In October, I had the incredible opportunity of joining a trade delegation to Indonesia alongside ten health and beauty entrepreneurs from New Zealand to learn about how the sector operates there and gain insights into how the skincare brand I work for, ManukaRx, might fit into the market.
Indonesia's economy has rebounded to pre-Covid growth levels and is going from strength to strength, driven by a growing middle class with increased purchasing power. The health and beauty sector is also thriving with expected revenue of some $8.8 billion in 2023 and projected growth of 4.4 percent per annum over the next five years.
The week-long visit took us to Denpasar, Bali, and Indonesia’s bustling capital city, Jakarta, home to of over 10 million inhabitants.
The entrepreneurs met with their equivalents in Indonesia and learnt how the sector operates there
During our time in Indonesia, we visited malls to understand the brands being sold, how health and beauty products are marketed and the price point that products are being sold at.
We also attended Indonesia’s largest health and beauty fair Cosmobeauté, met with local entrepreneurs and participated in cultural workshops that provided valuable insights into the local way of life.
At Cosmobeaute, it was surprising to see how many stands were offering make-your-own skincare-line contract manufacturing services to those attending the trade show. This really demonstrates how easy it can be for new competitors to enter the Indonesian market. The repercussions of this will be interesting to see. With more brands fighting for customers and retail space instore, brands will need to have a very strong USP [unique selling point] to stay competitive in what will likely become a very saturated and competitive market.
We met with some amazing entrepreneurs on the trip, including Suzy Hutomo, chairperson of The Body Shop Indonesia who started off with one franchise store 30 years ago and has since built an empire of more than 140 stores throughout the country.
We also heard from up-and-coming female health-and-body-business founders Dewi Kauw from Skin Dewi organic skin care brand; Ria Templer from Utama Spice; and Vanessa Ong from The Jamu Bar. All three are using natural ingredients that care for the body holistically.
Rebecca: "Indonesia is a high risk, high reward market."
Insights into Market Dynamics
Indonesia's health and beauty sector is marked by a unique blend of online and offline shopping habits. In the online space, we learned that male shoppers gravitate towards e-commerce platform Tokopedia and female shoppers, particularly those purchasing beauty and skincare products, prefer shopping platform Shopee.
However, the market is primarily offline, which makes up 75 percent of total health and beauty sales, with e-commerce accounting for the remaining 25 percent. Building a brand website is essential for establishing trust and credibility, although it primarily serves as a landing page.
More than one of the business owners we met spoke about how influencers, particularly micro-influencers with engaged audiences, wield significant sway in shaping consumer choices in the Indonesia health and beauty space.
TikTok, Instagram, and YouTube are the preferred platforms for brand awareness and sales.
We heard that personal brand accounts featuring a founder on Instagram and TikTok are more effective than brand accounts for product sales, echoing a trend that we regularly see here in New Zealand. It's worth noting that in September the Indonesian government passed legislation to ban commerce on social media platforms, such as TikTok Shop, to protect local business owners. It will be interesting to see how feasible this ban is and what impact it has on the market.
The entrepreneurs got to make their own herbal beverages at Jamu and Spice
When it comes to health and beauty, the Indonesian market is heavily influenced by Korean beauty trends, and consumers place strong emphasis on certain ingredients, seeking products that offer hydration, reduce the signs of aging, and address acne and blemishes. We noticed that product packaging highlighting specific benefits resonates well with consumers.
New Zealand products are typically seen to be high quality and premium, though we saw few examples of New Zealand products on the shelves and outside milk and mānuka their seemed to be low recognition for New Zealand commodities.
New Zealand and Australian brands such as Sukin, Blackmores, and Trilogy appear to have successfully penetrated the market, capitalising on their premium image.
When speaking with locals in the market, we noticed that there is strong recognition of mānuka, which further bolstered the appeal of exporting mānuka-based New Zealand products to Indonesia. Demand for mānuka honey increased significantly during the COVID-19 pandemic due to associated health benefits.
Indonesia's relationship-driven business culture necessitates finding the right local partners and demonstrates the need for commitment and patience. While the market is high-risk, with such a big population and growing middle class, it offers the potential for high returns.
Entering the market requires understanding the compliance required to export international health and beauty products into the market, most importantly, a Food and Drug Supervisory Agency (BPOM) certification.
Compliance can take anywhere from one to two months in-market to four to six months if applying from overseas. Indonesian-language stickers displaying product information are mandatory for all products, and products must display the BPOM certificate, as well as the distributor for each brand.
While currently optional for local and Indonesian brands, the government is also aiming to make halal certification a mandatory requirement for all beauty products by 2026. Trust and credibility play a pivotal role in influencing consumer choices, especially if a product was not halal-certified but considered vegan.
The entrepreneurs got to experience Indonesian culture such as traditional gamelan music
Travelling with a group of Kiwi health and beauty entrepreneurs was educational in its own right. It was fascinating to learn how different New Zealand businesses are growing their brands both domestically and internationally, and it was really useful to learn from others in the sector about what was working well for their brands, such as different approaches to marketing and distribution.
Indonesia is a high risk, high reward market. With a population of 274 million, and a growing middle class, the country is certainly one that could allow for a New Zealand brand to scale quickly, if the right partners (import, distributor and retail), can be sourced.
There is a significant amount of compliance that brands needs to adhere too, but if BPOM and halal certifications can be obtained then the effort to enter the market could prove to be more than worthwhile.
The Foundation's entrepreneurship programme supports emerging New Zealand entrepreneurs to build connections and facilitate business relationships in Asia, and supports Asian entrepreneurs to build connections in New Zealand.
The ASEAN Young Business Leaders Initiative (YBLI) is a key part of the New Zealand Government’s ASEAN strategy. The aim of the programme is to facilitate trade and build connections between business leaders and entrepreneurs in New Zealand and Southeast Asia. This is achieved through short, targeted visits to New Zealand and Southeast Asia for ASEAN entrepreneurs and Kiwi entrepreneurs respectively.