Indonesia grocery market to hit US$169b in 2022 but traditional retailers may lose ground to mini-marts, e-commerce: IGD

INDONESIA'S grocery market could be worth US$169.4 billion in 2022 - up from US$140.2 billion in 2019, a retail industry consultancy has suggested.

The compound annual growth rate of 5.2 per cent over two years, as forecast by research firm IGD, would make Indonesia the world's 13th-largest grocery market.

Indonesia is also projected to be the fourth-biggest grocery market in Asia in 2022 - after China in second place, India in third place, and Japan in fourth place.

But traditional retailers are expected to lose ground to convenience stores, which will grow their market share from 8.6 per cent in 2020 to 9.3 per cent in 2022. Online grocery retail will also expand from 0.3 per cent in 2020 to 0.5 per cent in 2022.

Said IGD Asia-Pacific head Nick Miles: "Retailers and tech companies including Alibaba have recognised the opportunity, following the mobility restrictions created by Covid-19.

"Emergence and growth of this channel will be powered by the increasing penetration of smartphones and the recovery of spending power amongst the population."

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Supermarkets and hypermarkets could also take a hit from Covid-19, especially if they are in malls where footfall has been affected, Mr Miles added.

That comes as he noted that leading minimart operators Alfamart and Indomaret "are expected to expand in geographic coverage and store numbers, especially outside Jakarta" and could implement new digital solutions as well.

Indeed, market research agency Neurosensum projected that 48 per cent more Indonesian consumers will buy groceries online in Ramadan 2021 (from mid April into May), than in the year before. Meanwhile, 33 per cent more consumers will buy non-groceries online.

Overall, the share of online sales is tipped to rise to 37 per cent this Ramadan, up from 33 per cent in 2020. That comes even as the firm expects Ramadan spending to dip by 0.4 per cent year on year in 2021, dragged down by the middle- and lower-income groups.

Products such as alcoholic and sugar drinks, cosmetics and apparel are expected to see sales declines, while health supplements, telecom services and home entertainment are among the segments that have been tipped to expand year on year.

Analysts from the BofA Global Research team said in a report: "We generally agree with the survey, and expect a quiet Ramadan spending this year."

They expect an ongoing shift towards at-home spending to continue in 2021, as consumers skip out-of-home consumption such as dining, gifts to relatives and the "mudik" custom of returning to hometowns.

Separately, softer Indonesian automobile sales in February were attributed to purchasing delays, as consumers awaited tax breaks that began in March.

But retailer earnings are still expected to "improve substantially" in the second quarter on better volume and margins, the BofA team added, especially as the luxury tax discount will be phased out from June onwards and purchasing power in Indonesia remains "very weak".