Magnum
ice cream and the Indonesian middle class
C. Harinowo Hadiwerdoyo, AN ECONOMIST
Sumber
: JAKARTA POST, 29 Desember 2011
Magnum ice cream was a phenomenal entrant
into the Indonesian middle-class lifestyle. Priced at Rp 10,000, the ice cream
was predicted to have a modest start.
In Indonesia, Rp 10,000, or roughly US$1.10, was considered an expensive product for the Unilever Indonesia standard. Therefore, when it was launched in 2009, it was predicted that the factory capacity would be more than enough to accommodate demand for the new product.
Management apparently underestimated the power of the Indonesian middle class. Sales of the new product exploded after it was launched, so much so that the company decided to contain the sales to Java only in order to limit the number of disappointed customers.
After expanding capacity, the sale of Magnum ice cream in 2010 increased not just by 10 percent, but by more than 10 times, or more than 1,000 percent.
In 2011, Magnum ice cream alone is predicted to produce sales revenue of more than Rp 500 billion. This is certainly a phenomenal record for one product in the company’s history.
The ice cream was later produced in different varieties, such as Magnum Classic, Magnum Truffle and Magnum Almond.
Customers were provided with a number of products to choose from so that the level of satisfaction could be increased.
The sales of the ice cream were supported by strong infrastructure in the form of cold storage and tens of thousands of ice cream cabinets throughout Indonesia.
Sales outside Java were also opened up after the new factory expansion was completed. That expansion enabled ice cream sales to increase by more than 10 times in 2010.
The phenomenal success of Magnum ice cream was replicated by the launch of the Buavita ice cream, in which Buavita fruit juices were converted into ice cream that tastes good and is healthy at the same time.
Rising health awareness encouraged many people to increase their consumption of the new fresh ice cream.
Unilever Indonesia has introduced three types of fruit ice cream: apple juice, strawberry and kiwi fruit. We may hear more about the performance of these types of ice cream soon, but we can expect that the new fruit juice ice creams, priced at only half the price of Magnum ice cream, will be a great sell.
Aside from increasing demand, the strong performance of the ice cream also benefited by the expanding networks of cooler infrastructure from the beginning of its commercial launch.
In Indonesia, Rp 10,000, or roughly US$1.10, was considered an expensive product for the Unilever Indonesia standard. Therefore, when it was launched in 2009, it was predicted that the factory capacity would be more than enough to accommodate demand for the new product.
Management apparently underestimated the power of the Indonesian middle class. Sales of the new product exploded after it was launched, so much so that the company decided to contain the sales to Java only in order to limit the number of disappointed customers.
After expanding capacity, the sale of Magnum ice cream in 2010 increased not just by 10 percent, but by more than 10 times, or more than 1,000 percent.
In 2011, Magnum ice cream alone is predicted to produce sales revenue of more than Rp 500 billion. This is certainly a phenomenal record for one product in the company’s history.
The ice cream was later produced in different varieties, such as Magnum Classic, Magnum Truffle and Magnum Almond.
Customers were provided with a number of products to choose from so that the level of satisfaction could be increased.
The sales of the ice cream were supported by strong infrastructure in the form of cold storage and tens of thousands of ice cream cabinets throughout Indonesia.
Sales outside Java were also opened up after the new factory expansion was completed. That expansion enabled ice cream sales to increase by more than 10 times in 2010.
The phenomenal success of Magnum ice cream was replicated by the launch of the Buavita ice cream, in which Buavita fruit juices were converted into ice cream that tastes good and is healthy at the same time.
Rising health awareness encouraged many people to increase their consumption of the new fresh ice cream.
Unilever Indonesia has introduced three types of fruit ice cream: apple juice, strawberry and kiwi fruit. We may hear more about the performance of these types of ice cream soon, but we can expect that the new fruit juice ice creams, priced at only half the price of Magnum ice cream, will be a great sell.
Aside from increasing demand, the strong performance of the ice cream also benefited by the expanding networks of cooler infrastructure from the beginning of its commercial launch.
Therefore, we may expect that the company
will need to further expand production capacity to meet increasing demand.
The Unilever story is basically a story of the rapid rise of the Indonesian middle class. The move to premium products such as Pond’s and ice cream is basically to reap the benefits of the rise of the Indonesian middle class.
With that benefit the company can continue to increase its sales by 14 percent annually on average. Over the last 10 years the company has been able to double its sales every five years.
Unilever Indonesia is currently enjoying annual sales revenue of ¤1.8 billion, so that by 2012 Unilever Indonesia will be able to realize their target to double the sales to ¤2 billion in five years.
It is therefore with no great surprise that Unilever Indonesia finally received a Compass Global Award, an award that marked Unilever Indonesia as the best company among the companies of Unilever Global.
The story of Unilever is basically the story of Indonesia. As the fourth most populous country in the world, Indonesia has been able to emulate their peers, such as China, India and Brazil.
Even though the country is not part of the famous BRIC countries, its performance is no less than
incredible.
In the past few years the country grew by more than 5 percent on average and will reach 6.5 percent for the entire year of 2011.
The performance of its nominal GDP was even more remarkable. In the past few years, the growth of the nominal GDP mostly stood at over 15 percent annually.
In 2010, the rate of growth of the nominal GDP was more than 16 percent and this may continue until the end of this year.
With the strong rupiah over the past few years, such a performance was then translated into a more remarkable nominal GDP.
In 2010, for example, Indonesia was able to manage nominal GDP of over $700 billion, almost double the prediction of Goldman Sachs in 2006.
In its study launched in 2007, Goldman Sachs with the title “N-11: more than just an acronym” predicted that the Indonesian GDP will reach $419 billion in 2010. Apparently, the Indonesian GDP recorded a respectable level of $707 billion that year.
What will be the outlook for the Indonesian economy in 2012?
The story of Unilever Indonesia basically will continue in 2012 by riding the expanding Indonesian middle class with increasing demand for premium products.
LCD and LED televisions, for instance, will dominate the television market instead of the outdated CRTs.
Automatic motorcycles will overtake the position of manual cycles in the coming years.
Increasingly expensive condominiums and houses will be more readily seen throughout larger cities. Domestic car sales may reach a new milestone by achieving 1 million cars in 2012.
All of these stories can be summed up by a simple conclusion, which is a robust economy that will produce more than 6 percent growth in 2012.
While crisis has been wrecking European countries and may affect import demand for Indonesian products, the rise of the Indonesian middle class, coupled with the new wave of demand coming from a per Capita GDP of over $3,000, will produce a much stronger domestic economy that will basically override the weak demand of European countries so that, overall, the Indonesian economy may decouple itself from western economies.
In nominal term, the Indonesian GDP will reach new heights by achieving an amount of Rp 8,500 trillion. If the exchange rate of the US dollar into the Indonesian rupiah can be kept at an average Rp 8,500, a level that was mostly achieved in 2011, Indonesian GDP will be no less than $1 trillion.
Such a performance will propel Indonesia into the exclusive list of countries such as South Korea, Australia and a few other emerging markets, such as China, India, Brazil and Mexico, which are currently on top of the list of the 10 largest countries of the G7 and several other countries.
If the $1 trillion GDP mark can be reached, Indonesia will beat the Goldman Sachs prediction that Indonesia will reach a GDP level of $1,030 billion in 2025.
At the same time, the IMF predicted that Indonesian GDP will cross the $1 trillion mark in 2014.
Therefore, once it is achieved in 2012, Indonesia will also be able to beat the predictions of respectable organizations, including the IMF.
The rapid growth of the economy will eventually significantly increase the purchasing power of the people so that growth will accelerate in the coming years. Therefore, this story may continue for the next few years.
In Korea, such accelerated development took place for 11 years. We do hope that for us, the period can last longer, until the end of the demographic dividend that will last until around 2030. ●
The Unilever story is basically a story of the rapid rise of the Indonesian middle class. The move to premium products such as Pond’s and ice cream is basically to reap the benefits of the rise of the Indonesian middle class.
With that benefit the company can continue to increase its sales by 14 percent annually on average. Over the last 10 years the company has been able to double its sales every five years.
Unilever Indonesia is currently enjoying annual sales revenue of ¤1.8 billion, so that by 2012 Unilever Indonesia will be able to realize their target to double the sales to ¤2 billion in five years.
It is therefore with no great surprise that Unilever Indonesia finally received a Compass Global Award, an award that marked Unilever Indonesia as the best company among the companies of Unilever Global.
The story of Unilever is basically the story of Indonesia. As the fourth most populous country in the world, Indonesia has been able to emulate their peers, such as China, India and Brazil.
Even though the country is not part of the famous BRIC countries, its performance is no less than
incredible.
In the past few years the country grew by more than 5 percent on average and will reach 6.5 percent for the entire year of 2011.
The performance of its nominal GDP was even more remarkable. In the past few years, the growth of the nominal GDP mostly stood at over 15 percent annually.
In 2010, the rate of growth of the nominal GDP was more than 16 percent and this may continue until the end of this year.
With the strong rupiah over the past few years, such a performance was then translated into a more remarkable nominal GDP.
In 2010, for example, Indonesia was able to manage nominal GDP of over $700 billion, almost double the prediction of Goldman Sachs in 2006.
In its study launched in 2007, Goldman Sachs with the title “N-11: more than just an acronym” predicted that the Indonesian GDP will reach $419 billion in 2010. Apparently, the Indonesian GDP recorded a respectable level of $707 billion that year.
What will be the outlook for the Indonesian economy in 2012?
The story of Unilever Indonesia basically will continue in 2012 by riding the expanding Indonesian middle class with increasing demand for premium products.
LCD and LED televisions, for instance, will dominate the television market instead of the outdated CRTs.
Automatic motorcycles will overtake the position of manual cycles in the coming years.
Increasingly expensive condominiums and houses will be more readily seen throughout larger cities. Domestic car sales may reach a new milestone by achieving 1 million cars in 2012.
All of these stories can be summed up by a simple conclusion, which is a robust economy that will produce more than 6 percent growth in 2012.
While crisis has been wrecking European countries and may affect import demand for Indonesian products, the rise of the Indonesian middle class, coupled with the new wave of demand coming from a per Capita GDP of over $3,000, will produce a much stronger domestic economy that will basically override the weak demand of European countries so that, overall, the Indonesian economy may decouple itself from western economies.
In nominal term, the Indonesian GDP will reach new heights by achieving an amount of Rp 8,500 trillion. If the exchange rate of the US dollar into the Indonesian rupiah can be kept at an average Rp 8,500, a level that was mostly achieved in 2011, Indonesian GDP will be no less than $1 trillion.
Such a performance will propel Indonesia into the exclusive list of countries such as South Korea, Australia and a few other emerging markets, such as China, India, Brazil and Mexico, which are currently on top of the list of the 10 largest countries of the G7 and several other countries.
If the $1 trillion GDP mark can be reached, Indonesia will beat the Goldman Sachs prediction that Indonesia will reach a GDP level of $1,030 billion in 2025.
At the same time, the IMF predicted that Indonesian GDP will cross the $1 trillion mark in 2014.
Therefore, once it is achieved in 2012, Indonesia will also be able to beat the predictions of respectable organizations, including the IMF.
The rapid growth of the economy will eventually significantly increase the purchasing power of the people so that growth will accelerate in the coming years. Therefore, this story may continue for the next few years.
In Korea, such accelerated development took place for 11 years. We do hope that for us, the period can last longer, until the end of the demographic dividend that will last until around 2030. ●
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