Interview: Hemant Bakshi
What is the overall growth potential for the consumer goods sector in the near future?
HEMANT BAKSHI: Overall, we are quite optimistic. We have a young population becoming more and more technologically savvy and people are willing to try new things. Consumption is something that Indonesians are quite excited about, so we believe that this will be a stable and fast-growing economy in the future.
There are some amazing opportunities for consumer products companies like us. The stable currency and forward-thinking economic government policies will allow the economy to continue to grow. Controlling inflation and developing infrastructure are positive for the consumer goods sector and economy as a whole. The government is being very progressive and is taking the right steps to improve Indonesia’s ease of doing business.
I think the main challenge for the country is one of execution, as it is for many emerging markets. The intent is great and plans are aimed in the right direction, but sometimes the execution and implementation is not so smooth. Although the ease of doing business is improving, we have to be realistic in expectations; real change can take a while to take shape. For instance, some of the regulatory framework could be simplified and some regulations still overlap. Streamlining and clarity in these areas will help attract more investment to Indonesia.
How do you assess the wage and skill challenge?
BAKSHI: Wage increases are normal for emerging countries like ours. People’s aspirations and spending rise, in turn raising the amount spent on consumer products. As this transition takes place, we need to focus on building skills. That is the biggest opportunity for us, and should be a greater focus than controlling wages. Furthermore, wage increases need to occur gradually and moderately to avoid the kind of increases that we had a few years back. Thankfully, the government has a fair formula that will help keep this rise moderated.
When we compare ourselves with other developing markets in Asia, Africa or Latin America, we can see the importance of improving the skill base for workers and encouraging them to work in value-added industries. The world is changing fast and will only change faster with artificial intelligence and robotics, leaving our workers behind if they are not ready to adapt, embrace new ways of working and add new skills that are sought after in this modern environment. Therefore, our company focus is to try and partner with the government and other bodies to ensure that our workers are ready for the future.
Which specific consumer segments offer the best investment opportunities?
BAKSHI: Let’s divide potential investment opportunities into three groups. First is the growing rich class who aspire to consume more quality products. Although the percentage of this segment is small, its size is still significant given the enormity of the country. The second group makes up two-thirds of the population, who up until recently were earning less than $2 a day. As this emerging middle class becomes more prosperous they will present a huge amount of business opportunities. Finally, there are people that remain at the bottom of the pyramid, and this group also has big business potential since it is a market that is largely untapped.
Ideally there would be different portfolios to respond to the needs of each segment, as all are large enough for consumer product companies to cater to. It is also very important to adapt to the local market. Once you spend some time in this country, you realise that there is no such thing as the “Indonesian consumer”, instead there is a consumer in Java, who is different to that in Sumatra or Papua, and understanding these differences is essential.
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