7 Opportunities for FMCG Industry in Indonesia to Thrive in 2022

The Fast-moving Consumer Goods (FMCG) industry is one of Indonesia's major industries and contributes significantly to Indonesia's economic development. Increasing purchasing power due to increased personal income and the development of urbanization that changes people's lifestyles are cited as some of the industry's primary growth drivers. 

During the COVID-19 pandemic, this was one of the unaffected country's industries. Indonesia recorded an overall positive change in FMCG market value of 8.8% year-on-year in the third quarter of 2020.

Let's see the FMCG market landscape in Indonesia and the opportunities in 2022 through this article.

FMCG Market Outlook and The Impact of The COVID-19 Pandemic

As one of the fastest-growing FMCG markets in Southeast Asia, Indonesia's FMCG market continues to evolve as demand increases and population lifestyles change. As of  the third quarter of 2020, Indonesian households spend 19% of their total household expenditure on FMCG products. 

In the third quarter of 2020, the food segment showed the most considerable change, with average consumer spending per trip increasing in all FMCG segments. In terms of distribution, traditional retail was the country's most important sales channel for FMCG products, with a 67% market share in the third quarter of 2020.

Both multinational and local companies dominate Indonesia's FMCG industry. Multinationals like Unilever Indonesia have revitalized the industry by offering Indonesian consumers more product options, from personal care products to groceries. Local market players like Indofood have proven that local skills can compete well in the FMCG sector. 

Given Indonesia's consumer behavior towards FMCG products during the COVID-19 pandemic, the outlook for the domestic FMCG market remains strong. In the meantime, all FMCG segments saw significant changes in the home care, dairy, and personal care segments, with positive changes in average consumer purchases per trip. 

The coronavirus pandemic has led to increased online shopping activities. Previously, consumers shopped at e-commerce only for secondary needs; now, consumers are also shopping for the primary needs by utilizing e-commerce or online stores. 

The Opportunities for FMCG Industry in 2022

Here are the opportunities for the FMCG industry in Indonesia to thrive in 2022.

• Health and Hygiene Products are on High Demand

During the pandemic, health and hygiene products undoubtedly become hot items among consumers. This situation gives advantages for FMCG companies with health and hygiene products on its inventory. 

So this time is an excellent opportunity to launch new products  with a value proposition or anti-bacterial or health in general. You can also bring new innovation to existing products to ensure its value to the customers as well as leverage your market.

• Migration to Digital Channels

In fact, in early 2020, the entire industry growth was positive. However, when President Joko Widodo announced the first suspected coronavirus (COVID-19) in Indonesia on March 2, 2020, there were changes to the industry map and the demand navigation for each company. Of course, FMCG business trends have also changed. 

In the second quarter (Q2), the Gross Domestic Product (GDP) at the macro level faced extraordinary challenges as it decreased by 5.2%. In the third quarter (Q3), conditions were further eroded because industrial activities were limited due to the implementation of the PPKM.

Fast Moving Consumer Goods (FMCG) retail outlets, both modern and traditional, are getting empty. People prefer to avoid crowds so as not to contract the virus. Instead, consumers are starting to look at online stores to shop for basic needs. Now, entering the second year of the coronavirus, with the omicron variant, most consumers remain vigilant and still choose to shop online.

• QRIS Payments for Contactless & Faster Payment

For security and cleanliness reasons, contactless transactions are more in demand by new regular customers. Balancing the online FMCG business trend, retail companies for FMCG products will carry the concept of Quick Response Code Indonesian Standard (QRIS) payments. 

The QRIS method is the same as the QR Code method in general. QRIS has been set to be the standardization of payments from Bank Indonesia (BI). The goal is to make the transaction process easier, faster, and secure. People will undoubtedly prefer digital payment methods that are safe and easy. Thus, if you look at the current trend, non-cash payments will be famous for the payment process.

• Shopping Trends in Wholesale

The more diverse sales channels offered by retailers, both through outlets and online, it turns out that will change people's consumption styles. Before the pandemic, people would prefer to shop for basic needs or according to their current needs. Online shopping trends will affect consumption styles and, of course, the FMCG business trend because people will tend to shop in large amounts while shopping for basic needs. Especially with the discounts and promos provided by FMCG retailers.

Half of the compensation goes to the primary needs when someone has received a salary. Wholesale sales from FMCG retailers will also support this style; buying in large quantities will get a much lower price. Online retailers will actively provide discounts and promos for consumers who buy a particular volume.

• Local Brands of Food And Beverage (F&B) Will Increase

The Fast Moving Consumer Goods (FMCG) industry is affected by the COVID-19 pandemic, including the Food and Beverage (F&B) industry. Although the community very much needs this sector, there is still a decline in consumption in the first quarter of 2020. For example, household consumer products have decreased from 5.02% to 2.84% during the first quarter (Q1).

However, at the end of 2020, the growth of the food and beverage industry reached 7.97%. It means that in the coronavirus (COVID-19) pandemic conditions, people are still looking for FMCG products in the Food and Beverage (F&B) industry. In 2022, it is estimated that there will be more local brands in the F&B industry that are expected to replace dependence on imported products. If this happens, it will be more profitable for economic growth in Indonesia because the need for labor will increase in addition to providing income for the country.

• FMCG Authentication and Brand Values

Trends in authentication and brand values ​​for the FMCG industry will be a unique value. Brand values ​​of FMCG products will appear in the value of a brand based on numbers, clarity, differentiation, consistency, brand performance, and others. 

Consumer tastes are no longer measured based on whether or not consumers are satisfied with a product or brand. However, they will be seen from financial and marketing analysis. The trend of FMCG authentication and brand values ​​will make many FMCG brands in the market authentic and have unique values. Thus, every FMCG brand is predicted to have a place in customers' hearts.

• FMCG Stocks Gain Popularity

The year 2022 will lead to a trend of stock investment preferring the FMCG industry, especially for food and beverage products. The challenges due to the coronavirus pandemic are predicted to show reversal signs, from a slowdown to recovery. 

Signs of recovery can be seen from the consumption ratio of all layers of consumers, which began to rise last September 2020. The average proportion of consumer income used for consumption has increased from 67.4% to 68.8%. 

Final Takeaway

Fast Moving Consumer Goods (FMCG) products will continue to be sought even though the threat of the coronavirus pandemic continues to haunt the public. For easy access to needs, all support is available, for example, with so many online stores that have recently supported instant payments and fast delivery systems.

If you look at current prospects and trends, you could say the FMCG business is the best opportunity for those who want to start a business. However, it would be best to have strong support to maximize your product sales.

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