The Premiumisation Today in Indonesia

The Indonesia GDP Increase : Are the Consumers Willing to Purchase More Premium Products in this Country?

The Indonesia GDP Increase : Are the Consumers Willing to Purchase More Premium Products in this Country?

The world is witnessing that Indonesia has doubled its economy in past six years and one of macro economy indicators, GDP per capita of Indonesia, had exceeding 3000 USD; which may give a hint on an overall consumer behavior changes, consumers may add more luxurious-less necessity products to their purchase basket and embrace premium brands in a heavier manner. In other separate note, numbers of Indonesia middle class consumers is increasing and now Indonesia is the country with the largest middle class consumers in the region (World Bank, 2011). Many economist believe that Indonesia as a country is going forward to a brighter direction.

The recent LinkQ* study of Kantar Worldpanel Indonesia, conducted across Indonesia with 7300 households sampling units, reveals that almost 90% of the respondents believes that the economy of Indonesia will demonstrate an average-good performance over the next 12 months, suggests that even in consumer level, optimism about Indonesia’s economy is quite strong as well. More interestingly, the consumer both in urban and rural areas have the same confidence level, meaning that the aura of optimism not exclusive to consumers in more developed area. However, if we break down into social economic class, it is of course obvious that more affluent consumers hold a more optimistic stance towards a stronger economic performance. However, even in the well-off consumer group, only 10% of it think that Indonesia economic will have poor performance over the next 12 months.

Optimism over Indonesia’s economic performance is apparently not followed by the optimism on personal level. Only 40% respondents think that their personal income over the next 12 months will increase while half of the respondent thinks that their personal income level will remains the same. The real question here is whether the belief on higher personal income translates into actual purchasing behaviour toward more premium brands/products. Higher penetration of digital product such as smartphones and tablet PC as well more demand for tours abroad provides hint that at least for the affluent consumer they have higher spending for luxurious things compared to previous years. The next question therefore whether we can see as well the same phenomenon in FMCG market, do consumers embraces more premium brands?

In fact, based on household panel data of Kantar Worldpanel, almost 10% of FMCG consumers already purchased shampoo premium brands and the figure even higher for baby milk power (21% consumers). Personal care especially cosmetic and skin care products together with babies’ products apparently have the higher penetration of premium brands among other FMCG categories. Overall, the LinkQ study result suggests that only 1 out of 4 consumers across all FMCG categories prefers the premium brand. but as we believe the non-premium brand buyers today might be our premium brand buyer tomorrow, it is important to keep an eye for the premiumisation phenomenon in Indonesia market.