Consumption Trends of Indonesian Middle Class Consumers MR-113_P40-55

ASIAN CONSUMER 4 TRANSFORMING ASIAN CONSUMER case study 4

Consumption Trends of Indonesian Middle Class Consumers

DEKA Marketing Research Managing Director

Irma Dharmaniati Malibari

DEKA Marketing Research Technical Advisor

Abdur Rahim Jabbar

% % 1 20052015INDONESIA ECONOMIC PERFORMANCE & FORECAST S 2005-20153,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 GDP 10 /PPP USD Billion/PPP

Indonesia one centers of will becomegrowthof the future economicIndonesia belonged to one of a few countries that recorded still positive economic growth of 4.55% in 2009 amid the financial crisis. In 2010, the Indonesian economy is expected to grow by 5.6%, whilst for the coming five years 2011-2015 , Indonesia is forecasted to achieve growth rates averaging at around 6.7%. With such positive development, Indonesia will become an economy of more than USD one trillion by 2015 USD 1,172 billion, estimated at the current USD price When the . figure is calculated at Purchasing Power Parity which better reflects the domestic purchasing power of Indonesian consumers the figure is estimated to , be around USD 1,551 billion. At that level of growth, the Indonesian economy is expected to increase by around USD 90 to 110 billionat the current price per year within the next five years.

1,800 1,600 1,400 1,200 1,000 800 600 400 200 --

--

GDP 10 USD Billion

GDP 10/ IDR Billion/Constant

: 2010Economic Watch Source: Economic Watch, 2010

40 Marketing Researcher No.113

Consumption Trends of Indonesian Middle Class Consumers

Consumption Trends of Indonesian Middle Class Consumers

1 11,72 PP 1

2 2007201570.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

THE DEVELOPMENT OF INDONESIAN MIDDLE CLASS 2007-2015

150400 PPP

2007 2008 2009 2010 2011 2012 2013 2014B-NAT C-NAT

2015

A BC 1 (MHE) Social & Economic Classification based on Monthly Household Expenditure (MHE) Above IDR 2,500,001 UDR 1,750,001 u/i IDR 2,500000 IDR 900,001 u/i IDR 1,750,000 IDR 600,001 u/I IDR 900,000 Below and up to IDR 600,000

: CBS:Central Bureau of Statistics 2007 SUSENAS Source: CBS, Susenas, 2007, using definition by The Nielsen Company, and Own Forecasts

Middle Class Households Spending Ranges from USD 150 up to 400 at PPP TermsPer Month

The generally accepted method of partitioning Indonesian social economic classes is through their monthly household expenditures. The classification as per that applied by The Nielsen Company is as below: The top class, A, are those households that spend more than IDR 2.5 million for purchasing products and services for everyday needsfood, clothing, cars, rent, personal services, etc. This amount can be . translated into USD 264/month per household at current prices, whereas on purchasing power parity terms, the figure stands at around USD 411/month per household. The middle class are those belonging to B & C categories, namely those households that spend from USD 95 up to and including USD 264 for daily necessities, equivalent to USD 148 - USD 410 on PPP terms per household per month.

Equivalent to USDcurrent price USD 264 USD 185 u/I 264 USD 95 u/I 184 USD 63 u/I 94 < USD 63

USDPPP

264 411

A

2,500,001

USD 411 USD 287 u/I 410 USD 148 u/I 286 USD 99 u/I 147 < USD 99

B 1,750,001 2,500,000 C D E 900,0011,750,000 600,000900,000 600,000

185 264 95 184 63 94 < 63

287 410 148 286 99 147 < 99

:

SUSENAS

The Size of the Middle Class Will Surely IncreaseBy applying the above criteria to the National Survey on Social and Economic Conditions of the Indonesian PeopleSUSENASconducted in 2007, the middle

Marketing Researcher No.113 41

ASIAN CONSUMER 4 TRANSFORMING ASIAN CONSUMER case study 4

% 1

class account for 62% of all households in urban areas and around 50% in rural areas, making a total of 55% of Indonesian households at the national level. In line with the expected economic growth that will drive up-ward mobility along the class stratification, the figure is estimated to reach 63% by 2015.This is quite a moderate forecast With that relatively . moderate upward movement, within the next five years 2011 to 2015 the middle class is expected to , expand by around 5 to 5. 5 million people per year.

The Expanding Economic Role of the Middle ClassThe economic role of the Indonesian Middle Class is much stronger than their sheer size. Based on available data, the total purchasing power to cover expenses for their daily living needs is expected to increase by around IDR 150 to 250 trillion at next five years current pricesper year within the

2011-2015 As such, the total spending power of . the middle class will be increasing by more than twofold compared to 2010.

% 3 10/20072015 INCREASING BUYING POWER OF INDONESIAN MIDDLE CLASS RP.BILLIONS/YEAR 2007-2015 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 -20072008 2009 2010 2011 2012 20132014 2015 C-CONS. EXP-NAT

Profile of the Indonesian Middle Class EducationThe level of education attainment of the majority of the Indonesian middle class is somewhat moderate, with average formal schooling years of around nine years. Less than 10% reached a tertiary educational level. 4 :3 3 5 1 B-CONS. EXP-NAT

PROFILES OF INDONESIAN MIDDLE CLASS:EDUCATION No Education Without Formal Education Primary School,not completed Primary School,completed Secondary School,completed High School,completed Academy University,graduated

16 29 23 20

: 2007SUSENAS Source: Own Estimates & Forecast based on Susenas, 2007

: 2009 Source: The Nielsen Company, Indonesia, 2009

42 Marketing Researcher No.113

Consumption Trends of Indonesian Middle Class Consumers

Consumption Trends of Indonesian Middle Class Consumers

5 :

PROFILES OF INDONESIAN MIDDLE CLASS: OCCUPATION

2 : TV ANY TV COLOR TV COLOR 1.25 Million Rupiah n=10,652

44 Marketing Researcher No.113

Consumption Trends of Indonesian Middle Class Consumers

Consumption Trends of Indonesian Middle Class Consumers

Indonesian Middle Class Display Significant Concern about Political, Social and Economic Conditions

The Indonesian middle class are very much aware of the political, economic and cultural problems faced by society at large. Corruption is top in their mind as one of the major problems facing the nation. They realize the turbulent changes happening at once. Their social concerns are shown through their conviction that the Government should also help the unemployed and everyone with extra money should allocate some part to charities. In general they are optimistic about the future in the belief that democracy seems to be working in Indonesia. At heart, they are still holding fast to the traditional virtues as they believe that Playboy magazine should not be permitted in Indonesia. They also tend to preserve the traditional values of obedience and respect to authority. They also share deep concerns with regards to environmental problems faced by the nation.

Playboy

7 : 10

ATTITUDES:SOCIAL ISSUES-TOP1075% 76% 76% 77% 78% 78% 82% 83% 83% 84% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Obedience and respect for authority are the most important virtue children should learn.

if we don't act now we'll never control our environmental problems. Democracy is working in Indonesia.

Play boy Magazine like Play boy should not be permitted in this country. At heart I'm an environmentalist.

There's too much change going on these days.

I think it is Government's duty to support those who can't nd work.

I'm optimistic about the future. I believe a percentage of everyone's income should go to charities. Corruption is one of the major problems facing this country.

0%

% 1.25 : Roy Morgan Single Source20106 : 1.25 10,652 Source: Roy Morgan Single Source Indonesia June 2010 (National) Base: Total Population 14+, with HH Expenditure > 1.25 Million Rupiah n=10,652

Marketing Researcher No.113 45

ASIAN CONSUMER 4 TRANSFORMING ASIAN CONSUMER case study 4

Indonesian Middle Class Show Balanced Attitudes toward Advertising and Media

TV as an electronic media is one of the major sources for information on world events. They have positive attitudes towards advertising materials broadcasted as those are considered interesting and even sometimes more interesting than other TV programs. However, on the other hand, the Indonesian middle class TV watchers also believe that there are some ads that are just deceiving.

There Are Ample Opportunities for Health and Leisure-Related Products

Concern about health is starting to develop amongst the Indonesian middle class. They try to get a sufficient amount of good nutrients and avoidless healthy food like red meat, high fat food and , unnecessary additives. However, there are still more than half who do not have the correct opinion and therefore do not behave accordingly. Once the

8 : 10

ATTITUDES:ADVERTISING & MEDIA-TOP10 31% 36% 36% 41%