Unilever's Indonesia Headache: Boycott and Local Brands' Rise

As Unilever grapples with a boycott in Indonesia, local brands are seizing the opportunity to gain market share and compete with the multinational giant. The boycott, driven by consumer sentiment against Unilever's perceived support of Israel's military offensive in Gaza, has led to a significant decline in the company's market share and sales growth in the country.

Unilever first acknowledged the impact of the boycott in February 2023, stating that sales growth in Southeast Asia had been hurt by shoppers in Indonesia boycotting its brands. In October 2023, Unilever revealed that its market share in Indonesia had declined to 34.9% in the third quarter from 38.5% a year before, indicating a loss of market share due to the boycott. Unilever's Indonesia unit reported an 18.2% decline in quarterly underlying sales to 8.4 trillion Indonesian rupiah ($533 million) in October 2023, further highlighting the impact of the boycott on its sales growth.

The boycott has also led to a decline in Unilever's market share across various categories, with competitors enjoying strong growth in its place. For instance, local laundry detergent maker Wings Group and Roma biscuit maker Mayora Indah have stepped in to replace Unilever's brands in the top 10 consumer brands list in Indonesia. Additionally, homegrown halal beauty firm Paragon's Wardah, Aice, and new international players such as Skintific from China have emerged as competitors in the market.

Unilever has implemented several strategies to address the boycott and regain market share in Indonesia. These include revamping the distribution system, making brands more contemporary, improving pricing consistency, expanding product reach, and improving online sales and distribution. However, local Indonesian brands have capitalized on the boycott and the changing market landscape to gain market share and compete with Unilever in several ways.

Local brands have been able to offer products at lower prices compared to Unilever, making them more affordable for Indonesian consumers who are increasingly price-sensitive due to economic conditions. Local brands have also capitalized on the large Muslim population in Indonesia by obtaining halal certification, which appeals to Muslim consumers who prefer products that comply with their religious lifestyles and needs. Additionally, local brands have been able to connect with Indonesian consumers on a deeper level by understanding and catering to their cultural preferences and needs, such as offering products relevant to Indonesian consumers' skincare concerns and preferences.

The rise of e-commerce platforms in Indonesia has provided an opportunity for local brands to reach a wider audience and compete with multinational companies. Local brands have been able to leverage the popularity of new social media and e-commerce platforms to rapidly gain traction and capture market share from leading brands. The boycott against Unilever and other multinational companies has also raised awareness among Indonesian consumers about the importance of supporting local brands, giving local brands an opportunity to educate consumers about their products and the benefits of choosing local over multinational companies.

In conclusion, Unilever's boycott-related challenges in Indonesia have created an opening for local brands to gain market share and compete with the multinational giant. While Unilever is taking steps to address the boycott and regain market share, local brands' ability to offer lower prices, obtain halal certification, cater to cultural preferences, and leverage e-commerce platforms has allowed them to capitalize on the situation and emerge as strong competitors in the Indonesian market. As the market continues to evolve, both Unilever and local brands will need to adapt and innovate to maintain their positions and capture market share.