Consumption Trends of Indonesian Middle Class Consumers MR-113 - P40-55

ASIAN CONSUMER
4
TRANSFORMING ASIAN CONSUMER
case study 4
Consumption Trends of Indonesian

Middle Class Consumers
DEKA Marketing Research

Managing Director
Irma Dharmaniati
Malibari
DEKA Marketing Research

Technical Advisor
Abdur Rahim
Jabbar
Indonesia will become one of the future

centers
of economic growth
Indonesia belonged to one of a few countries that
recorded still positive economic growth of 4.55% in
2009 amid the financial crisis. In 2010, the
Indonesian economy is expected to grow by 5.6%,
1 20052015
whilst for the coming five years 2011-2015,

Indonesia is forecasted to achieve growth rates
averaging at around 6.7%. With such positive
INDONESIAS ECONOMIC PERFORMANCE & FORECAST2005-2015
development, Indonesia will become an economy of
3,500,000
more than USD one trillion by 2015 USD 1,172
3,000,000
billion, estimated at the current USD price

. When the
1,800
1,600
1,400
2,500,000
figure is calculated at Purchasing Power Parity
1,000
2,000,000
which better reflects the domestic purchasing power
800
1,500,000
of
1,000,000
be around USD 1,551 billion. At that level of growth,
500,000
the Indonesian economy is expected to increase by
--
around USD 90 to 110 billionat the current price
1,200
600
400
200
--
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP
10
USD Billion
GDP
10/PPP
USD Billion/PPP
GDP
10/
IDR Billion/Constant
: 2010Economic Watch Source: Economic Watch, 2010
40 Marketing Researcher No.113
Indonesian consumers
, the figure is estimated to
per year within the next five years.
Consumption Trends of Indonesian Middle Class Consumers
2
20072015
THE DEVELOPMENT OF INDONESIAN MIDDLE CLASS2007-2015
11,72
70.0%
PP
1
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
150400
PPP
B-NAT
BC
Social & Economic Classification

based on Monthly Household
Expenditure (MHE)
2,500,001
Above IDR 2,500,001
B 1,750,001 2,500,000
C
D
E
Middle Class Households Spending

Ranges from USD 150 up to 400
at PPP TermsPer Month
The generally accepted method of partitioning

Indonesian social economic classes is through their
monthly household expenditures. The classification as
per that applied by The Nielsen Company is as below:
The top class, A, are those households that spend
more than IDR 2.5 million for purchasing products
and services for everyday needsfood, clothing, cars,
rent, personal services, etc.
. This amount can be
1
(MHE)
2015
C-NAT
:
CBS:Central Bureau of Statistics
2007
SUSENAS
Source: CBS, Susenas, 2007, using definition by The Nielsen

Company, and Own Forecasts
20072008
2009 2010 2011 2012 2013 2014
Equivalent to
USD
USD

current price
264
USD 264
185 264
PPP
411
USD 411
287 410
translated into USD 264/month per household at

current prices, whereas on purchasing power parity
terms, the figure stands at around USD 411/month
per household.
The middle class are those belonging to B & C
UDR 1,750,001 u/i IDR 2,500000
USD 185 u/I 264
USD 287 u/I 410
categories, namely those households that spend from
900,0011,750,000
95 184
148 286
USD 95 up to and including USD 264 for daily

necessities, equivalent to USD 148 - USD 410 on
IDR 900,001 u/i IDR 1,750,000
USD 95 u/I 184
USD 148 u/I 286
600,000900,000
63 94
99 147
IDR 600,001 u/I IDR 900,000
600,000
Below and up to IDR 600,000
USD 63 u/I 94
< 63
< USD 63
USD 99 u/I 147
< 99
PPP terms per household per month.
< USD 99
SUSENAS
Size of the Middle Class Will

The
Surely Increase
By applying the above criteria to the National Survey
on Social and Economic Conditions of the Indonesian
PeopleSUSENASconducted in 2007, the middle
Marketing Researcher No.113 41
ASIAN CONSUMER
4
case study 4
class account for 62% of all households in urban areas
and around 50% in rural areas, making a total of 55%
of Indonesian households at the national level. In line

with the expected economic growth that will drive
up-ward mobility along the class stratification, the
figure is estimated to reach 63% by 2015.This is
quite a moderate forecast. With that relatively
moderate upward movement, within the next five years

2011 to 2015, the middle class is expected to
expand by around 5 to 5. 5 million people per year.
Expanding Economic Role of the

The
Middle Class
The economic role of the Indonesian Middle Class
is much stronger than their sheer size.
Based on
available data, the total purchasing power to cover

expenses for their daily living needs is expected to
increase by around
IDR 150 to 250 trillion at
current pricesper year within the
next five years
2011-2015
. As such, the total spending power of
the middle class will be increasing by more than twofold compared to 2010.
Profile of the Indonesian Middle Class
Education
%
3 10/
20072015
INCREASING BUYING POWER OF INDONESIAN MIDDLE CLASSRP.BILLIONS/YEAR
2007-2015
The level of education attainment of the majority of

the Indonesian middle class is somewhat moderate, with
average formal schooling years of around nine years.
Less than 10% reached a tertiary educational level.
4 :
PROFILES OF INDONESIAN MIDDLE CLASS:EDUCATION

3
2,000,000
3 5
1,800,000
1,600,000
1,400,000
B-CONS.
EXP-NAT
1,200,000
1,000,000
800,000
20
200,000
20072008
2009 2010 2011 2012 20132014
: 2007SUSENAS
Source: Own Estimates & Forecast based on Susenas, 2007
2015
Without Formal Education
Primary School,not completed
Primary School,completed
Secondary School,completed
High School,completed
23
C-CONS.
EXP-NAT
400,000
No Education
29
600,000
--
16
:2009
Source: The Nielsen Company, Indonesia, 2009
Academy
University,graduated
5 :
PROFILES OF INDONESIAN MIDDLE CLASS:

OCCUPATION
90%
80%
92.93
SEWING MACHINE
11.32
TV COLOR
92.04
CAMERA
10.58
TV COLOR<30"
91.90
DIGITAL CAMERA
7.19
IRON ELECTRIC
89.42
KARAOKE
6.37
GAS STOVE
82.77
PRINTER
6.14
FAN ELECTRIC
73.59
INCIDENCE OF CAR OWNERSHIP 5.76
RICE COOKER
58.49
HAIR DRYER
5.75
VCD VCD PLAYER
58.18
AIR CONDITIONER/AC
3.76
REFRIGERATOR
51.69
TOASTER ELECTRIC
3.41
WATER PUMP ELECTRIC 51.34
VIDEO CAMERA
2.07
BLENDER
49.92
MICROWAVE OVEN
1.70
RADIO CASSETTE
46.50
WATER HEATER
1.61
CD CD PLAYER
44.49
VACUUM CLEANER
1.52
ADULT BIKE
33.58
TV BLACK & WHITE
1.34
MIXER
33.01
DVD DVD PLAYER
31.29
MOTORCYCLE
25.41
WASHING MACHINE
17.36
RADIO
17.03
Blue Collar
REGULAR PHONE
14.45
White Collar
///
NCIDENCE OF COMPUTER/NOTEBOOK/
LAPTOP/PALMTOP OWNERSHIP
12.75
70%
60%
50%
40%
30%
20%
10%
0%
2008 2009
Other
Entrepreneurs
PROFILES OF INDONESIAN MIDDLE CLASS:OWNERSHIP OF DURABLES
TV ANY
100%
2 :
:2009
Source: The Nielsen Company, Indonesia, 2009
BUYING CAR INCIDENCE
1.27
/ ORGAN/PIANO
1.03
FAX
0.47
TV COLOR>30"
0.35
ANSWERING MACHINE
0.22
SATELLITE DISH
0.10
:2009 Source:The Nielsen Company, Indonesia, 2009
Occupation
Blue collar workers dominate the middle classes
occupation, followed by entrepreneurs, likely to be
running the small and medium enterprises. Some
sizable groups earn their living through being white
collar workers, either as civil servants or employees in
private companies.
CDDVD
Hi-Fi
/
Ownership of Durables
To support their lifestyles, the Indonesian middle
class purchased a set of general/basic brown goods or
small appliances to own such as TVsalmost all are
color typesand CD and DVD players. However, there
are ample opportunities to offerhigher end brown
goodslike Camcorders, Hi-Fi and Home Theater/
Cinema as well as video game consoles and answering
machines, since their ownerships are still at a relatively
low level.
With regards to white goods or major
household appliances such as Freezers, Refrigerators,

those things are generally available at their respective
PDI
homes. As their
increases along with the expected growth in the
Indonesian economy as a whole, their demands for
personal disposable incomePDI
ASIAN CONSUMER
4
case study 4
more refined white goodslike Air conditioners,
Dishwashers, Clothes dryers, Drying cabinets, Kitchen

stoves, Water heaters, Washing machines, and
Microwave ovens are highly likely rise fast as well.
Middle Class People Are

Indonesian
Undergoing Transitory Phase
The Indonesian middle class would like to see
themselves as Indonesian. They display some key
characteristics of middle class values like emphasis
on success and the importance of a full social life.

Due to recent historical experiences, the
consciousness of and the need for security seems to
be on the high side, both at the macro-environmental
as well as micro-environmental levels such as job
security. To some extent, the signs of being under a

transitional phase can be detected through their
concerns about the threats to Indonesian societal
values as well as on the uncertainty that the future
poses. It can then be understood why most

Indonesian middle class perceive themselves to be
true believers by regularly going to places of worship.
6 :
ATTITUDES:ABOUT ME-TOP10
66.7%
I regularly go to the mosque or my place of worship.
68%
68%
It is important that I have responsibility in my job.

The fundamental values of our society are under serious threat.
69%
I more extrovert than introvert.
75%
I really want to enjoy things now because I just don't know what the future will bring.
78%
I need to have security in my job.
85%
It is important to have a full social life.
86%
Succeed is important to me.
88%
I'm security conscious
88%
I consider myself Indonesian.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%
1.25
:
Roy Morgan Single Source
20106
: 1.2510,652
Source: Roy Morgan Single Source Indonesia June 2010 (National)
Base: Total Population 14+, with HH Expenditure > 1.25 Million Rupiah n=10,652
Indonesian Middle Class Display

Significant Concern about Political,
Social and Economic Conditions
The Indonesian middle class are very much aware of
the political, economic and cultural problems faced by

society at large. Corruption is top in their mind as one
of the major problems facing the nation. They realize
the turbulent changes happening at once. Their social
concerns are shown through their conviction that the
Government should also help the unemployed and
everyone with extra money should allocate some part

to charities. In general they are optimistic about the
future in the belief that democracy seems to be
working in Indonesia. At heart, they are still holding
fast to the traditional virtues as they believe that
Playboy magazine should not be permitted in

Indonesia. They also tend to preserve the traditional
values of obedience and respect to authority. They
Playboy
also share deep concerns with regards to
environmental problems faced by the nation.
7 :10
ATTITUDES:SOCIAL ISSUES-TOP10
75%
76%
76%
Obedience and respect for authority are the most important virtue children should learn.
if we don't act now we'll never control our environmental problems.

Democracy is working in Indonesia.
Play boy
Magazine like Play boyshould not be permitted in this country.
77%
78%
At heart I'm an environmentalist.
78%
There's too much change going on these days.
82%
I think it is Government's duty to support those who can't nd work.
83%
I'm optimistic about the future.
83%
I believe a percentage of everyone's income should go to charities.
84%
Corruption is one of the major problems facing this country.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%
1.25
:
20106
: 1.2510,652
ASIAN CONSUMER
4
case study 4
Indonesian Middle Class

Show Balanced Attitudes
toward Advertising and Media
TV as an electronic media is one of the major
sources for information on world events. They have
positive attitudes towards advertising materials
broadcasted as those are considered interesting and

even sometimes more interesting than other TV
programs. However, on the other hand, the Indonesian
middle class TV watchers also believe that there are
some ads that are just deceiving.
There Are Ample

Opportunities for Health and
Leisure-Related Products
Concern about health is starting to develop

amongst the Indonesian middle class. They try to get
a sufficient amount of good nutrients and avoidless
healthy food
, like red meat, high fat food and
unnecessary additives. However, there are still more
than half who do not have the correct opinion and

therefore do not behave accordingly. Once the
8 :10
ATTITUDES:ADVERTISING & MEDIA-TOP10
31%
Quite often I nd TV advertising more entertaining than the programmes.
36%
36%
I don't read the in ads in newspapers and the magazines.

I often redeem coupons to get discounts or special oers.
41%
TV advertising often gives me something to talk about.
44%
I can't help noticing advertising on buses.
55%
Some TV advertising is devious.
62%
I can't miss seeing those big billboard signs.
66%
I nd TV advertising interesting.
67%
I always watch the news on TV to keep me up-to-date.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
%
1.25
:
20106
: 1.2510,652
100%
awareness has been built and knowledge is spread
more widely, there will be ample opportunities for
health-related products.
Opportunities can also be explored on some leisure
10%
activities that are still relatively low amongst the
middle class. The incidence of playing video games

and computer games is much lower than 10%.
9 :10ATTITUDES:HEALTH&FITNESS-TOP10
37%
I love to do as many sports as possible.
39%
Health food is not necessary if you eat properly.
44%
I would like to be able to lose weight.
46%
I always think of the number of calories in the food I'm eating.
47%
A low fat diet is a way of life for me.
51%
I'm concemed about my cholesterol level.
56%
I'm eating less red meat these days.
65%
I try to buy additive free food

eg, preservatives, MSG etc.
.
69%
I try to get enough calcium in my diet.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%
1.25
:
20106
: 1.2510,652
10 3:10LEISURE ACTIVITIES IN THE KAST3 MONTHS-TOP10
//
4%
Played video games at homeeg, PlayStation/Nintendo/Sega
Played board gameseg, Monopoly
6%
Played computer games at home
6%
Worked in the garden
6%
Went to a professional sports event
6%
Worked on a car
9%
Dressmaking
9%
18%
Did some formal exerciseeg, gym, aerobics, running,cycling etc
Played a sports
29%
Hobbies
32%
0%
5%
10%
15%
20%
25%
30%
35%
40%
%
1.25
:
20106
: 1.2510,652
ASIAN CONSUMER
4
case study 4
made products. However, it can be visibly seen that
this is a sort ofconditional love

, namely in so far that
New Products Get Chances As Middle

Class People Look For Variety As
Well As Quality-Price Balance
Preferences seem to be directed towards Indonesian-
the quality warrants the price level.
When the quality
requirement is not fulfilled, the Indonesian middle class

will go for products or brands that give a proper
balance between values obtained against the money
spent. The Indonesian middle class look for alternatives
driven by searching for a bargain in terms of value for

money. As such, they express their openness towards
new and different products.
Japanese Products and Brands Top the

Lists of Purchase Likelihood among
Non-Domestic Sources
Thanks to a long-established market presence,

Japanese products and brands, next to Indonesian-made
products, come second in the list of alternative sources,

followed by Chinese, then by non Asian countries of
origin: USA, Australia, Italy, Germany and France. As a
late-comer, Korea stands in only eighth position.
11 :10ATTITUDES:SPFCIFIC PRODUCTS & SHOPPING-TOP10
44%
I like to try the free samples they offer in supermarkets.
I would like to buy a home computer.
46%
52%
I have favorite brands for most things I buy and I tend to stick to them.
I enjoy clothes shopping.
53%
I don't buy luxuries anymore.
55%
I enjoy grocery shopping.
55%
56%
I am always ready to try new and dierent products.
70%
I'll go out of my way in search of a bargain.
75%
I believe quality is more important than price.
79%
I try to buy Indonesian made products as much as possible.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
%
1.25
:
20106
: 1.2510,652
100%
A Gradual but Sure Shift towards

Shopping From Modern Retailers
Seems Imminent
Both traditional and modern retailers are the major
distribution channel for fast moving consumer goods

FMCG
. The role of traditional retail outlets is still
very much dominant; however, there is a gradual but

sure shift towards shopping from modern retailers.
FMCG
This is in line with the growing number of modern
retail outlets as well as their shares of consumer
purchasing money.
The number of modern retailers has significantly
12 :10
MORE LIKELY TO BUY PRODUCTS MADE IN COUNTRY-TOP10
100%
90%
increased from around 7,800 outlets2005to around

14,000 outlets 2009. Compared to traditional
89%
retailers, modern retailers give middle class consumers
80%
70%
60%
61%
more convenience in terms of ambiance, wider range
55%
46%
50%
40%
40%
39%
38%
38%
of product selection and more consistent quality.
37%
27%
30%
20%
10%
0%
Indonesia Japan
China

USA
Australia
Italy
Germany France
Korea
Canada
%HHRp1.25M14+
: 2010 6 ( )
: HH Expenditure>1.25Million Rupiah n=10,652 14+
Hot Products : Telecommunication

Products, Two-Wheelers, Car, Brown
and White Goods
Telecommunication Products
The last five years have seen a dramatic growth in
13 3:10SHOPPING IN THE LAST 3 MONTHS-TOP10 ACTIVITIES
3%
Bought goods on interest free terms.
Went to a home furnishing store.
4%
Went to a music store.
6%
Went to a beauty salon or spa.
7%
Went to a bookshop.
12%
Went to a clothes shop or boutique.
13%
KAmPm
17%
Went to a convenience storeeg,Circle-K,AmPm etc

.
Went to a department store.
28%
33%
Went to a huge supermarket/hypermarketeg,Carrefour etc

.
79%
Went to a corner shop/warung/toko kelongtong.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%
1.25
:
20106
: 1.2510,652
ASIAN CONSUMER
4
case study 4
the markets for products that are used by the
Indonesian middle class, particularly in the
telecommunication sector, automotive and white as

well as brown goods sectors.
As per the latest
estimate, the number of mobile telecommunication
7,800
1
subscribers is recorded at 180 million or around 80%
4,000
penetration.
This is an increase from 165 million
users in 2009, which was also more than doubled

from the 2006 figure as the nation
s operators lured
users by cutting call and messaging chargesin a
price war like situationwhich has significantly
decreased Average Revenue Per UserARPU
. As a
result, roughly 97% of mobile telecommunication
customers in Indonesia use prepaid services, with a

relatively high level ofchurn rate
. The number of
14
NUMBER OF MODERN RETAIL OUTLETS
16,000
12,000
%18,000
,
14,000
10,000
8,000
6,000
6,465
4,000
8,889
11,819
2,000
--
2005
2006
2007
2008
2009
Wholesale Club
Hypermarket
Convenience Store
Supermarket
ARPU
7,356
10,607
Minimarket
:Retail Asia On-line,2010

Source:The Nielsen Company, Indonesia,,2009, and Retail Asia On-line, July 2010.
15
SMART PHONE WILL SURPASS THE REGULAR FEATURES
100%
90% 87%
90%
80%
86% 84%
83% 81%
79%
76%
73%
70%
69%
65%
60%
55%
50%
40%
60%
30%
20%
10%
21%
17% 19%
14% 16%
10% 13%
0%
27%
35%
40%
45%
08 008 008 009 009 009 009 010 010 010 010 011 011 011
2
2
2
2
2
2
2
2
2
2
2
2
2
3/
4/
1/
2/
3/
4/
1/
2/
3/
4/
1/
2/
3/
QQQQQQQQQQQQQ-
20
2/
Q-
24%
31%
51%
49%
Feature phone SMART phone

:2010 Source:The Nielsen Company, 2010
subscribers may grow to 200-210 million within two
yearsby around the end of 2011 or early 2012
before it reaches a plateau.
An interesting characteristic of the Indonesian
mobile phone market is the fast increase in the
growth of smart-phones. The profile of smart phone
BlackBerry i-Phone
BlackBerry
i-Phone
12%
250
users is very young53% of mobile web users are

between the ages of 18 and 27and skewed in terms
of gender82% of the total number of mobile web
users are male. The smart-phones are commonly
used by the young as well in Indonesia for leisure
activities such as social networking especially
Facebook and Twitter
. At that level of growth rate, it
is expected that smart phones will likely overtake
mobile phones with normal features by Q-III/2011.
Another unique feature of the smart-phone subsector is that BlackBerry beats i-Phone. The two
phenomena of smart-phone beating feature phones
and BlackBerry beating i-Phone are related to some
other factors such as the condition of internet access
as well as some cultural elements. As per the latest
BlackBerry
estimate, there are roughly 30 million people in

Indonesia with internet access a penetration of
around 12%, but only about 2.5 million have
dedicated access, due to its relatively high cost. Even
if a person can afford to have broadband access at
BlackBerryi-Phone
i-PhoneMB
-
BlackBerry
BlackBerry
BlackBerry
home, most often, the speed is not reliable. Therefore,

most people rely on shared internet connections in
places such as internet cafes or public libraries.
BlackBerry has entered to occupy thevacant space
by offering subscribers a prepaid plan for just around
US$ 17 per month to unlimited access to data with
calls and SMS.
Above all else, BlackBerry has been priced very
competitively against i-Phone: i-Phone is sold
exclusively by a certain single provider for USD 700800from around USD 1,000 to USD 1,200 after
initial launchcomplete with a 500 MB data plan;
Blackberry costs USD 500. In addition, unlike in other
parts of the world, most users in Indonesia
BIS
BlackBerry
dominated by the young and professional apply
BBM
BlackBerry also for leisure activities such as social
ASIAN CONSUMER
4
case study 4
networking.
BlackBerry
subscribe to BlackBerry Internet ServiceBISand
Therefore, most BlackBerry users
use BlackBerry Messenger BBM services. The

Indonesian cultural element that highly values
sociability through intensive interaction and
exchanging information and social gossip has induced
the surging popularity of Social Media like Facebook
and Twitter, which in turn, has helped the growth of

BlackBerry in the smart-phone segment in Indonesia.
Unfortunately, Japanese products and brands seem to
be under-represented in this growing sector.
PPP
Automotive Sector : Two-Wheelers

The market for two-wheelers in Indonesia displays a
very much encouraging growth pattern, even faster
than the growth of the economy as a whole as
measured in terms of Purchasing Power Parity
PPP
. With the half-yearJanuary to June 2010
sales recorded at 3.6 million units, the two-wheeler
market in Indonesia is predicted to reach new records
with total sales of 7.2 million units for 2010.
With
significant growth from year to year, the Indonesian
motorcycle market is predicted to reach 10 million
AISI
units by 2013- 2014 as per the expectation of the

Association of Indonesian Motorcycle Industries
AISI
. In this sub-sector, Japanese brands/makes
such as Honda, Yamaha, Suzuki and Kawasaki
16 19962009
PERFORMANCE OF INDONESIAN
TWO-WHEELER MARKET1996-2009
dominate the market with cumulative shares of more

than 90%.
17 19972015
PERFORMANCE & FORECAST OF INDONESIAN
CAR MARKET1997-2015
1,200
7,000,000
1,400
1,000
6,000,000
1,200
5,000,000
1,000
4,000,000
800
1,000
3,000,000
600
800
2,000,000
400
1,000,000
200
800
600
400
200
--
96 97 98 99 00 01 02 03 04 05 06 07 08 09
19 19 19 19 20 20 20 20 20 20 20 20 20 20
--
GDP
10/PPPGDPUSD Billion/PPP
Wholesalesunit
:AISI
2010
Source:AISIThe Association of Indonesian Two-Wheeler Industry,2010
1,800
1,600
1,400
1,200
600
400
200
--
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
'000Car sales'000
Optimistic
GDP
10/PPPGDPUSD Billion/PPP
: Gaikindo2010 Source: Gaikindo, 2010
--
The increasing growth of the motor-cycle market
has been facilitated by a number of factors. The first
is the increased percentage of consumers who

embraced financial products coupled with widening
access to credit at relatively acceptable interest
rates. This favorable financial arrangement has
facilitated people
s buying power, thus driving
affordability. Another factor is the growing working

population which drives upward migration of
household income levels, supported also by fast
paced urbanization that is to increase from 50% in
2011 to 55% by 2015. In addition, the middle class
is expected to expand by 3 - 4 million every year
within 2010-2015.
Automotive Sector : Car

The growth rates of the Indonesian automotive
market have generally been in line with the rates of
the economic conjunctures. The economic and
political crisis in 1998-1999 drove down the demand
for automotive products.
Increase in the domestic
prices of fuel in March and October 2005 also
negatively affected the Indonesian car market.
The
last disturbance to the growth pattern was the global

economic crisis of 2008-2009. In 2010, the market
seems to have rebounded; the Association of
Indonesian Automotive IndustriesGaikindoreported
Gaikindo
that car sales in Indonesia had jumped 76% to
2007
14
35
370,206 vehicles in the first half of 2010, driven by

strong demand for minivans. At that level of strong
rebound, car sales are expected to top 700,000 units
in 2010 for the first time.
The large size of the Indonesian population and the
low level of car ownership in 2007, only one in
every thirty-five people in Indonesia owned a car,
compared with one in fourteen in Thailand and one in
seven in Malaysiain the country plus the growing
economy suggest there is a lot of potential for
expansion in the automotive industry.
In the long
term prospect, with such an encouraging trend, the

optimistic view will see that Indonesia may hit its first
million car sales in the next three to four years. The
second million might be reached within the next ten
to twelve years.
ASIAN CONSUMER
4
case study 4
100
200
In this automotive sector, Japanese brands/makes

such as Toyota 38% market share, Daihatsu
15%, Mitsubishi 14%0, Suzuki 9%, Honda
8%, Nissan 5%, Isuzu 3%, Hino 3%, and
Mazda less than 1% dominate with cumulative
shares of more than 90%.
38%
segment dominates the automotive market in
15%14%
9%
8%
5%
3%
3%
1%
MPVs
Avanza
The passenger vehicle
Indonesia, with mini-vans and multi-purpose vehicles

MPVs in extensive use for both personal and
commercial operations. As an example, 30% of total
sales of the market leader, Toyota, are for Toyota
s
Avanza, a four-door family hatchback multipurpose
model.
Brown and White Goods

The Indonesian market registered around IDR 71
trillion for consumer durables that include both brown
and white goods in 2009.
The first quarter 2010
market value for consumer durables tracked

byTEMAX amounted to IDR 19.3 trillion with a growth
rate of 18% from the same quarter last year. Strong
growth could be seen from both the Major Domestic
GfK TEMAX2010
and Small Domestic Appliance sectors. The
Consumer Electronics and the Photo sectors had only

single digit growth.
Based on the facts of ownership levels of certain
higher end brown goodsandmore refined white
goodsamongst the Indonesian middle class, it can
be expected that double-digit growth will become the
rates that will drive the market demand for consumer
durables.
In this sector, Japanese products and
brands have become household names such as

Panasonic, Sony, Sanyo, etc.
for and Challenges Facing

Opportunities
Japanese Products and Brands
The Indonesian middle class constitutes the major
part of the consumer market that presents ample
opportunities for Japanese products and brands. This

source of volume zone is expected to control
bigger
buying power as the Indonesian economy is expected

to grow healthily in the coming decades. These new
spenders will surely buy greater quantities of the
same products and a greater variety of products that
are currently unaffordable for them.

The improved economy will increase personal
disposable income that will also change spending
patterns.
towards non-food, thus opening up ample
The share of spending on food will shift
opportunities for more white and brown goods as well

as health and leisure-related products. Spending on
food will now gradually be more on prepared food as
well as on food with international tastes and trends.
The general challenges for Japanese manufacturers
will be to develop the market for products to cater for
today
s underserved needs that will emerge to
become demands as purchasing capability increases.
As such, strategies forearly captureare required,
particularly for products that are currently unavailable
from domestic producers.
Another challenge will be
to out-maneuver the local as well as international

players that have captured a significant portion of
Indonesian middle class spending.
3 I.T.
HOME APPLIANCES AND i.T. PRODUCTS SHOW DOUBLE-DIGITGROWTH

YEAR
Consumer ElectronicsCE
PhotoPH
Major Domestic AppliancesMDA
Small Domestic AppliancesSDA
Information TechnologyIT
Telecommunication
TC
Office Equipment & Consumable EO
Q2
Q3
Q4
Q1
Q1 10/
2009
2009
2009
2010 Q1 09
IDR bn IDR bn IDR bn IDR bn IDR bn
2,595
2,669
2,685
2,784
7,5%
519
450
473
484
3,4%
1,537
1,970
2,018
2,074
53,2%
1,481
1,786
2,000
1,851
57,0%
2,486
2,430
2,677
3,109
14,0%
7,898
8,427
9,005
8,436
10,9%
473
480
507
521
16,1%
:2010`GfK Retail and Technology

GfK, TEMAX Indonesia
Source: GfK, TEMAX Indonesia, GfK Retail and Technology, 2010
Irma Dharmaniati Malibari

UNICEF IndonesiaJunior Research ExecutiveAC
NielsenSenior Research Executive
PT Bayer Indonesia
Research Manager
1993Deka Marketing
ResearchIndonesian Marketing Research
ESOMAR
Abdur Rahim Jabbar

P.T. Unilever Indonesia TbkStrategic Planning
ManagerSupreme Audit Board of the Republic of
Indonesia BeingPublic Relations Consultant
strategic advisor2007

Consumption Trends of Indonesian Middle Class Consumers MR-113 - P40-55

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ASIAN CONSUMER

Consumption Trends of Indonesian

DEKA Marketing Research

DEKA Marketing Research

Indonesia will become one of the future

2009 amid the financial crisis. In 2010, the

Indonesian economy is expected to grow by 5.6%,

whilst for the coming five years 2011-2015,

INDONESIAS ECONOMIC PERFORMANCE & FORECAST2005-2015

development, Indonesia will become an economy of

more than USD one trillion by 2015 USD 1,172

billion, estimated at the current USD price

figure is calculated at Purchasing Power Parity

which better reflects the domestic purchasing power

be around USD 1,551 billion. At that level of growth,

the Indonesian economy is expected to increase by

around USD 90 to 110 billionat the current price

: 2010Economic Watch Source: Economic Watch, 2010

40 Marketing Researcher No.113

per year within the next five years.

Consumption Trends of Indonesian Middle Class Consumers

Consumption Trends of Indonesian Middle Class Consumers

THE DEVELOPMENT OF INDONESIAN MIDDLE CLASS2007-2015

Social & Economic Classification

Above IDR 2,500,001

Middle Class Households Spending

The generally accepted method of partitioning

Source: CBS, Susenas, 2007, using definition by The Nielsen

translated into USD 264/month per household at

UDR 1,750,001 u/i IDR 2,500000

USD 185 u/I 264

USD 287 u/I 410

categories, namely those households that spend from

USD 95 up to and including USD 264 for daily

IDR 900,001 u/i IDR 1,750,000

USD 95 u/I 184

USD 148 u/I 286

IDR 600,001 u/I IDR 900,000

Below and up to IDR 600,000

USD 99 u/I 147

PPP terms per household per month.

Size of the Middle Class Will

Marketing Researcher No.113 41

class account for 62% of all households in urban areas

and around 50% in rural areas, making a total of 55%

of Indonesian households at the national level. In line

figure is estimated to reach 63% by 2015.This is

quite a moderate forecast. With that relatively

moderate upward movement, within the next five years

Expanding Economic Role of the

available data, the total purchasing power to cover

IDR 150 to 250 trillion at

current pricesper year within the

next five years

Profile of the Indonesian Middle Class

The level of education attainment of the majority of

PROFILES OF INDONESIAN MIDDLE CLASS:EDUCATION

42 Marketing Researcher No.113

Without Formal Education

Primary School,not completed

Consumption Trends of Indonesian Middle Class Consumers

Consumption Trends of Indonesian Middle Class Consumers

PROFILES OF INDONESIAN MIDDLE CLASS: