Credit Suisse Indonesia Consumer Survey: Small Tickets to a Better Future
    Category: Column By : Ella Nusantoro Read : 1821 Date : Sunday, May 04, 2014 - 16:52:12

    For the fourth time, the Credit Suisse Research Institute conducted a consumer survey in nine emerging countries, namely Brazil, China, India, Indonesia, Russia, Saudi Arabia, South Africa, Turkey and Mexico. In Indonesia, it surveyed six areas in Java and four areas outside of Java that concluded Indonesians are the second-most confident citizen—Brazilians at the top—albeit on a lower level than the previous year. Some 38% of respondents expect better income in the next six months, which is in line with incoming minimum wage increase in Indonesia in 2014.

    Moreover, Indonesians continue to be optimistic as they saw their income growing along with the largest hike in minimum wages in 2013. This year’s survey also showed that 16% of respondents saw an increase of more than 10% on their income, up from only 13% in the previous survey, particularly in Java and especially in Jakarta, where the highest minimum wage increase happened in 2013.

    Nonetheless, most are expecting less increase in their income over the next 12 months, which is consistent with the lesser increase in the minimum wage in 2014. As a result, Indonesians are becoming more careful with their spending, particularly for big-ticket items. They are instead focusing more on the smaller-ticket space (sports shoes, watches, perfumes, and jewelry) and electronic space (LCD-TVs, desktops computers and tablets). However, in the staples space, people are still looking to purchase instant noodles, bottled waters, dairy, carbonated drinks and cigarettes.

    With overall lower income due to higher unemployment and the increase in the cost of living, 73% of respondents think that it is not a good time to make major purchases despite their confidence in their income outlook. For instance, we expect a slowdown in the property sector this year as Indonesians face legislative and presidential elections, a period marked by rising mortgage rates.

    Nevertheless, with a population of more than 250 million and a young demography, Indonesia undoubtedly offers a huge domestic market potential as its middle income is rising. However the large population base is not well supported by sufficient infrastructure, resulting in under-penetration of most products compared with other emerging countries. For instance, penetration of mobile phones (both basic phones and smartphones) and computers are still the lowest in the region.

    Access to the Internet is still low albeit growing at a fast rate. Four-wheeler penetration is also considerably low compared to two-wheeler penetration as roads are small and narrow. Toyota is the leading brand in the four-wheeler category while Honda continues to lead in the two-wheeler category.

    For brand preference, Indonesia is the second country, after India, with the largest proportion preferring local brands among emerging countries. For essential items such as instant noodles, bottled water, and cigarettes, Indonesians across all income levels favor local brands. We believe this is because of the strong preference for local flavors, coupled with strong distribution networks. Indomie and Mie Sedap are the leading brands in the noodle category, while Aqua is the leading brand in bottled water. The three largest cigarette manufacturers, Gudang Garam, Sampoerna and Djarum, are still customers’ most favored brands.