INDONESIA: Unilever, the global consumer goods giant headquartered in London, is facing a turbulent period in Jakarta, its largest Southeast Asian market. Once a dominant player in the country’s fast-moving consumer goods (FMCG) sector, Unilever now finds itself contending with shifting consumer preferences, intense local competition, and a boycott movement reportedly linked to the ongoing Israel-Palestine conflict.
According to an article published by Business Times, the company’s grip on the Indonesian market, home to over 280 million people, has begun to slip, and the road to recovery appears challenging.
Market share slips as sales decline
Unilever Indonesia’s market share dropped to 34% in the third quarter of 2024, down from 38% the previous year, signalling a troubling decline in its standing. The company’s financial results for 2023 further highlight this downturn, with net profits falling to 4.8 trillion rupiah (approximately S$398.4 million), down from 5.4 trillion rupiah in 2022. The company’s stock price has also been hit hard, losing 84% of its value from its February 2018 peak, a clear indication of investor concerns. By January 2025, shares had plummeted to just 1,750 rupiahs, adding to the company’s mounting challenges in a critical market.
In an attempt to recalibrate, Unilever Indonesia has sold off its ice cream business to Magnum Indonesia for seven trillion rupiah, a move that marks a strategic shift towards its core beauty and wellness segments. Benjie Yap, president and director of Unilever Indonesia, stated that the company aims to streamline operations, improve efficiency, and innovate more effectively within its core business areas to stabilize and strengthen its position.
Political and social unrest fuel boycott
The company’s struggles have been compounded by socio-political tensions in Indonesia, particularly with the ongoing Israel-Palestine conflict. A rise in the “no-buy” movement, targeting brands with alleged ties to Israel, has notably affected Unilever’s sales. Indonesia, with the world’s largest Muslim population, has seen a surge in calls for boycotting global brands that are perceived to support Israel’s actions in Gaza.
In October 2024, Unilever reported an 18% drop in third-quarter sales, totalling 8.4 trillion rupiahs, compared to the same period in 2023. While the company acknowledged the impact of the boycott campaigns, it refrained from providing specific details. Analysts, however, warn that continued political and social unrest could further disrupt the company’s financial performance.
Competition from local brands intensifies
Amid these challenges, Unilever faces rising competition from local Indonesian brands that have gained traction during the boycott movement. Companies like Wings Group and Mayora, key players in Indonesia’s FMCG sector, have successfully positioned themselves as alternatives to Unilever’s products. According to e-commerce platform data, sales of beauty and personal care products from Wings Group saw a 22% increase during the height of the boycott last year, while Mayora experienced a 9% uptick in food and beverage sales.
Local brands have benefited from a broader shift in consumer behaviour, with many Indonesians opting for more affordable and locally produced goods. This trend has been accelerated by the economic impact of the COVID-19 pandemic, which led to a contraction in the country’s middle class. As more consumers turn to online platforms for their shopping needs, Unilever’s premium products have faced heightened competition from both local and international brands offering lower-priced alternatives.
A tough road ahead
Unilever’s recent efforts to adapt to these changes include its brief foray into e-commerce through a joint venture with Gojek called GoToko, which was launched in 2020. The initiative aimed to capitalize on Indonesia’s booming online market, but the venture was short-lived, shutting down in early 2023 after less than three years of operation.
Experts argue that Unilever’s struggles reflect a broader failure to anticipate and respond to shifts in Indonesian consumption patterns. Nailul Huda, director of the Center for Economic and Law Studies, pointed out that the company seemed unprepared for these changes, only attempting to address them when the pandemic was already underway.
As consumer habits evolve and competition intensifies, Unilever must find new ways to stay relevant in this increasingly competitive and politically charged market.
While Unilever Indonesia remains a significant player in the country’s FMCG landscape, its future in the region is far from guaranteed. With local competitors closing the gap, shifting consumer behaviour, and external political pressures weighing heavily on the company, Unilever will need to adapt quickly and strategically if it hopes to regain its former dominance.