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May 29, 2017

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Indonesia a new frontier for consumer goods companies

JAKARTA, The Jakarta Post/Asia News Network--In the world of consumer products, all eyes are on Indonesia. If the country can manage inflation and political instability, reduce regulatory complexity, increase labor market flexibility and improve infrastructure, it could become the globe's next big prize. Over the next 15 years, Indonesia will gain 80 million new consumers, according to Euromonitor, accounting for 40 percent of the new consumers in the ASEAN (Association of Southeast Asian Nation) over that period.

Faced with such a potential huge market, no multinational corporation (MNC) consumer products firms with global ambitions can afford to ignore Indonesia. Some local companies are proving formidable competitors as they invest heavily to reinforce their positions at home while expanding internationally.

Despite the vast potential and importance for global and domestic companies alike, catching the Indonesia growth wave isn't a sure thing. Consumer goods companies that come out ahead will be those that understand the uniqueness of Indonesia's consumer goods landscape and shopper behavior.

Making the most of the Indonesia opportunity begins by realizing that the country is a "winners take all" market today. Consumers are dispersed across the archipelago, infrastructure is poor and retail outlets are fragmented.

Traditional trade accounts for more than 80 percent of grocery retail value, a situation that will not materially change soon. Thus, it's costly to reach shoppers — companies need scale to win. Indonesia's consumer product market is therefore highly consolidated, with the top four to six brands controlling 60 percent or more of the market in many product categories.

Just as the business landscape is unique, so are its shoppers. To understand shopper behavior, we synthesized findings from a range of exclusive sources, including proprietary consumer insights gleaned from 7,000 households and developed through a partnership with Kantar Worldpanel. We also drew on analysis from Bain's expert network and years of experience in Indonesia.

Among the findings: Indonesia's shoppers are willing to pay more for branded products with quality or functional benefits.

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