EXECUTIVE SUMMARY
Continuous robust growth in tissue and hygiene in 2011
The rapidly growing Indonesian economy continues to spur domestic spending, with higher spending on tissue and hygiene the result. Tissue and hygiene in Indonesia benefited in 2011 from the rise of Indonesia’s middle class as disposable income per capita continues to increase in line with the rapid expansion of the Indonesian economy. Higher income levels are being translated into higher spending on basic goods and the increasing affordability of secondary necessity goods, including many tissue and hygiene categories. Nevertheless, demand for tissue and hygiene faces the hurdle of a substantial increase in the cost of the raw materials required for the manufacture of tissue and hygiene products such as cotton and paper, which is set to result in concomitant increases in the average unit price of tissue and hygiene products during the forecast period. As result, value growth in tissue and hygiene in Indonesia outpaced volume growth in many tissue and hygiene categories during 2011.
The popularity of standard and economy tissue and hygiene products increases
Despite rising disposable income levels, maintaining a low unit price remains one of the most important competitive advantages for winning consumer favour in Indonesia. In tissue and hygiene, for example, it is standard and economy priced products which continue to thrive amidst rising demand for cheaper options as these products cater to demand from the vast majority of Indonesia’s vast consumer base. Price competition among Indonesia’s tissue and hygiene manufacturers remains heated, with various price promotions offered in collaboration with retail channels. Brands competing within the same categories generally alternate price promotions and temporary discounts though retail distribution channels, although these promotions also often coincide. Value for money products such as products in larger pack sizes are often offered at considerably lower unit prices than the same items in smaller packaging sizes, and these bulk packaging sizes are becoming increasingly popular among Indonesia’s burgeoning middle class, who are able to take advantage of the long-term benefits of purchasing tissue and hygiene products in bulk.
Uni Charm Indonesia strengthens its position as the leading company in 2011
Amidst increasing competition among local and imported products, Uni Charm Indonesia PT recorded a robust performance in 2011 as it extended its leadership over its competitors in tissue and hygiene. During 2011, the company continued with its relentless efforts to develop new products, establishing stronger distribution channels and engaging in attractive marketing strategies. The best news during the year in terms of the company’s revenues came from its flagship brand in baby nappies/diapers/pants, Mamy Poko. The Mamy Poko umbrella brand accounted for a substantial proportion of total retail value sales in nappies/diapers/pants in Indonesia during 2011, with the Mamy Poko Pants sub-brand especially popular in disposable pants. In addition to its ongoing success in nappies/diapers/pants, Uni Charm Indonesia PT is also one of leading contributors to sanitary protection in Indonesia and managed to sustain a strong performance throughout the year.
Supermarkets and hypermarkets maintain their major role in the distribution of tissue and hygiene
Due to the nature of tissue and hygiene in that it is a category which caters more towards Indonesia’s middle-income to upper-income consumers, supermarkets and hypermarkets remain the primary distribution channels for tissue and hygiene products in Indonesia. This trend is even more visible in terms of the creeping urbanisation in Indonesia, a process which is resulting in profound changes in the Indonesian retailing industry as traditional retail outlets such as warung and open markets are gradually giving way to modern retail formats. Chained supermarkets and hypermarkets continue to open new outlets in various areas in Indonesia, primarily in the country’s first-tier and second- tier cities. Convenience stores is another retail distribution channel which is increasingly replacing the role of warung not only in urban areas but also suburban and rural areas.
Healthy growth is expected across tissue and hygiene over the forecast period
Healthy population growth in Indonesia—particularly in terms of the high growth in the number of newborn babies in the country—is paving the way for healthy growth to be recorded in tissue and hygiene in Indonesia throughout the forecast period. The leading manufacturers of tissue and hygiene in Indonesia are expected to continue investing in expanding their presence by improving their local manufacturing facilities, bolstering their marketing activities and building their distribution networks. Procter & Gamble Home Products Indonesia PT is currently building its first Indonesian manufacturing facility at Karawang in a clear attempt to achieve stronger penetration in nappies/diapers/pants through its flagship brand Pampers. Once fully operational, this manufacturing facility is expected to increase Procter & Gamble’s presence in Indonesia considerably.
Multinationals establish local manufacturing facilities
The thriving Indonesian economy continues to attract foreign investors seeking to expand their business in Indonesia, a country with very high growth potential. This rising level of foreign investment is being seen across a wide variety of industries and is being spurred by the rising interest of major multinational companies which see the opportunity to establish a presence in Indonesia by offering an extensive range of consumer goods. The encroachment if these multinational companies presents a significant challenge to local companies. Nevertheless, domestic companies still have ample opportunity to develop strong growth in Indonesia thrive as rapidly rising demand and the advantage of having a deeper understanding of local trends and preferences means that Indonesian companies are able to employ unique marketing strategies which are geared to local demand, allowing them to tap into specific consumer segments.
Following the success of local tissue and hygiene company Uni Charm Indonesia PT in earning a significant value share in nappies/diapers/pants in Indonesia after the completion of its second manufacturing facility in May 2010, Procter & Gamble Home Products Indonesia PT followed suit in 2011 by investing some US$100 million in a production facility at Karawang, West Java. This factory is expected to be fully operational by the end of 2013.
Current impact
By making use of local production and manufacturing facilities, the multinational tissue and hygiene companies which are operating in Indonesia are expected to be benefit from the ability to offer products which are customised to meet local needs and suit local preferences. For example, nappies/diapers/pants in Indonesia continues to be dominated by standard and junior products on the one hand and medium and large sizes on the other. In terms of pricing, standard and economy products dominate the vast majority of tissue and hygiene categories in Indonesia due to a very high percentage of Indonesian consumers falling within the middle and low income segments. By maintaining local manufacturing facilities, the production processes of multinational tissue and hygiene companies can be easily customised so as to meet the unique demands of Indonesia, thus conferring advantages such as higher levels of efficiency and, ultimately, lower production costs.
Another advantage of having local manufacturing facilities is the more competitive pricing this allows as there are lower shipping costs involved as well as exemptions from import tax. The excessive bureaucracy involved in Indonesia’s import procedures often discourages Indonesian importers from marketing products in Indonesia as the total cost involved in the importation process quickly becomes too high for importers to be able to maintain pricing levels which would position their products as competitive with local products. The constant adjustment of retail selling prices is another challenge facing the importers of products into Indonesia due to the ongoing fluctuations in currency levels. Nevertheless, the Indonesian rupiah has become increasingly stable following the fallout from the country’s 1998 monetary crisis, and this fact that made it more attractive for foreign investment to enter Indonesia.
Outlook
The continuous investment of multinational tissue and hygiene companies in Indonesia is anticipated to continue during the forecast period. Manufacturing is expected to remain one of the strong pillars of the Indonesian economy during the forecast period and an economic environment which is conducive to foreign investment is expected to result in continuous strong growth in tissue and hygiene in Indonesia during the forecast period. Multinational tissue and hygiene companies are expected not only to engage in local production activity during the forecast period, but they are also set to expand their production capacity in order to meet growing demand. Some of these manufacturers have also been exploring the possibilities of exporting their Indonesian produced products.
Nonetheless, the outlook for the involvement of foreign companies in tissue and hygiene in Indonesia also faces the challenge of the lack of highly developed infrastructure in Indonesia, a situation which is often regarded as a serious drawback for foreign investors seeking to open local facilities. For this reason, the development of infrastructure is set to play an increasingly crucial role in the flow of multinational investment into Indonesia during the forecast period. The continuous commitment of the Indonesian government in terms of providing improved infrastructure in areas such as transportation and telecommunication is anticipated to be a major motivation behind strengthening the incentive for foreign investment in tissue and hygiene in Indonesia during the forecast period.
Future impact
The expansion of the domestic manufacture of tissue and hygiene products in Indonesia is anticipated to accelerate during the forecast period and beyond as Indonesia is expected to be one of major economies in Asia over the course of the forecast period. Although some of the raw materials required for the production of tissue and hygiene is are expected to continue to be imported into Indonesia due to the lack of domestically produced raw materials, the rise of local production of these materials is expected to reduce the cost of tissue and hygiene production for some multinationals, making it even more attractive to engage in local production rather than simply marketing and distributing imported tissue and hygiene products.
Competition in tissue and hygiene in Indonesia is expected to become increasingly heated during the forecast period as both multinational and local companies will continue to strive to increase their value shares in an ever-expanding category. New product launches are expected to continue to occur regularly during the forecast period as more innovative products are expected to be one of key attractions to tissue and hygiene for many Indonesian consumers. Multinational tissue and hygiene companies are expected to face significant challenges from local companies, many of which have the advantage of being historically well known in the country, not to mention their already well-established distribution networks. One example of such a successful local producer is Graha Kerindo Utama PT, a giant producer of tissue and a company which tapped into nappies/diapers/pants in Indonesia in 2011 by launching its Peemo Premium Baby Diapers brand.
Standard and economy products continue to be highly dominant
Despite the ongoing rise in the numbers of Indonesians who are classified as middle-class—a situation which has arisen as a result of rising disposable income levels—standard and economy products continue to register the highest growth in tissue and hygiene amidst growing demand for tissue and hygiene products in all categories. Although demand is rising for premium tissue and hygiene products, it is standard and economy products which continue to account for the bulk of volume and value sales in tissue and hygiene in Indonesia. Premium tissue and hygiene products continue to cater mainly to a small niche segment of affluent Indonesians and, moreover, demand for premium tissue and hygiene is increasing more slowly than demand for standard and economy tissue and hygiene products.
One major reason for the ongoing overwhelming preference for standard and economy tissue and hygiene products in Indonesia can also be explained by reference to the increasing cost of living across various regions of Indonesia, primarily the country’s rapidly growing first-tier and second-tier cities. The regional minimum wage has recently been adjusted in various cities across Indonesia in order to keep pace with the rising cost of meeting one’s basic needs, including fuel.
Current impact
Indonesia’s tissue and hygiene manufacturers are currently witnessing rising demand for standard and economy products, and this demand is now much stronger than the level of demand for their premium products. Premium tissue and hygiene brands such as Mamy Poko have also begun offering economy products, and these have so far garnered a favourable response in Indonesia and had begun to account for the majority of the brand’s value sales by end of the review period. In 2011, Pampers launched Pampers Pants Ekonomis, an economy line in disposable pants, in attempt to boost its value share by developing a larger consumer base among Indonesia’s vast lower income segment. Existing standard and economy tissue and hygiene brands such as Sweety, Popoku and Lolla continued to record strong growth in demand throughout the review period as they remained focused on targeting lower income consumers.
During the review period, two of Indonesia’s retail tissue giants, Pindo Deli Pulp & Paper Mills PT and Graha Kerindo Utama PT, sought to build upon their leading positions in retail tissue by engaging in aggressive marketing for their standard and economy retail tissue products. Pindo Deli Pulp & Paper Mills PT markets the Nice and Jolly brands in Indonesia, while Graha Kerindo Utama PT markets the Multi and Dynasty brands. Both companies are also present in premium retail tissue also, with Pindo Deli marketing the Paseo brand and Graha Kerindo marketing the Tessa brand. The pricing strategy in standard and economy retail tissue is seen as the most prevalent and effective way of developing sales in retail tissue in Indonesia. Price discounts are often on offer under these brands as Indonesia’s leading retail tissue manufacturers seek to appeal to a wider range of consumers who might otherwise be more interested in more affordable standard retail tissue brands. In addition, bulk packaging is a very common way of Indonesia’s tissue and hygiene companies offering better value for money. Retail tissue in large bulk packaging sizes is often preferred to the same or similar products offered in smaller packaging sizes due to the lower unit price. Multi and Nice are two retail tissue brands which are often sold in the 1kg soft packs, much larger than the 300g or 360g packs which are generally used for the Paseo and Tessa brands.
Outlook
The high proportion of Indonesian consumers who fall within middle-income and low-income segments is expected to continue developing during the forecast period. This is expected to continue supporting demand for standard tissue and hygiene products over premium variants. The culture of looking for tissue and hygiene products which offer the best value for money is also expected to continue in Indonesia during the forecast period. High inflation and the rapidly rising living cost are two factors which are expected to force Indonesian consumers to maintain minimum expenditure, in spite of rising disposable income levels. Economy priced tissue and hygiene products are therefore expected to continue thriving in Indonesia, irrespective of the country’s status as a rising economic power.
Future impact
The preference for economy priced tissue and hygiene products in Indonesia is expected to continue during the forecast period for various reasons, including the relative strength of the country’s traditional tissue and hygiene brands and the high proportion of Indonesian consumers who fall under middle and lower income segments. The preference for economy priced tissue and hygiene products in Indonesia is also expected to create a barrier to any possible shift towards environmentally friendly tissue and hygiene products in Indonesia during the forecast period as ecologically sound products are relatively expensive and are regarded as being less attractive than standard and economy equivalents.
Due to the fact that tissue and hygiene in Indonesia remains at an early stage of development as well as the fact that the bulk of the category’s consumers are urban dwellers, the availability of economy tissue and hygiene products offers an interesting proposition for recent adopters of tissue and hygiene products in Indonesia. The low unit price of economy tissue and hygiene products is expected to lead to consumers who are new to tissue and hygiene engaging in sample purchases of many tissue and hygiene products during the forecast period. This is set to remain a vital element in further improving the penetration of tissue and hygiene products in Indonesia during the forecast period.
The role of modern retail channels increases in the distribution and marketing of tissue and hygiene
The expansion of modern retail outlets continued to expand significantly in Indonesia during 2011 due to positive general economic growth and various government stimulus campaigns aimed at fostering higher levels of investment in modern retailing. The expansion also reached Indonesia’s second-tier and third-tier cities, allowing these smaller municipalities to realise some of the untapped potential which exists in Indonesia’s less developed rural areas. Expansion plans in Indonesia’s densely populated first-tier cities also continued aggressively throughout 2011 as the presence of modern retailing outlets continued to expand. Modern retailing is rapidly replacing traditional retailing as the distribution channel of choice for consumer goods in Indonesia.
This trend towards modern retailing is leading to a shift in the distribution patterns of tissue and hygiene products. While the proportion of tissue and hygiene value sales accounted for by traditional retailers continues to diminish, the ever wider range of modern retail channels has led to more avenues for the distribution of tissue and hygiene in Indonesia. Although supermarkets and hypermarkets still account for the highest proportion of tissue and hygiene retail distribution among modern retail channels, the role of convenience stores, health and beauty retailers and other non-grocery retail channels such as bookstores in the retail distribution of tissue and hygiene products in Indonesia continues to increase. The preference for modern retail outlets in Indonesia continues to be supported by several factors including the lower prices charged for certain key products, the frequent price promotions on offer, the advent of product bundling, bonus content and free gifts, not to mention the much wider range of products on offer in supermarkets and hypermarkets than in warung and other traditional retail outlets and the much higher levels of convenience and the generally superior retail shopping experience on offer at modern retail outlets. All of these advantages equate to shopping at modern grocery retail establishments often being regarded as a recreational activity for many Indonesian families, rather than a chore.
Due to the narrowly defined profile of the target consumer segment for tissue and hygiene, which consists largely of urban consumers, modern retail channels represent an attractive option for tissue and hygiene manufacturers as they seek to target the same consumer segment as supermarkets and hypermarkets; middle-income urban consumers who often frequent large format retail outlets during weekends.
Current Impact
Due to the ongoing shift in consumer preference in Indonesia towards modern retail distribution channels and the target segment for tissue and hygiene products consisting largely of urban consumers, the role of modern retail channels in the distribution of tissue and hygiene products remains crucial. New product developments in tissue and hygiene are often introduced exclusively through modern retail channels, with hypermarkets especially popular, due to the limited shelf space available within traditional retail outlets. Due to the wide product portfolios offered in modern retailing channels, certain tissue and hygiene manufacturers also rely on hypermarkets to showcase the full scope of their product portfolios, which often include products as diverse as sanitary protection, nappies/diapers/pants, retail tissue and wipes. Furthermore, incontinence products, nappies/diapers/pants, wipes, kitchen towels and paper tableware are all retail tissue categories which rely heavily on modern retail distribution channels to reach their target audience of middle-income and upper-income consumers.
In addition to being the core distribution channel for tissue and hygiene, many of Indonesia’s modern grocery retailers have also become the focal point for the marketing and promotional activities of a growing number of issue and hygiene companies. The strategies of certain tissue and hygiene manufacturers for the promotion of their tissue and hygiene products with the aim of boosting sales include periodic price discounts, product bundling, free gifts, prize draws and registration for competitions and rewards programmes and none of these options are generally available through Indonesia’s traditional retail channels. Modern retail channels are also invariably the spearheads for the increasing availability of more sophisticated tissue and hygiene products, with hypermarkets especially offering benefits such as greater shelf space. Improved displays, point-of-sale marketing materials and sales promotional teams are often dispatched to modern, large-format grocery retail outlets in order to best communicate the promotional messages and strategies of tissue and hygiene companies to Indonesian consumers.
Outlook
The shift in preference towards the distribution of tissue and hygiene products through modern retail channels in Indonesia is expected to gain momentum during the forecast period. The nature of the target consumer group for tissue and hygiene—retail hygiene in particular—is set to foster a beneficial environment for manufacturers to develop the distribution of their products through modern retailers as a way of boosting sales of their products. These efforts will be further encouraged by an increasing focus on online promotion and the use of social media as promotional campaigns for tissue and hygiene over the forecast period.
The rapid expansion of modern retailers into Indonesia’s second-tier and third-tier cities is also likely to improve the reach of tissue and hygiene manufacturers in Indonesia, exposing their brands and product to an ever wider consumer audience. This will provide the country’s tissue and hygiene manufacturers with an effective method of communicating new product launches to the denizens of these second-tier and third-tier cities, especially since not all product developments in tissue and hygiene are communicated through mass advertising.
Future Impact
The expansion of modern retail channels in Indonesia is expected to gain momentum over the forecast period, particularly chained hypermarkets and chained convenience stores, both of which are channels which are funded largely through franchising systems. During 2010, the sale of a 40% share in Carrefour Indonesia PT to Trans Retail PT, a subsidiary of local conglomerate Para Group, is a clear indicator that domestic ownership of modern retail companies increased during the review period. The locally owned nature of the modern retail operators in Indonesia is expected to pave the way for the smoother execution of expansion plans over the forecast period. The government is also working with banking institutions to reduce interest rates and foster stronger investment in modern retailers.
Looking forward to the forecast period, the trend towards more sophisticated tissue and hygiene products is expected to rely heavily on modern retailing formats, which is the grocery shopping preference spot for affluent and middle class Indonesian households. New product launches and marketing efforts through modern retailers are expected to be the key drivers of developments in tissue and hygiene over the forecast period.
The culture of continually seeking good value for money will also lead Indonesian consumers to vary the tissue and hygiene brands they choose during the forecast period. Modern retail outlets often offer promotional price discounts, bonus content, free gifts, bundling with other tissue and hygiene products or other related products, prize draws, competitions and brand activation events. These factors often sway consumer choice with regards to particular tissue and hygiene brands due to more favourable price/quality ratio which result. At the same time, these efforts also offer Indonesia’s tissue and hygiene manufacturers the chance to build emotional branding relationships with their consumers and foster greater brand loyalty.
The major trend in nappies/diapers/pants is towards disposable pants
The advent of disposable pants was the most important innovation in nappies/diapers/pants in Indonesia during the review period and the rising demand for disposable pants in Indonesia has led to an increase in the proportion of nappies/diapers/pants value sales accounted for by disposable pants, a trend which accelerated towards the end of the review period. The leading brands in nappies/diapers in Indonesia have were all engaged in the launch of disposable pants within their existing product ranges towards the end of the review period and disposable pants now offered in sizes ranging from newborn pants to junior pants. Due to the convenient usage they offer, disposable pants are becoming particularly popular among the parents of active toddlers, many of whom refuse to have their nappies changed. Disposable pants offer a convenient way of tackling this issue. Indonesian mothers are increasingly shifting towards disposable pants to the detriment of more traditional disposable nappies/diapers.
Current impact
All of Indonesia’s leading nappies/diapers brands now have at least one disposable pants variant within their product ranges. Moreover, they are all engaged in expanding the range of disposable pants which they offer within their product ranges. Previously, disposable pants was oriented more towards the premium end of the consumer spectrum. However, as demand for disposable pants has increased in Indonesia, the leading manufacturers have launched a wider range of economy variants. During 2011, Procter & Gamble Home Products Indonesia PT launched its Pampers Pants Ekonomis sub-brand in a bid to cater to the rising demand for disposable pants among Indonesia’s low-income segments. Pampers Pants Ekonomis is a range of disposable pants which are considerably cheaper than standard pants but still offer levels of product quality which are commensurate with the levels of quality which are considered normal for standard and premium products in nappies/diapers/pants in Indonesia. Standard nappies/diapers brands such as Sweety and Fitti also launched disposable pants during the review period. Nonetheless, nappies/diapers/pants in Indonesia remains a category dominated by standard and premium priced brands such as Mamy Poko, Huggies and Pampers. Economy products such as Lolla, Happy Nappy and Popoku continue to focus on standard nappies/diapers as these represent the best value for money to Indonesia’s low-income majority.
By the end of 2011, retail value and volume sales of disposable pants had exceeded retail value and volume sales of nappies/diapers. The increasing interest in convenient products which are suitable for the very busy lifestyles of modern urban Indonesian consumers combined with rising disposable income levels led to higher numbers of Indonesians to purchasing pants over diapers during 2011. Moreover, the majority of nappies/diapers/pants consumers in Indonesia remain middle-income and upper-income consumers, whereas low-income consumers generally remain loyal to reusable cloth nappies/diapers. Reusable cloth nappies/diapers have historically been the most popular option for generations of Indonesian mothers and were the only choice until disposable nappies/diapers were launched in the country in 1980s.
In terms of sizes, disposable pants in Indonesia are also increasingly being made available in various sizes rather than the previously dominant standard and junior sizes. Mamy Poko launched its small sized newborn pants in 2010 to become one of the first nappies/diapers/pants brands in Indonesia to offer disposable pants for newborns. By end of review period, nappies/diapers pants for newborns remained dominated by nappies/diapers as the availability of newborn pants remains minimal.
Outlook
The trend towards higher sales of disposable pants in Indonesia is expected to continue building over the forecast period, with the result that the proportion of nappies/diapers/pants value sales accounted for by disposable pants is set to increase. Nonetheless, the central role of nappies/diapers in the category is not expected to diminish to any great extent as nappies/diapers continue to offer better value for money than disposable pants, especially for low-income consumers. Rising disposable income levels are, nevertheless, are also set to improve the growth opportunities for economy nappies/diapers/pants as large numbers of low-income Indonesians are expected to shift from reusable cloth nappies/diapers to disposable diapers and nappies/diapers are much more likely to be used by lower income Indonesians than disposable pants, which tend to carry higher unit prices. Meanwhile, rising disposable income levels are also expected to result in increases in the purchasing power of middle income Indonesians, leasing them to purchase disposable pants in greater quantities.
Nappies/diapers in Indonesia is therefore a category which is expected to increase at a slower rate than disposable pants over the forecast period. Moreover, the leading manufacturers of nappies/diapers in Indonesia have been able to develop economy disposable pants. Higher competition in nappies/diapers/pants is therefore expected to place further pressure on the manufacturers of economy disposable pants during the forecast period, leading them to minimise price increases and focus on improving product quality as the availability of economy disposable pants continues to build.
Future impact
The rising proportion of total nappies/diapers/pants retail value and volume sales accounted for by disposable pants is therefore anticipated to accelerate before the end of forecast period. By the end of review period, the value and volume sales generated by the category-leading Mamy Poko brand’s disposable pants are set to exceed the value and volume sales generated by Mamy Poko nappies/diapers. Such trends are expected to be recorded by other brands, particularly those brands which focus on standard and premium products. Economy nappies/diapers/pants brands are expected to remain strongest in nappies/diapers despite, although they are also expected to launch lines of disposable pants in the near future.
Product innovation is expected to be more evident in disposable pants than in nappies/diapers during the forecast period, in both premium and economy segments. A wider range of sizes of disposable pants are expected to become available during the forecast period. For example, disposable pants for newborns in small sizes—a product group which is currently rather rare in Indonesia—are expected to become increasingly available rare for pants by end of the review period. Nonetheless, standard and junior sizes are expected to remain in the majority in disposable pants due to rapid growth of babies up to 5kg.
Private label tissue and hygiene increases in prominence
The significance of private label in tissue and hygiene in Indonesia increased towards the end of the review period. The country’s leading modern grocery retail chains—the majority of which are operated under a franchising system—stepped up their moves to offer a comprehensive range of private label products so as to increase profit margins.
Although private label in Indonesia remains limited to a narrow range of product categories, tissue and hygiene is one of these product categories and private label tissue and hygiene products are widely available in the outlets of various grocery retail chains throughout Indonesia. The most prominent products offered under private label in Indonesia include cotton wool/buds/pads, nappies/diapers/pants and boxed facial tissues. These private label tissue and hygiene products are mostly available at unit prices which are substantially lower than branded equivalents, a situation which gives private label a considerable competitive advantage over branded products.
Current impact
Sales of private label tissue and hygiene continue to increase in Indonesia throughout the review period and this is a development which can be mainly attributed to the healthy growth recorded in chained grocery retailers across Indonesia. The more chained grocery retail outlets that open in Indonesia, the better the chance for private label tissue and hygiene products to register higher sales as the consumer base for private label continues to expand.
From the perspective of Indonesian consumers, retail selling price remains the key demand factor, and this is boosting demand for private label tissue and hygiene over branded equivalents. Product quality remains the second most important consideration for Indonesian consumers, however, there is little differentiation between standard and economy products in categories such as retail tissue and cotton wool/buds/pads. Indonesian consumers generally perceive these products to be of uniform quality, and this perception has developed in spite of the fact that the majority of Indonesians would be completely unaware that the manufacturers of private label retail tissue and cotton wool/buds/pads are often the very same manufacturers of branded equivalents. Private label tissue and hygiene products maintain a distinct pricing advantage over branded equivalents, many of which must also pay retailers a substantial fee in order to have their products stocked on the shelves of modern chained retail outlets, further boosting the unit price in comparison with the price of private label.
And it is not only in terms of availability that private label tissue and hygiene is expanding in Indonesia; the range of product variants is also becoming wider. For example in nappies/diapers/pants, private label lines such as Carrefour have been offering nappies/diapers ranging from small sizes suitable for newborns to extra-large sizes suitable for toddlers. During 2010, Carrefour also launched private label sanitary protection in a bid to appeal to lower income consumers.
Outlook
The growing presence of private label in tissue and hygiene in Indonesia is expected to continue over the forecast period due to the rising consumer acceptance and awareness of the acceptable quality levels of private label products, which will continue to offer good value for money in terms of the price/quality ratio. Other than that, the healthy growth of modern retail chains is expected to continue throughout the forecast period, therefore providing ample opportunity for retailers to expand their consumer bases.
The challenge for private label in Indonesia is therefore expected to continue to come mainly from the high degree of competition posed by the giant multinational and domestic producers of branded tissue and hygiene products, many of whom have a long history in Indonesia and loyal consumer bases across the country. The distribution networks of the largest tissue and hygiene companies in Indonesia cover even the country’s most remote rural areas through traditional independent grocery retail networks. Those Indonesians with higher income levels will also continue to prefer branded tissue and hygiene products due to the perception that these products offer superior quality to private label equivalents, many of which are perceived as being of inferior quality.
Future impact
A wider range of private label tissue and hygiene is expected to occupy more shelf space in Indonesia’s modern chained grocery retail outlets. These retailers are expected to closely follow the prevailing trends by offering better value for money. In addition, the number of modern chained grocery retail outlets in Indonesia is also expected to have increased substantially by the end of the forecast period. This is particularly true in terms of the rapid expansion in the numbers of convenience stores in Indonesia under brands such as Indomaret and Alfamart, which are rapidly moving into Indonesia’s rural areas. These chained convenience stores are increasingly replacing the role of warung, the traditional kiosks which are ubiquitous in suburban and rural areas across Indonesia and are classified under other grocery retailers.
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Overview
Discover the latest market trends and uncover sources of future market growth for the Tissue and Hygiene industry in Indonesia with research from Euromonitor's team of in-country analysts.
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The Tissue and Hygiene in Indonesia market research report includes:
- Analysis of key supply-side and demand trends
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Tissue and Hygiene in Indonesia?
- What are the major brands in Indonesia?
- What are the most dynamic tissue and hygiene categories?
- What are the major markets for tissue products sales?
- What are the major markets for hygiene products sales?
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This industry report originates from Passport, our Tissue and Hygiene market research database.
