Venu Madhav, Executive Director of Client Leadership, Nielsen Indonesia
Ramadan, the month-long period where Muslims pray and engage in reflection, started August 1st, and in Indonesia – the world’s largest Muslim country – a majority of consumers will abstain from eating during the day. But that hardly means Indonesians will spend less on food and beverages; in fact, Nielsen research shows that households actually spend more during the festive season. After sundown, families and friends gather to break the fast at Iftar time, the traditional eating of three dates or sweet snacks and then celebrate with joyous banquets and dinners.
Manufacturers can expect to see healthy growth in consumer good sales value as Ramadan always drives consumers to spend more. Nielsen recorded 9.2 percent growth in sales value of consumer goods during 2010’s festive months. Growth in consumer good sales during the festive month came from all income levels, but lower income groups increased their spending by 30 percent last year. Middle class households posted a 16 percent increase while upper income homes spent 13 percent more.
The festive season means it’s time to entertain and connect with friends, and several categories enjoy strong growth during this period. Below are highlights from key categories of the festive months:
- Assorted biscuits, used as gifts for others and also as snacks to welcome guests during fast-breaking, grew 11 times in sales value during festive months of 2010 compared to a regular month. Nielsen data shows that more consumers buy this product, with penetration reaching 11 percent during this period compared to 0.7 percent penetration in regular months. Wafers, used for the same purpose as biscuits, also enjoyed 25 percent growth, driven mainly by an increase in volume per buyer.
- Soft drinks also enjoyed growth in volume as sales of large plastic bottles tripled during the festive months. Sales of soft drinks are driven by increased penetration and purchases from Upper and Middle classes.
- Sales of Margarine and Syrup during the festive months tended to be slower; however, in the month leading up to this period, sales grew 36 percent in value for margarine and 37 percent for syrup, indicating that consumers stocked up on these items to prepare for the festive period.
- Non FMCG categories that enjoy growth during the festive months are apparel and electronic appliances, with both categories enjoying double digit growth, 15.9 percent and 17.1 percent respectively, during last year’s festive months, led largely by upper income consumers.
While consumers buy products for gifting and entertaining others, they are also purchasing more convenient products for themselves. Categories such as sausages & meat balls (+34%), canned fish and meat (+119%) and nuggets (+49%) all tend to enjoy growth during the holy month. These products help consumers prepare their meals faster, especially important during times when domestic help is not available.
Festive Months: Time to watch TV?
During the festive months, consumers are not only changing their buying behavior but also the way they consume the media, especially television. Compared to regular months, there were 14 percent more TV viewers during Ramadan 2010. They are also watching more TV, spending 4 hours and 40 minutes compared to 4 hours and 16 minutes during regular months.
There are several explanations for this trend. First, consumers prefer to stay home and spend time with family and entertain guests, but also watch TV, which airs religious programs during this time. Second, school holidays during this period lead to a 27 percent increase in the number of viewers aged 5-14. The festive months also feature a new prime time that occurs during the morning meal from 02:00 to 05:00. Nielsen analysis shows that during festive months of 2010, the number of viewers during this “new” prime time increased six times compared to regular months.
This years’ festive month is likely to show robust growth, especially now that GDP per capita has crossed USD 3,000 and consumer confidence is still relatively high. We expect middle income consumers will contribute significantly to CPG sales growth during this year’s Ramadan period, while upper income consumers will continue to spend on lifestyle related products, contributing to the growth of other categories such as health, automotive and tourism. Ramadan is of course first and foremost a celebration of faith and devotion, but Indonesian businesses also have good reason to celebrate during the festive period.