GlobalData expects Indonesian soft drinks market to grow at CAGR of 6%-8% from 2023 to 2028, fueled by health and wellness trends, despite inflation concerns and economic uncertainty; manufacturers must balance health benefits and affordability

Sample article from our Food & Beverage

July 28, 2023 (press release) –

Since the authorities lifted all COVID-19 restrictions, on-the-go and on-premise consumption of non-alcoholic beverages has surged in Indonesia. However, consumers remain price-sensitive in light of the recent inflationary spike and economic uncertainty. This calls for soft drinks manufacturers to strike a fine balance between health & wellness and affordability to succeed in the Indonesian soft drinks market, which is set to expand at a value compound annual growth rate (CAGR) of 6–8% over 2023–28*, according to GlobalData, a leading data and analytics company.

Bobby Verghese, Consumer Analyst at GlobalData, comments: “The COVID-19 pandemic stimulated consumer demand for healthy food and drinks in Indonesia. Even as the pandemic concerns have waned, health and wellness trends are exerting a strong influence on beverage purchases in the market. This aligns with GlobalData’s Q1 2023 consumer survey finding that the food and beverage purchases of 78% of Indonesians are often or always influenced by how well the product/service impacts their health and wellbeing**. They are opting for natural soft drinks, such as packaged water, juice, and nectars, and undermining demand for sugar-laden soft drinks categories, such as still drinks, squash/syrups, and fruit powders. The health trend is also spurring demand for low-/no-calorie/sugar/fat variants of carbonates, energy drinks, and iced/RTD tea drinks.”

Deepak Nautiyal, Director of Consulting, APAC, GlobalData, notes: “As consumers revert to their hectic pre-pandemic lifestyles, they are demanding functional beverages to keep them healthy and energized. However, due to the prolonged Russia–Ukraine conflict and the climate change phenomenon, fuel and commodity prices are rising. Manufacturers are under pressure to pass on these rising input costs to consumers to conserve their margins. Notably, GlobalData’s survey reveals that 87% of Indonesians are concerned about the impact of inflation on their household budgets**. Amid this cost-of-living crisis, consumers are exercising frugality, with the impact reverberating in both retail and on-premise sales. These bargain hunters are switching to cheaper brands and labels or cheaper stores.”

Verghese adds: “While inflationary pressures are expected to ease, the political turmoil in the run-up to 2024 Indonesian general elections will continue to fuel economic uncertainty. Soft drinks manufacturers are thereby compelled to strike a fine balance between price and health benefits. Leading companies have already rolled out small single-serve packs of premium beverages with rounded “single currency-note” price tags to position them as pocket-friendly indulgences. Additionally, beverage makers are offering discounts on bulk packs and multipacks to boost volume sales. “Shrinkflation” is also increasingly visible in retail stores and foodservice venues, with serve-portion sizes shrinking and prices remaining constant. However, this strategy can cost companies their long-term consumer goodwill especially as word-of-mouth publicity of such tactics can travel fast through social media.”

Nautiyal concludes: “The onus is thereby on manufacturers to shift consumers’ focus from price tags to the value-added features of the product. For instance, several juice startups have recently introduced 100 percent natural juice shots formulated with specific health and functional claims. The concept of customized health drinks in a small capsule pack can be positioned as a value-for-money proposition over a larger juice drink pack that is loaded with sugar, calories, and artificial additives. Soft drinks makers can develop more consumption occasions for small packs, such as after-work hours relaxation or post-workout recovery. And, as macroeconomic conditions improve, manufacturers can incentivize consumers to trade up to larger packs of these health shots for more frequent consumption.”

* GlobalData Consumer Intelligence Center – Market Analyzers, accessed in July 2023

** GlobalData Q1 2023 Consumer Survey­ – Indonesia, with 532 respondents, published in May 2023

Catch up with Deepak Nautiyal at the FHA Food & Hotel Indonesia tradeshow at the Jakarta International Expo 2023 from 25–28 July 2023

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Dan Rivard
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