
Mead
Johnson
Nutrition
Nippon
Indosari
Other
baked
goods
Biscuits
Baby
food
Heinz
15
Total = 52B
Nestl
RFC
Coca-Cola
K.
Api
Unilever
Oriflame
LOral
Unicharm
Djarum
Gudang Garam
Philip Morris
P&G
Sinar Sosro
Sinar
Sosro
Unilever
Indofood
Indofood
Prima
Andalan Djaja
Danone
Nestl
Alam Makmur
Dairy
Rice
Snacks
Acquired
Danone Biscuits
in 2007
M.
Nutrifood
Indah
TC Pharma. Ind.
K.
Farma
Heinz
Fonterra
Sido Muncul
Tempo Scan Pacific
G.
Subur
Beverage Partners
F.
Campina
Otsuka
S.
Incofood
Tang
Mas
Johnson
Martha Tilaar
Softex
Orang Tua
Kao
Wings
Mandom
Lion
Unilever
Pepsi
Mayora Indah
Malvolia
Orang
Tua
Siantar
Top
GarudaFood
Campbell
SMART
Indofood
Perfetti VM
GarudaFood
Charoen
Pokphand
Petra Foods
Nestl
Ajinomoto
Danone
Confectionery
Mayora Indah
Mondelez
20
RFC
Danone
Wings
Ultrajaya
40
Fonterra
Morinaga
60
Other minor
regional players
Abbott
80
Johnson
Wings
Unilever
100%
Other
Hot
processed drinks
food
Soft
drinks
Personal
care
Tobacco
Instant
noodles
Acquired Numico
and Sari Husada
in 2007
MNCs
Home care
Acquired
Aqua in 1998
Local majors
Serial
acquirer
Acquired
Sampoerna
in 2005
Acquired
Bentoel
in 2009
* Excludes fresh food, apparel, consumer electronics, appliances, toys, personal accessories and home/garden categories
Other processed food includes oils and fats, sauces/dressings, frozen processed food, canned processed food, chilled processed food, ice cream,
meal replacement, spreads and other smaller processed food categories. Soft drinks includes water, carbonated drinks, juices; Personal care includes
beauty, tissue and hygiene and other personal care
Sources: Euromonitor (Sep. 2013); literature searches
Page 15
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 8: Category creation is another route to leadership; Pocari Sweat is a great example
Pocari Sweat created the isotonic category in Indonesia
Adapted right to win: rehydration for dengue fever; recovery from fasting
Pocari Sweat
2011
2010
2009
2008
2007
2006
2005
2004
2003
Page 16
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Page 17
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Figure 9: Category followers have opportunities to break through; Wings shows how
Wings has rapidly gained share from Indofood...
Indonesias instant noodles revenue
(Current retail sales price, IDR T)
CAGR
(20032013)
30
1
Compelling
product value
proposition
11%
22.6
20
Others
7%
Wings
26%
Investments
in sales and
marketing
13.7
10
Indofood
8.0
Strong
distribution
reach
10%
2003
2008
Scale economies
to achieve cost
leadership
2013
Figure 10: Leading players have achieved broad reach with different models
Estimated Tier 1 distribution reach of leading FMCG companies (by outlets)
600K
500
~500
~450
400
~350
~300
~300
300
~250
~200
200
100
Unilever
Coca-Cola
Amatil
Pepsi
Indofood
Sinar
Mas
Kapal
Api
~100
~100
Garuda
Food
Petra
Foods
~100
Dosni
Roha
Distribution companies
Notes: Distribution reach refers to number of outlets where distribution is handled either through principals' own logistics facilities or preferred distribution network
(e.g., category exclusive in some cases, with dedicated personnel running in store activation in other cases)
Nirwana Lestari is part of Petra Foods company
Sources: Literature search; distributor interviews; FMCG management interview
Page 18
Nirwana
Lestari
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
6 HR readiness: A growing pain for consumer products multinationals in emerging markets, http://www.bain.com/publications/articles/
hr-readiness-a-growing-pain-for-consumer-products-multinationals-ceo-forum.aspx.
Page 19
Winning on the Next Frontier: Five Rules for Reaching Indonesian Shoppers | Bain & Company, Inc. | Kantar Worldpanel
Acknowledgments
This report is a joint effort between Bain & Company and Kantar Worldpanel. The authors would like to thank
Johanne Dessard, Asia-Pacific practice area manager, for leading the thinking behind the report. They extend
their gratitude to the many others who contributed to the report, in particular Bain & Company managers Edy
Widjaja and Dominik Utama, and practice area senior consultant Laura Norrie.
Page 20
Bain in Indonesia
Bain was the first strategic consulting firm to set up an office in Southeast Asia in 1993. Since our founding, Bain
Southeast Asia has thrived on the dynamism of the booming Southeast Asian economy. With our hub in Singapore
and satellite offices in Bangkok, Kuala Lumpur and Jakarta, we have more than 140 consultants today, spread across
19 nationalities. In Indonesia specifically, we have established deep and long-standing relationships with both
multinationals and local corporations, across a wide range of sectors.
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