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Energy Drinks in Indonesia to Rise With Low-Income Consumers

10/19/2017
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Growing health consciousness amongst Indonesian consumers remained the main challenge facing energy drinks players in 2016. To boost volume growth, existing energy drinks players focused their efforts on improving product availability in traditional retail outlets in the hope of reaching out to a higher number of low-income consumers, who are less concerned about their health.

While health will be the biggest threat to energy drinks within the future, brands targeting lower-income consumers will thrive. Generally, these brands are local and are eroding the share of bigger names. However, leading brand Kratingdaeng is likely to remain fairly immune to the threat from economically priced brands with a distinct consumer segment and strong advertising budget to communicate its unique brand identity. Despite this, energy drinks faced an 8% increase in the off-trade average unit price in 2016, as companies faced increasing costs of raw materials and consequently raised their prices. These increases were mainly from leading brands rather than local brands who were targeting the more price-sensitive low-income consumers.

Due to Indonesians’ healthier mindset, energy drink players released relatively few new products due to the demand slowing. Although, new product launches, such as Kratingdaeng Pro, tended to target high-income consumers, through new product benefits. New product launches included Kuku Bima Ener-G!, by Sido Muncul PT and Kratingdaeng Pro, by Asia Health Energi Beverages, as a ready-to-drink. While Kuku Bima Ener-G! targets low- to mid-income consumers, Kratingdaeng Pro is aimed at the higher-income segment.

In the short term, both products are likely to sustain as the companies are well-established and distribute nationwide. However, the long-term of these products remains to be seen. While it is still cheaper than existing energy drinks, Kuku Bima Ener-G! as a ready-to-drink is more expensive than its powder concentrates counterparts. Kratingdaeng Pro is also more expensive than regular Kratingdaeng in glass bottles. Thus, consumers, especially those who are more concerned about price, are likely to continue to purchase the older format of the brands.

The company, Asia Health Energi Beverages PT continued to lead energy drinks in 2016 with a 67% off trade value share with its well-established Kratingdaeng brand. Kratingdaeng continues to have strong brand image and product availability within modern and traditional channels in Indonesia. The company also recorded the biggest increase in value share in 2016, gaining two percentage points due to its improved product distribution to traditional distribution channels and captivating television advertisements, which proved effective in influencing the purchasing decision of lower-income consumers.

Overall, energy drinks will continue to grow from 2016 to 2021 by 11.6% in constant value growth. With this, companies will continue to target low-income, price conscious consumers and try to continue to break into health conscious consumer’s minds.

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