Consumers Move Up Spend More
Indonesia’s economy may be in a slow down but it remains a growth region with a high level of consumer confidence. With rising spending in education, fashion, and loans, while curbing entertainment expenses, consumers seem to be preparing for the future
As a data provider for the Indonesian Media Guide 2015, Nielsen’s media director Hellen Katherina was on stage at the report’s launch (29/9) to present some of the company’s findings which covered a wide range of subjects from the impact of economic situations to the things that are valued the most by consumers.
Katherina explained how weak government spending is having a materially significant impact in the reduction of consumer confidence and GDP growth. Between 2010 and 2013, government spending grew at a rate of 4.0%-6.9% but in 2014 and throughout the first half of 2015, it has dropped to as low as 2.0%, rising slowly to 2.3% last quarter. From 2014, investment growth has remained less than half the numbers of 2011-2012 even going as low as 3.6% in Q2 2015.
Household spending up
Despite the slowdown in economy, growth in household consumption remains positive, rising more than 6% in Q2 2015 compared to Q1, Katherina said. Education (24%), fashion (30%), and loans (31%) are the components that are significantly driving this increase while spending on recreation and entertainment has dropped by 27%.
She also said that in terms of consumer confidence, Indonesia’s figure remains very high at 120, third behind India and The Philippines, far ahead of global average of 96 for the second quarter of 2015. These numbers however are slightly lower than figures for Q1 2015 where Indonesia was second behind India at 123 with a global average of 97. While these signify a reduction over the previous quarter, it still represents a very confident Indonesian market.
However, Katherina noted that the rise is spending isn’t necessarily due to consumers buying more items but primarily due to rise in cost of goods and a shift in purchase behavior. She explained that while the growth in purchase value of fast-moving consumer goods reached 11%, in terms of volume it only went up by 1% overall.
The good news for some FMCG companies is that there are categories that managed to outperform the average volume growth. In commodity food and beverages these are cooking oil (16.4%) and mineral water (4.7%). In the impulse category, these include snack (11.2%), juice (5.9%), flavored water, 6.3%, and candy (3.1%). The largest growth though, is in non food and beverages commodity. Baby diapers (18.7%), dishwashing liquid (13.6%), detergent (9%), and toothpaste (5.4%). Katherina explained that this signifies a shift in consumer segmentation as people increasingly adopt more manufactured hygiene products over traditional ones.