Catherine Eddy, Managing Director, Consumer, and Irawati Pratignyo, Managing Director, Media
Just a few years ago, a major bank predicted that Indonesians would, on average, earn US$3,000 per capita by 2020. At the beginning of 2011, Indonesia hit that mark, beating the prediction by nearly a decade. While other countries in the region and around the globe have been affected by significant economic uncertainty, Indonesia’s economy is running at full bore, with a rapidly expanding middle class that is now the third-largest in the world. At 48 percent of the population and accounting for 44 percent of all FMCG spending in the country, middle class consumers are shaping today’s retail scene. Recently, during its 35th Annual Marketing and Media Presentation in Jakarta, Nielsen provided nearly 1,000 clients and stakeholders with a snapshot of what Indonesia’s middle class is doing in terms of media usage and shopping patterns, and how companies can reach them effectively.
While all income groups have benefited from Indonesia’s accelerated growth, the middle class has enjoyed the most rapid advances in terms of spending increases and quality of life improvement, and increased demand in a range of consumer categories from home electronics and appliances to health and beauty products. The Indonesian middle class prefers to combine the convenience and fresh offerings found through traditional retail channels such as wet markets with the price-savings and expansive product offerings of the modern trade.
Some key facts about middle class shopping trends that retailers and manufacturers need to consider include:
Indonesians of all income levels love to watch TV, and nearly all (95%) middle class homes own a TV, with 96 percent watching programs every day. Other traditional media such as radio and newspapers are also popular, but are increasingly being consumed online, a trend driven primarily by Indonesian youth. Internet usage and mobile phone ownership are surging, each increasing every quarter. Mobile penetration is already high, and purchase intent for smartphones is strong. These devices are fast becoming the primary platform for a variety of activities, such as watching video, accessing the Internet and connecting to social networks, opening a space for marketers and content providers to focus their efforts to include mobile in their content distribution. Nevertheless, relevancy and convenience to the consumers remain key to mobile content distribution.
Key media usage trends for middle class Indonesians include:
Given the abundance of opportunities in the marketplace, how can retailers, manufacturers, marketers and media companies connect with the middle class consumer? In a number of consumer goods categories, innovation has proven to be a growth engine. For example, in the ice cream category, the number of new varieties has surged by nearly 32 percent, with single packs the driver of sales. Volume sales of snack noodles surged 92 percent in the past year, thanks in large part to new flavors and a repositioning of the category (what used to be seen as a basic meal now is a great, convenient snack). The instant coffee market has expanded, and middle class consumers contributed 71 percent of volume growth within that category. In contrast, categories that presented few innovations saw slower growth.
In addition to innovation, other trends seen among Indonesia’s middle class consumers include: