• Wed. Nov 30th, 2022

The Economics of Indonesian FMCG Industry – University

ByStephanie M. Akbar

Oct 30, 2022

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Rudolf Tjandra (Jakarta Post)

Jakarta ●
Mon 31 October 2022

2022-10-31
02:22
0
c5899ceba9df082b5eba6392e50c9669
4
Academia
commodities, industry, COVID-19, supply chain, regulation, bureaucracy, market, commodity, inflation
Free

Many of us expected the global economy to recover soon from the devastating impact of the COVID-19 pandemic, reopening cross-border trade, releasing pent-up demand during the peak of the pandemic and driving up the prices of raw materials and durable goods. goods.

But our dependence on the whims and whims of a few western advanced economies, led by the United States, which are currently experiencing one of the highest inflations, caused by their previous accommodative economic policies, has instead brought the most of the world’s economies in a worse state than before the pandemic.

While their inflation remains exorbitant, central banks in the United States and Europe have aggressively raised their key rates with little regard for most other countries, which hold mostly US dollar-denominated debt. So far, emerging Asia is still far from the worst of the East Asian economic crisis of the late 1990s, but those with current account deficits have historically been more exposed to external shocks and to currency volatility whenever the Federal Reserve tightens monetary policy. Politics.

The current account measures the net flow of goods, services and income into and out of a country. Each category is measured separately, but if their cumulative outflow is greater than what comes in, that country will run a deficit. Most ASEAN countries prefer to have surpluses, which means that they generally seek to maximize exports of goods and services while reducing imports.

As a major commodity exporter, Indonesia has seen an unprecedented reversal in its external balance, with the current account balance improving significantly from a deficit of US$31 billion in 2019 to a surplus. of $3.3 billion in 2021, fueled mainly by $31.5 billion in coal exports and $26.5 billion. palm oil exports.

The windfall from the commodity boom allowed the government to shield the population from the inflationary impact of the food and fuel crises and the relatively low inflation allowed the Bank of Indonesia to keep its policy rate rather stable, compared to most other countries, which have aggressively raised their interest rates.

As the Asian Development Bank’s Managing Director for Southeast Asia, Ramesh Subramaniam, recently noted, prospects for recovery in Southeast Asia are encouraging, but not without lingering risks, including uncertainty. heightened due to the Russian invasion of Ukraine and the evolving conflict, the emergence of variants of COVID-19 and the scarring effects of the pandemic through significant job and education losses, disruption output, fragile business confidence and lower productivity growth.

Supporting local industries with the competitive edge to propel a resilient and inclusive recovery will not only require sector-specific interventions from governments, but should include measures that reflect more business-friendly policies and capable bureaucrats that enable our business environment to help businesses navigate the challenges of this unstable, uncertain and complex world in the post-pandemic era.

Indonesia needs efficient and transparent supply chains, the use of technology and improved processes to improve product quality, simplified regulations and effective business-government partnerships.

The government has set a total investment target of Rp1.2 quadrillion ($80 billion) this year and Rp1.4 quadrillion in 2013 to achieve economic growth of 5-5.5%. In addition, it has significantly accelerated the granting of business licenses and improved the general investment climate, thanks to the Job Creation Act and the one-stop online submission of applications.

Within manufacturing, the fast-moving consumer goods (FMCG) industry has been one of the strongest performers during the pandemic and has rebounded even more strongly following the easing of restrictions on social mobility.

FMCG products are plentiful and easy to find in the market, such as food and beverages, toiletries, soap, shampoo, toothpaste, cosmetics, razors, detergents, and medicines. The high demand for FMCG products makes the FMCG industry market in Indonesia very promising. This is marked by the presence of large companies such as Nestle, Unilever, Orang Tua, Mayora, Sasa, KC Softex and others

As one of the fastest growing FMCG markets in Southeast Asia, the FMCG market in Indonesia has grown along with the increase in demand and the changing lifestyle of its people. Since 2018, Indonesian households have spent almost 20% of their total expenditure on FMCG products. In Q3 2020, every FMCG segment in the country saw an increase in average consumer spending per trip, with the food segment recording the largest change.

The increase in fuel prices in September affected the demand for consumer products, as the secondary impact of the increase in the cost of energy also increased the prices of many consumer goods. But the effect of the slowdown in demand will last only three to six months and consumption will recover strongly again.

Moreover, considering the behavior of Indonesian consumers towards branded FMCG products, the outlook for the FMCG market in the country will remain robust. Going forward, I am confident that all FMCG segments will continue to see positive changes in average consumer purchase volume per trip, with a larger shift in the Food & Beverage, Homecare, dairy products and personal care.

The resilience of the FMCG industry has remained virtually unchanged throughout the pandemic. It is essential for brands to capitalize on the opportunity to accelerate their growth throughout 2023.

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The writer is CEO and CEO PT Sasa Inti.


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