McKinsey research

The new Indonesian consumer

December 2012 | By Arief Budiman, Heang Chhor, Rohit Razdan, and Ajay Sohoni

The growth in Indonesia’s consuming class is forecast to be bigger than that in any other economy, apart from China and India, and would generate more than $1 trillion in product and service opportunities over the next two decades.

Indonesia is one of the world’s fastest-growing economies, largely thanks to its robust and increasing domestic consumption. Its population of 240 million people offers vast potential to a wide variety of consumer companies. The opportunity to serve Indonesian shoppers should only increase in the coming years as millions of them move up the income ladder. An additional 90 million Indonesians could enter the consuming class, which could reach 135 million by 2030 if the country’s GDP grows between 5 to 6 percent a year, according to the McKinsey Global Institute (MGI).

The attractiveness of the Indonesian economy is already drawing considerable foreign business interest. The Swedish housewares company Ikea said recently it would enter Indonesia, and many of the world’s leading automakers have announced plans to expand there. Consumer-goods companies with a long history in the country, such as Nestlé and Unilever, have announced expansions of their local manufacturing plants and distribution operations.

To help local and multinational companies better understand Indonesian consumers, McKinsey & Company in 2011 and 2012 conducted one of the most comprehensive consumer surveys ever undertaken in the country. In “The New Indonesian consumer,” McKinsey’s Consumer and Shopper Insights team interviewed more than 5,000 consumers covering 44 cities of all sizes across the archipelago. We focused on five product categories, based on expected growth and company interest: automotive, consumer electronics, financial services, food and beverage, and home and personal care.

The results of the survey reveal a rich diversity of consumers across geography and socioeconomic status. In an attitudinal segmentation, for example, we identified seven distinct “faces” of Indonesian consumers. Our study also found that brands exert an unusually powerful influence on consumer decision making in Indonesia, far more than what we have seen elsewhere in Asia, including China.

To read the rest of this report, download “The new Indonesian consumer,” (PDF–4.97 MB).