A review on Indonesia’s cosmetics industry and the opportunities on investment and local brand acquisition in the industry
These last few years, the Indonesian cosmetics industry has exponentially risen. The COVID-19 pandemic, the changing lifestyle of Indonesian women and the growth of the industry made the future of the industry look promising. Based on the Central Bureau of Statistics (BPS) , in the first quarter of 2020, the growth of the chemical, pharmaceutical and traditional medicine industries including cosmetics has increased by 5.59%. The growth of the cosmetic market in Indonesia is also projected to increase by 7% in 2021.
The rise of the cosmetics industry is indicated by the birth of new local brands. In 2019, it is recorded that there are 294 of new cosmetics businesses of big and small enterprises in Indonesia. The soaring trend of cosmetic and beauty products was able to draw attention from global brands to acquire booming cosmetics companies to invest in. For example, the trending “k-beauty” was able to drive global brand from New York, Esteé Lauder, to invest inb Have & Be Co. Ltd., seoul based skincare company. The Korean company is the parent company for the beauty product brand Dr. Jart+. The deal marked Estée Lauder’s first acquisition of an Asia-based business. French cosmetic brand, L’oreal, also acquired Japanese skincare brand, Takami Co. L’Oréal renewed a long-term brand licensing agreement with the brand owner and signed a clinic collaboration contract.
The Growth of Local Cosmetics Industry
According to Bisnis.com, the cosmetics industry is projected to increase in sales as the handling of the Covid-19 pandemic with ongoing vaccinations and the recovery of the economy. The Association of Indonesian Cosmetics Companies and Associations (PPAK Indonesia) projected that the sales this year will grow by 7% or around USD 7.45 million compared to 2020’s USD 6.95 million. 2019’s gains were fairly stagnant, considering that in 2018 the industry recorded sales of around USD 6.90 million.
On the other hand, the development of the cosmetics industry has a good development trend. In the last five years, the Food and Drug Supervisory Agency (BPOM) noted that there were 185,290 cosmetic products circulating in the market. According to the latest data from the Ministry of Industry in 2018, there were 153 new small and medium scale cosmetic industries. This figure accumulates the total number of cosmetic industries to 760 companies, of which 95% are filled by SMEs and only 5% are large-scale industries.
Local Brand Draws Attention for Investment
Una Brands is committed to allocating an investment of IDR 500 billion (or the equivalent of USD 35 million) to support local brands through acquisition programs, providing working capital, operational support, to international business expansion. CEO and Founder Kiren Tanna also plans to develop Indonesia as a strategic sourcing hub to expand the supply chain base for other Una Brands portfolios. The company has signed exclusive agreements with several brands in Indonesia and targets 12 to 15 brands to be acquired by 2022. Una Brands is an e-commerce aggregator start-up in the Asia-Pacific market region. Una Brands has a wide presence including Indonesia, Singapore, Malaysia, Australia, China, India, Taiwan, Korea and Japan.
Local Product Dominating The Market
According to data from Compas.co.id, in early 2021, the sales transactions of beauty products in e-commerce has increased by 46.8%. In addition, the total value of transactions in the online market itself is approximately IDR 40 billion. Cosmetic products that are also included in valuation are facial cosmetics, lip cosmetics, and eye cosmetics. Transactions in the cosmetic category itself have reached IDR 893 million in January 2021. Most sales of cosmetics are in the facial cosmetic category.
In early 2021, the competition among cosmetic brands was quite tight. Indonesian brand Scarlett managed to lead the market with total sales reaching IDR 85 million followed by popular korean beauty products Innisfree, which came in second place, with total sales of IDR 65 million and Laneige with total sales of IDR 60 million.
Local facial cosmetic brands that are also ranked in the top 10 brands are namely Dear Me Beauty, Erto’s, LT Pro and also Everwhite while also competed with other international brands such as Mineral Botanica, Pigeon and Pond’s.
Indonesian Brands Which Penetrated International Market
Recently, there are many local beauty products that have no less good quality with international brand. In fact, several beauty brands from Indonesia have successfully penetrated the international market and are used by citizens of the world. This also indicates that local beauty brands are making more high quality and competitive products. Indonesian brands which have already went international are Mustika Ratu, Sensatia botanicals, Dear Me Beauty, Wardah, Make Over, Bali Alus and Polka.
Aside from that, another local brand has been getting attention from their newest collaboration. Local brand Jacquelle is the first Indonesian cosmetic brand ever to collaborate with Disney. The collaboration has even been initiated since 2021 by launching Complete Me! Face Palette. The launch, which coincided with Disney’s collaboration products with international cosmetic brands, such as MAC and Colourpop. Featuring the character of Minnie Mouse, the product is a multifunction which already contains eyeshadow, blush, bronzer, and highlighter.
To encourage the cosmetics industry to move forward, the government encourages the ability to supply raw materials to continue to increase. Social Bella’s CEO John Marco Rasjid is optimistic that the industry will have the potential to grow with an abundance of raw materials. With the growing enterprises, e-commerce sales, high demand for beauty products and brand acquisition to local products, the future looks bright for Indonesia’s cosmetics industry. It is also optimist from local brands can
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*This article is written by Nadia Syailendra