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Boycotts, pricing erode Unilever's (UL) Indonesia market share
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Local brands Wings, Mayora Indah increasingly popular
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Indonesia contributed about 4% of Unilever's (UL) global sales
in
2023
By Richa Naidu and Stefanno Sulaiman
LONDON/JAKARTA, Jan 9 (Reuters) - A boycott against
Unilever (UL) and other multinationals operating in Israel has
worsened the global consumer company's loss of market share in
Indonesia, Southeast Asia's largest economy, where it is
battling smaller, often cheaper local rivals.
Unilever (UL), like other big consumer goods companies, has been
under fire in many Muslim-majority countries for what some
shoppers see as tacit support of Israel's military offensive in
Gaza through business activity.
Unilever (UL) first said last February that sales growth in
Southeast Asia had been hurt by shoppers in Indonesia boycotting
its brands in response to the geopolitical situation. In
October, it revealed its market share in Indonesia had declined
to 34.9% in the third quarter from 38.5% a year before.
The group's Jakarta-listed business brought in $2.39 billion
in 2023, contributing 3.8% to group sales, but the trading
environment is difficult. Despite owning major brands including
Axe deodorant, Cornetto ice creams and Royco seasoning powder,
Unilever (UL) has struggled to grow market share for nearly a decade
as shoppers switch to cheaper local brands.
According to research firm Kantar, Unilever's (UL) Royco,
Lifebuoy and Sunlight brands were among Indonesia's top 10
consumer brands in 2020. During the COVID-19 pandemic, earnings
reports show Unilever (UL) raised prices sharply to keep up with
rising costs. By 2023, only Royco remained in the top 10 with
local laundry detergent SoKlin maker Wings Group and Roma
biscuit maker Mayora Indah stepping in.
Unilever (UL) is also facing competition from homegrown halal
beauty firm Paragon's Wardah, Aice, which makes ice cream, and
new international players such as Skintific from China.
At a local online store, a 400-millilitre bottle of liquid
soap made by Wings Group's Nuvo brand was selling for about 20%
less than Unilever's (UL) Lifebuoy liquid soap in the same size. A
700-ml bottle of Wings' SoKlin liquid laundry detergent was
about 7% less than Unilever's (UL) Rinso detergent.
'SOCIETAL CHANGE'
Unilever's (UL) pricing challenges in Indonesia come as recent
data shows that the size of Indonesia's middle class shrank
between 2019-2024 due to layoffs and lower job opportunities,
prompting demand for cheaper groceries, according to local
retailers' association Tutum Rahanta.
Unilever (UL) executives said in October they are trying to give
their Indonesian brands a makeover given the "significant
societal change" taking place, with people increasingly shopping
online and looking for better prices. They expect to see an
improvement in the next six months, they said.
Unilever's (UL) Indonesia president, Benjie Yap, told Reuters in
a statement: "It can be seen that we are navigating in a
situation full with challenges, but we clearly understand the
steps necessary to overcome it while continuing to adapt to a
rapidly evolving market landscape."
"The decline in market share occurred in almost all
categories due to several things, one of which is negative
consumer sentiment," Yap said.
Unilever (UL) is aiming for more consistent pricing, getting its
products into "more" and "better" stores, and improving the way
it manages inventory and sells and distributes products online,
it says.
BOYCOTTS MAKE AN IMPACT
Unilever (UL) acknowledged in October that the boycotts had made
a dent in sales, though it has not provided details.
PT Unilever Indonesia Tbk in October reported
an 18.2% decline in quarterly underlying sales to 8.4 trillion
Indonesian rupiah ($533 million).
About 87% of Indonesia's population of 280 million is
Muslim, and pro-Palestine groups and apps have emerged urging
people to boycott brands, including those made by Unilever (UL).
A Reuters review of the global "No Thanks" app - built by
pro-Palestine developer BashSquare - shows shoppers are urged to
boycott, for instance, Ben & Jerry's (UL) ice cream while locally
produced brands such as Indomie noodles are highlighted as "good
for now!".
The app enables shoppers in many countries to scan product
barcodes and recommends buying decisions based on parent
companies' action - or inaction - when it comes to the war. The
app's Instagram page claims it has 7 million users.
Riska Rahman, a 31-year-old mother of one, has been
boycotting products from Rinso laundry detergent and Pond's
moisturiser to Rexona deodorant and Pepsodent toothpaste in
protest against Unilever's (UL) continued presence in Israel.
"We cut everything straight away," she said.
Competitors have enjoyed strong growth in most of Unilever's (UL)
categories, including packaged food, beauty and home care,
analysts said.
The Indonesian homecare market is expected to grow this year
by 11.5% to $3.4 billion, and the packaged food market is
estimated to grow roughly 11.7% to $21.8 billion, according to
Euromonitor International data.
Meanwhile, underlying sales for Unilever's (UL) homecare and
personal goods unit in Indonesia fell 20.8% in the third
quarter. Underlying food and refreshment sales were down 13.3%.
"Local and foreign brands seized this opportunity, ramping
up aggressive promotions, particularly on e-commerce platforms,"
Cheria Widjaja, an analyst at DBS Bank, said. The brokerage
last month downgraded Unilever's (UL) Indonesia business to 'fully
valued' from 'hold'.
(Reporting by Richa Naidu and Stefanno Sulaiman. Editing by
Matt Scuffham and Elaine Hardcastle)
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