Indonesian imports of cosmetics reached an estimated of $250 million in 2008, a 34 percent increase over the 2007 figure of $187 million. U.S. products accounted for over $10 million of all imported cosmetic products. The sales prospects remain good with steady growth projected over the next two years. While local products account for over 80 percent of the market share, imported cosmetics with international brands are widely available in the Indonesian market. Despite rapid growth in the industry and sharp competition among brands, Indonesia is still a good potential market for imported cosmetics. The market is expected to grow at an average of 10-15 percent annually.
There are no restrictions on importing cosmetic products to Indonesia. However, imported cosmetics must be registered at the National Agency of Drug and Food Control (Indonesian acronym BPOM). Registration of imported cosmetics can be done only by local agents or distributors. Import duties for cosmetic products are 10 percent. In addition, a value-added tax (VAT) of 10 percent is imposed on all imported cosmetic products. BPOM has taken tough measures on registration of imported cosmetics. The current registration process is slow, with indefinite time for results. This might impact the number of newly imported cosmetic products in the long run, as distributors may focus more on existing products in the Indonesian market.
The demand for cosmetics and toiletries has increased substantially over the past years. Business sources forecast a positive outlook for the cosmetics market in coming years. For the time being, due to concerns about the economy, the high dollar exchange rate, and the upcoming appointment of the new cabinet in October, the market is predicted to remain stagnant. However, growth of 10-15 percent is projected for 2010 and 2011.
Overall demand of cosmetics and toiletries in Indonesia will continue to increase substantially, despite the extremely tight competition. Domestic manufacturers are successful in the middle and low-end market segment, and supply most of the local demand. There is good acceptance of imported cosmetics in Indonesia which represents around 16 percent of the total market. Most popular cosmetics brands have entered the Indonesian market and are experiencing growing sales.
In the cosmetics sector, skin care products accounted for more than 32 percent of total imports. The U.S. was the third largest supplier in this category. Business sources predict that the market size and sales for skin care products will continue to increase due to the growing awareness of the value of skin-care treatment for both males and females. An increasing number of men, as well as working women, are more concerned about their skin care, driving the demand for men-oriented products, as well as anti-aging and skin whitening products. The market for both local and imported anti-aging and whitening products still has potential to grow.
Men’s cosmetics and toiletries are becoming popular and the potential is large. Men’s personal grooming products have shown an increase in recent years, a sign that this segment of the Indonesia cosmetics market is growing. Most men’s cosmetics are sold in department stores and through multi-level marketing companies.
The growth potential is also affected by increased demands from the service industry such as beauty parlors and spas. Spas and salons offering treatment programs have increased in number. More people seek professional help for facial and skin treatment, stimulating the growth in sales for skin care products. More new upscale beauty salons and skin care clinics were opened in shopping centers. The number of professional hair care salons selling specialty products has also increased.
In addition to generic spa and beauty treatments, spa businesses and related product lines have increased their offerings to consumers. Wedding spa or pre-wedding body and beauty treatment has become a trend in Indonesia, contributing to the growth of the skin care market. Presently, local products dominate the market for skin and body care. The Indonesian spa industry is widely recognized particularly in the hotel and resort areas. There are increasing opportunities for spa aromatherapy supplies, since local producers lack the research capabilities to develop quality products.
By Sharon Chandra