Branding key in Indonesia

24 December 2012

JAKARTA: Consumer spending is due to rise rapidly during the next two decades in Indonesia, a country where branding plays a particularly prominent role in driving purchase decisions, a study has argued.

McKinsey, the consultancy, stated that the Indonesian "consumer class", members of which earn over $3,600 per year, should house 135m people in 2030, compared with 45m in 2010.

"We see tremendous potential in Indonesia's consumer market as the economy continues to grow and Indonesian consumers become wealthier and more sophisticated," Arief Budiman, a director at McKinsey, said, as reported by the Jakarta Globe.

"With consumer spending expected to increase by 7.7% a year - that presents a trillion dollar business opportunity by 2030."

This expansion of 90m people is likely to be the third largest worldwide at the national level, falling behind China and India, each of which have populations of over 1.2bn, versus 242m in Indonesia.

In keeping with such a shift, expenditure on food and beverages by Indonesian shoppers should come in at $194bn in 2030, an increase of 173% on today.

Based on a poll of 5,500 people in 44 cities and 24 provinces, McKinsey also found 47% of adults in Indonesia associate well-known brands with being good quality, a total standing at 42% in China and 32% in Taiwan.

Elsewhere, while 36% of participants in Indonesia thought high prices indicated the product in question had a similar standard of quality, this reading hit 32% in China and a modest 9% in Taiwan.

Some differences did exist within Indonesia, however, as shoppers in Surabaya, located in East Java, were found to be "more brand-orientated" than their peers in Jakarta, the country's capital.

Word of mouth from friends and relatives exerted a particularly profound influence on purchase habits overall, with television also important. Social media and mobile are increasing their salience, however.

Retail habits are also distinctive in the country, with minimarkets accounting for 41% of expenditure on food and beverages, compared with the combined 39% for hypermarkets and supermarkets.

The Indonesian economy also looks relatively robust, given that 61% of GDP was drawn from domestic consumption in 2010, a figure which may reach 65% in 2030.

Data sourced from Jakarta Globe/Jakarta Post; additional content by Warc staff