Indonesias Burgeoning Beauty Scene
With the clock ticking toward the deadline for all beauty products that sell in Indonesia to be completely halal certified by October 2026 —still in a grace period of more than seven years after the law came into effect in 2019 — both global and local beauty brands are looking at ways to comply with one of the most important beauty markets in the Asia Pacific region.
Global brands have long indicated that Indonesia’s fast-growing middle class and increasingly affluent consumers make it a market worth changing for. The beauty and personal care market in Indonesia stood at nearly $7 billion in 2020 according to Statista, and is estimated to grow to approximately $9.6 billion by 2025.
Hair care is the largest segment at approximately 35 percent, followed by skin care at 32 percent, makeup 20 percent and fragrance at 13 percent; 88 percent of sales are in the mass channel.
While Unilever is the market leader with brands like Sunsilk and Lakme, other key players also include L’Oréal and Procter & Gamble. Other popular global brands include Laneige, Innisfree, Nature Republic and The Body Shop, and others. Leading local brands include Wardah, a bestseller, Sari Ayu and Mustika Ratu.
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The fourth most populous country in the world, with a population of 276 million, Indonesia is also a big mover for Gen M — the Muslim consumer, with the largest Muslim population in the world. Analysts say it sets the trends for other countries with big Muslim populations.
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Halal products, meaning “permissible according to Islam,” have increasingly become important for Generation M, following guidelines that include ingredients like pork and alcohol, and also processes and systems of preparation.
Although global companies have been working toward halal products in previous years, there is still much to be done with global sourcing and ingredients for many of the products with changes being worked around their supply chains.
“The Indonesian market is huge,” said Reggie Costillas, Fragrance & Beauty Head – Givaudan Indonesia. “We’ve been seeing the changes in the market and the way things are shifting and we’re prepared for it,” he said, referring to the company’s factory which has been certified halal since 2016.
“But in terms of halal-driven content, that is an evolving area,” he continued. “What is halal in the minds of the consumer? In the beginning it was ingredients. Now it is growing into a concept.”
According to Mintel Global New Products Database, beauty and personal care product launches in Indonesia with a halal claim showed a 20 percent increase from May 2019–April 2020 to May 2020–April 2021.
“It’s just a matter of time for brands to launch separate sidelines just for the Indonesian market,” said Sharon Kwek, associate director – Southeast Asia, Beauty & Personal Care, Mintel. “Also looking at consumer expansion, this is very timely, because more and more consumers are into natural, clean ingredients and halal beauty also has a niche appeal toward the mindful and conscious consumers who are after clean and vegan beauty.”
Umesh Phadke, president director, L’Oréal Indonesia, is equally clear that the Indonesian consumer cannot be underestimated.
“Indonesia is a very dynamic and active beauty market,” he said, noting that the combination of young consumers — the average age is 29 years old — combined with a growing economy has resulted in steady growth.
Even during the last year, Phadke said, the economy showed resilience compared to neighboring countries. As well, it is a digitally savvy population, with upwards of 170 million people owning smart phones.
“As a result, the consumer is very optimistic, young, digitally enabled, connected with the rest of the world and looking at the latest [trends and products] and at what she can use in the Indonesian context,” he said. “By virtue of being so dynamic and active, the Indonesian market has been very much at the forefront when it comes to fulfilling consumer needs.”
L’Oréal has 100-percent certified halal factories in Indonesia, China and India, and the Garnier products sold here have been halal since 2019. Other of its brands are moving toward that goal.
Garnier, which is sold in about 250,000 stores plus e-commerce, is gaining strength with room to grow, said Phadke, who noted that the country has about three million stores total.
While certifications are becoming standardized, the consumer has been changing, too, both in terms of experimentation and purchase.
The fastest change is being seen in urban consumers. Jakarta, with its population of 10.56 million, is the country’s largest city, while Surabaya, Medan and Semarang are also rife with young people.
Fragrance has become a very popular category, said Costillas, who noted that the market is evolving rapidly. “Fragrance is a driver of purchase,” he said. “Not just as a first purchase, but a repeat purchase.”
In 2020, a key shift has been toward niche fragrances, a sector which doubled in size compared to the 30-50 percent increase posted by the fine fragrance category.
“The consumer is starting to explore more,” said Costillas, noting that part of the shift was due also to the COVID-19-driven closure of traditional retail and the growth of e-commerce, a channel that niche players are more present in.
Hair color is also growing quickly. “The common thinking was women wearing a hijab wouldn’t care if their hair was colored or not, but that couldn’t be further from the truth,” said Phadke. “We saw the hijab adoption went from 20 percent to 69 percent over the past 10 years. Hair color also grew.”
Phadke explained that research showed women were actually more open to experimentation, as wearing a hijab protected them from general comments. “So, what we saw was that fashion shades actually grew with the use of hijab,” he said.
COVID-19 also impacted the color cosmetics category. During the initial lockdown period, sales slumped, said Phadke, but noted that when indications start to appear that lockdowns are going to be lifted, “makeup buzz shoots through the roof.
“Women are itching to use makeup,” he continued. “It’s like you’ve held them back, but the moment there is an opportunity, they will go back.”
Online sales have been growing at 50-60 percent, with formats like liquid lipsticks performing extremely well.
Other categories, like UV protection, have surged over the last year, and premium products also did well, as consumers cut down on their normal spend on eating out and traveling.
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