Three Key Points for Indonesia Local FMCG Companies to Tame The Multinationals

Aditya Setiabudi
Jul 30, 2017 · 4 min read

Nation proud can be one of many weapons for local companies to surpass global companies that have its “aggressive tentacles” attached to various countries. This actually happens in reality, including in Indonesia, where the growth of local FMCG companies is unstoppable whereas multinational FMCG companies that have long-rooted have now been struggling to find ways to grow. But is it single-handedly driven by over-proud Indonesians who have a high preference to only buy local brands? Nope, it isn’t. In fact, local companies manage to thrive faster through a preponderance ways which can alter the way people perceived brands. We expect that there are three significant drivers which have boosted Indonesia local companies to excel in the FMCG industry in Indonesia. Those three drivers are:

  1. Less and Less Red tape

Consumer behaviour changes in Indonesia are an essential thing to capture in order to, at least, “survive” in FMCG business. Local companies are more flexible in adapting with those changes whilst multinational companies are tied with “norms” and “rules” set regionally or globally for converting ideas into actions. Hence, multinational companies are either too late in taking actions causing inability to capture those changes or cut by “global decision” since it’s not fit with their vision or mission.

Local companies, on the other hand, have more flexibility to cater consumers’ needs since they are positioning themselves closer to them. Moreover, local companies have a shorter chain of decision maker and most of them are Indonesians which make them more sensitive in sensing and quickly capturing the changes in consumer behavior

  1. Benefiting Cultural Knowledge

Most local companies have been long adapting to Indonesia’s vast cultures which become one of the backbones in both producing and also marketing the products. Hence, consumers’ preference to local brands is high since they perceive those brands are able to cater their emotional and/or physical needs and fit with their culture either in term of behaviour or norm. For example, Roma Biskuit Kelapa which has a huge market in Indonesia is catering most of Indonesians’ culture in providing foods for sharing and using coconut which is a flavour that close to Indonesians both emotionally and physically. Indomie is another example where most of its variants use heritage foods flavour to strengthen the cultural needs that Indonesians often look up to.

On the other hand, multinational companies are very often trying hard to introduce global brands into Indonesia which probably would take time for Indonesians to adapt with it. Some of global brands remain pricy, having unusual attributes, or having bizarre tastes for some people which make those brands a bit harder to penetrate Indonesia market.

  1. Winning on Unexpected Areas

Local companies are also more adaptive on capturing opportunity of Indonesia’s various landscapes where each landscape has its own consuming behaviour. For example, the way rural areas and urban areas treat FMCG is something that can’t be unified or even behaviour between Sumatera and Java is totally on a different layer. Local companies, with its strong and fast distribution, now tend to push certain brands in unexpected areas such as rural areas or Outer Java areas to firstly introduce their brands with, of course a cultural touch. Knowing that there are a far fewer FMCG brands competing in those unexpected areas in a comparison with urban areas, it surely makes their brands faster to grow.

This good news will be used by local companies as an “investment” to enter urban areas, later on, and focusing “the war” within those areas with massive spending on marketing without having to think in expanding to other untouchable areas (they have been here before). A good example would be Big Cola, Hatari Biscuit, some of Roma biscuit brands, Wings’ brands which have successfully ambushed multinational companies who have been excessively spending on urban areas.

Hence, knowing that multinational companies have known these three drivers to re-enter the market, will it make them as faster as local companies to thrive? Might be, but these three drivers are hard to implement especially when it comes to the first driver, less red tape. The other two key winning points can’t be pushed unless global framework set by multinational companies to run their business in various countries can be modified to fit with consumer behaviour’s dynamic and this means less red tape. Global theme or aspiration can be very tempting and inspiring, but hey, you are in Indonesia after all.

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Aditya Setiabudi

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