The Development of the Indonesian Bottled Water Industry Despite the COVID-19 Pandemic
Bottled Water Industry Overview in Indonesia
Changing customer preferences and growing demand for clean and safe drinking water aid the exponential growth of the bottled water market in Indonesia. Rising disposable income in the country is driving the market, thus, enabling higher sales revenue for the market players. The bottled water market in Indonesia is expected to grow annually by 6.9%.
The highest percentage of consumers in the bottled water market is still located in the Java and Bali Province at 60%, followed by the Jakarta Metropolitan Area and East Java. The Bottled Water Industry is expected to grow by 10% in the present year as the newly built infrastructures which the Indonesian government has been incessantly building are gradually starting to operate. The utility in the bottled water industry Utilitas has increased to 80% entering the fourth month of the COVID-19 pandemic although it had previously dropped to 50%.
The business potential of the Indonesian bottled water industry is quite prospective due to the increase of investment from several manufacturers such as the investment of Orang Tua Group in Crystalline. PT Sariguna Primatirta Tbk. has also invested in CLEO who is currently expanding into building three new factories. PT Indra Karya, a state-owned corporation is also contributing to the bottled water industry development.
Bottled Water Market Trends in Indonesia
Indonesia bottled water market is segmented by type into Still Water, Sparkling Water, and Functional Water; by Distribution Channel into Supermarkets and Hypermarkets, Convenience Stores, Online Retailers, On-trade and Other Distribution Channels. Therefore we would like to explain the bottled water market trends in Indonesia in order to advise the right action plan for your company market entry.
Easy Availability of Bottled Water in the Market
The key strategy for the bottled water market, to gain high revenue, is enabling the easy availability of bottled water in the market. The higher the availability of bottled water, the higher would be the market penetration. Global companies, such as Danone, Nestle, and Coca-Cola, are focusing mainly on the aspect of making their respective brands easily available in the market, which is the main part of their marketing strategy.
In this attempt, the global giant of bottled water market, Danone-AQUA, established approximately 2 million sales points across Indonesia. Thus, AQUA has accounted for the highest market share in the Indonesian bottled water market. AQUA uses 75 family-owned distributors who have been part of the business since its inception. The company has 220 depots which distribute to wholesalers and to restaurants, such as Warung and Toko.
Flavored Water is the Fastest Growing Segment
The Flavored water segment of the market studied experiences major competition from substitute drinks. The calorie balance and the amount of sugar present in the water are the challenging factors that have an impact on the market. The market has a great potential for growth due to additional flavors, and consumers perceive that additional fruit extracts would improve the nutritional benefits. With the increase in market penetration, the key players such as YOU•C1000, Ale-Ale, Pocari Sweat, Mogu Mogu, and Coolant also tend to come up with a new combination of flavors, such as orange, lemon, starfruit, and strawberry.
Low Prices and Poor Quality of Tap Water Help to Maintain Demand
The trend towards busier lifestyles in Indonesia also stimulated growth in bottled water consumption in 2019, as did the increase in economic activity that accompanied the general election campaign during the early months of the year. Moreover, while economic conditions improved, many consumers remained quite price-sensitive after having experienced a drop in purchasing power over 2017–2018.
Launch of Health-Oriented Products Likely to Persist Despite Niche Appeal
The health and wellness trend has had a growing influence on new product development activity in bottled water in recent years. The latter part of the review period saw the entry of more products positioned as having functional benefits, such as Pristine 8+ and Eternalplus (E+) mineral water products containing alkaline variants with a higher pH content, Evian with mineral water products containing potassium, magnesium, and sulfate to improve health, etc.
Major Players of the Bottled Water Industry in Indonesia
The Indonesian bottled water market is a fragmented market. Danone has a prominent market share in the nation, followed by other international players, like Coca-Cola and Nestle. Several new players are entering the market and are able to capture the market at a very fast pace, owing to the increasing demand for bottled water. The most common trend in the nation is that foreign companies are either joining or acquiring local companies, which already has a share in the bottled water market. For example, the Danone Group acquired Aqua, and Coca-Cola acquired Ades Bottled Water.
- Asahi Beverages
- Danone
- The Coca-Cola Company
- Nestle SA
- Fraser and Neave, Limited.
Danone Maintains its Lead Despite Growing Competition
Danone Aqua remained the clear leader in bottled water in off-trade value terms in 2019 thanks to its wide distribution network and a well-developed portfolio that offers reputable brands such as Aqua, VIT, and Evian in a variety of pack sizes. However, the company posted steep declines in off-trade volume and current value sales due to growing competition in its traditional stronghold of still purified bottled water.
Tirta Fresindi Jaya Makes Rapid Gains in 2019
Tirta Fresindo Jaya ranked second overall in bottled water in 2019 and was by far the most dynamic player in terms of off-trade volume and current value sales growth. It recorded rapid volume and value share gains in still purified bottled water — primarily at the expense of Danone — thanks to a competitive pricing strategy and improvements in the distribution of its Le Minerale brand via traditional and modern grocery retailers channels.
Asahi Indofood Benefits from Wider Distribution of its Club Brand
Third-ranked bottled water company Asahi Indofood Beverage Makmur PT continued to post steady growth in off-trade volume and current value sales in 2019. In addition to the affordable price positioning of its Club brand, its positive performance reflected improvements in distribution via convenience stores and other modern grocery retailers’ channels.
Bottled Water Market in Indonesia during COVID-19
The Bottled Water business in Indonesia is experiencing a huge drop due to the impact of COVID-19 on the tourism industry in Indonesia. The large-scale social distancing measures also play a part in the significant impact on the Bottled Water industry due to the very limited activities outdoors. In April, bottled water products dropped by 40%.
Rachmat Hidayat, the chairman of the Indonesian Bottled Water Association (Aspadin) stated that Aspadin is only expecting to see an increase of 4–5% in the bottled water industry in this year, considering 95% of the Aspadin members are small business owners and depend on these small-packaged water products
However, in the past couple of months, the bottled water industry seems to be experiencing an increase in demand as production has increased by 20%. Syamsul Hadi, the Director of Tirta Kanjuruhan in Malang stated that bottled water products lately have been seeing an increase in demand after the previous drop, the increase is up to 20% from the previously established target.
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The Indonesia Bottled Water Industry is still steadily growing. Despite the drop in sales at the beginning of the COVID-19 pandemic, the industry is now gradually returning to its progressive state. With the diversified market segments such as flavored water and health-oriented marketing which are currently in trend, the industry will be seeing growth in the future.
