Unilever, similar to other major consumer goods firms, has faced criticism in numerous Muslim-majority nations, where some consumers perceive its business activities as implicit support for Israel's military actions in Gaza.
In February, Unilever acknowledged that its sales growth in Southeast Asia had been negatively impacted by the boycott of its brands by Indonesian consumers in response to the ongoing geopolitical tensions. By October, the company reported a decrease in its market share in Indonesia, dropping to 34.9% in the third quarter from 38.5% the previous year.
The company's operations in Jakarta generated $2.39 billion in 2023, accounting for 3.8% of total group sales, yet the trading conditions remain challenging. Despite owning well-known brands such as Axe deodorant, Cornetto ice creams, and Royco seasoning powder, Unilever has struggled to increase its market share for nearly a decade as consumers gravitate towards less expensive local alternatives.
Research firm Kantar noted that Unilever's Royco, Lifebuoy, and Sunlight brands were among Indonesia's top 10 consumer brands in 2020. During the COVID-19 pandemic, Unilever's earnings reports indicated significant price increases to manage rising costs. By 2023, only Royco remained in the top 10, with local brands like Wings Group's SoKlin laundry detergent and Mayora Indah's Roma biscuits taking their place.
Additionally, Unilever is contending with competition from local halal beauty brand Paragon's Wardah, Aice, a producer of ice cream, and new international entrants such as Skintific from China.
A local online shop has a 400-millilitre bottle of liquid soap from Wings Group's Nuvo brand priced about 20% lower than Unilever's Lifebuoy liquid soap of the same size. Meanwhile, a 700-ml bottle of Wings' SoKlin liquid laundry detergent is around 7% cheaper than Unilever's Rinso detergent.
SOCIETAL CHANGE
Unilever is facing pricing issues in Indonesia as recent reports indicate that the middle class has decreased in size from 2019 to 2024 due to job losses and fewer employment opportunities, leading to a higher demand for affordable groceries, according to the local retailers' association, Tutum Rahanta.
In October, Unilever executives mentioned they are working on revamping their Indonesian brands in response to the "significant societal change" happening, with more people shopping online and seeking better deals. They anticipate improvements in the next six months.
Benjie Yap, Unilever's Indonesia president, told Reuters: "We’re navigating through a challenging situation, but we know the steps we need to take to adapt to a fast-changing market."
Yap added, "The drop in market share has affected nearly all categories, largely due to negative consumer sentiment."
Unilever is focusing on stabilizing prices, increasing product availability in "more" and "better" stores, and enhancing its inventory management and online sales strategies.
BOYCOTTS MAKE AN IMPACT
In October, Unilever admitted that the boycotts had impacted sales, although they didn’t share specific figures.
PT Unilever Indonesia Tbk reported an 18.2% drop in quarterly underlying sales, totaling 8.4 trillion Indonesian rupiah ($533 million).
Approximately 87% of Indonesia's 280 million residents identify as Muslim, leading to the rise of pro-Palestine groups and applications that encourage consumers to boycott various brands, including those produced by Unilever.
A review by Reuters of the global "No Thanks" app, developed by pro-Palestine creator BashSquare, reveals that consumers are prompted to avoid products like Ben & Jerry's ice cream, while locally made items such as Indomie noodles are promoted as "acceptable for now."
This app allows users in multiple countries to scan product barcodes and provides recommendations based on the actions or inactions of parent companies regarding the ongoing conflict. The app's Instagram account claims a user base of 7 million.
Riska Rahman, a 31-year-old mother, has stopped purchasing items from Rinso laundry detergent, Pond's moisturizer, Rexona deodorant, and Pepsodent toothpaste in response to Unilever's ongoing operations in Israel. "We cut everything straight away," she stated.
Analysts note that competitors have experienced significant growth across most of Unilever's sectors, including packaged food, beauty, and home care.
According to Euromonitor International, the Indonesian homecare market is projected to expand by 11.5% this year, reaching $3.4 billion, while the packaged food sector is expected to grow by approximately 11.7% to $21.8 billion.
In contrast, Unilever's underlying sales in Indonesia for its homecare and personal goods division dropped by 20.8% in the third quarter, with underlying food and refreshment sales declining by 13.3%.
Cheria Widjaja, an analyst at DBS Bank, stated that both local and international brands capitalized on this opportunity by intensifying their promotional efforts, especially on e-commerce platforms. Last month, the brokerage revised its rating for Unilever's operations in Indonesia from 'hold' to 'fully valued'.