2008-2009 DATA CONSULT. All rights reserved.
INDONESIAN COMMERCIAL NEWSLETTER
September 2011


TOOTHPASTE INDUSTRY IN INDONESIA


Introduction

Indonesia is one of a few countries that managed to chalk up a fairly high economic growth in 2009 to 2011, when many advanced economies suffered a contraction; Indonesia recorded an economic growth of 4.5%  in 2009 only lower than the economic growth rates of China and India. In 2010, the country recorded a stronger growth of 6.1% and the high economic growth rate continued in 2011.

The big domestic market and prudential policy adopted by the government and the country's banking industry saved the country from the devastating impact of the global financial crisis.

Increase in domestic demand and the purchasing power of the people in 2010 pushed up inflation but   remained within control. Inflation was exceeding 6.9% in 2010 and became lower in 2011.

The strong growth of domestic consumption has support the growth of demand of consumer goods including toothpaste.

Domestic production

Production capacity

Toothpaste industry in Indonesia has grown fast in the past several years to follow the trend of population growth and the increase in the purchasing power of the people and improvement of the people's awareness of tooth health.

Based on data at industry ministry, the capacity of the country's toothpaste industry has expanded sharply in the past three years. The production capacity in 2007 was 50,000 tons per year, but in 2010, the capacity already reached 92,000 tons per.

The highest increase in the production capacity was recorded in 2008, up 30,000 tons to 80,000 tons per year. In 2009, the production capacity grew only by 5000 tons per year to 85,000 tons per year, and in 2010, the capacity grew 8.2% to 92,000 tons per year.

Producers expanded their production capacity to meet growing market demand in the country as a result of the population and economic growth.

Table - 1
Indonesia's toothpaste production capacity

Year        Production capacity  (tons/y)        Growth
(%)
2006        50,000        -
2007        50,000        -
2008        80,000        60
2009        85,000        6.3
2010        92,000        8.2
Source: Industry ministry, Data Consult


Main players

The country has 15 big and medium producers of toothpaste with fairly wide market coverage. There are many small producers with market coverage within their base areas.

Among the big players are PT Unilever Tbk; PT Ultra Prima Abadi; PT Lion Wings; PT Enzym Bioteknologi Internusa; PT Filma Utama Soap; and PT Miswak Utama.

The largest in production capacity   is Unilever with a capacity of 56,500 tons per year. With that production capacity, Unilever dominates the domestic market. The second largest producer Ultra Prima Abadi is far below with a capacity of 14,500 tons.  The third largest is Lion Wings with a production capacity of 12,500 tons per year.

Production

Toothpaste is used by almost the entire population; therefore, production of toothpaste grows from year to year to follow the population growth. The country's production of toothpaste has grown  fast in the last past six years with average growth rate of more than 16% per year.

In 2008, the country's production of toothpaste surged 50% from the previous year - or to 74,895 tons in 2008 from 50,150 tons in 2007. The production growth was slower in the following two years to 76,393 tons in 2009 and to 83,430 tons in 2010 as shown in the following table.

Table -3
Indonesia's production of toothpaste, 2005 - 2010

Year        Production (tons)        Growth (%)
2006        47,258        
2007        50,150        6.1
2008        74,895        49.3
2009        76,393        2.0
2010        83,430        9.2
Growth rate (%)        16.6
Source: Industry ministry , Data Consult

Exports

Exports by Volume and Value
The country has exported part of its production of toothpaste. The export growth has been encouraging in the past three years. Exports averaged 6,703 tons a year in the period of 2005 to 2010 despite decline recorded in 2006 and 2007.

The country has exported toothpaste mainly to other Asean countries like Malaysia, Singapore, and the Philippines, and to countries in Africa like Uganda and Kenya.

After declining in 2006 and 2007, exports grew 4.5% to 5,959 tons in 2008, by 7.1% to 6,382 tons in 2009 and by 19.1% to 7,603 tons in 2010. See the following table.

Table - 4
Indonesia's exports of toothpaste, 2006 - 2010

Year        Volume (tons)        Growth 
(%)        Value 
US$ (000)        Growth
(%)
2006        6,113        -27.7        11,329        -29.0
2007        5,705        -6.7        10,853        -4.2
2008        5,959        4.5        11,831        9.0
2009        6,382        7.1        12,169        2.9
2010        7,603        19.1        16,090        32.2
Average        6,703        -0.74        13,038        2.18
Source: Central Statistic Agency (BPS) , Data Consult

Exports by countries of destination
Producers of toothpaste in Indonesia have exported part of their production to several countries including Malaysia, Uganda, Kenya, Singapore, Hongkong, Pakistan, China and United Arab Emirates.

Malaysia has been the major export destination of toothpaste since 2005. In 2010, exports to Malaysia reached 2,792 tons and valued at US $ 5.6 million.

Imports

While being an exporter, the country has continued to import toothpaste. Growing production toothpaste has not slowed imports. Imports have increased from year to year by an average of 29.8% a year in 2005-2010 periods.  A decline was recorded only in 2007 when imports fell 13.4%.

In 2010, imports surged 71.4% to 1,331 tons valued at US$7.4 million.

Imports by countries of origin
Imports of toothpaste have come from various countries in Asia such as Thailand and Malaysia and Europe.

Thailand and Malaysia have continued among three largest countries of origin. In 2010, the largest imports came from Thailand reaching 1,190 tons valued at US$6,115,000. Thailand has since 2008, been the largest supplier of toothpaste for Indonesia.

Malaysia is by far the second largest supplier from which imports totaled only 63 tons valued at US$331,000. In 2005,   Malaysia was the largest supplier, but in 2006 and 2007, the place was taken over by China.

Among supplying countries from Europe are the Netherlands, Germany and Sweden. The United States is also a regular supplier of toothpaste for Indonesia.

Market Size

It is assumed that the domestic market size of toothpaste is the same as  the total production plus imports minus exports. Based on the above calculation, the country's toothpaste consumption has increased 16.5% a year in the past six years. The condition of the world's economy hardly has effect on the consumption of toothpaste. In 2006, consumption grew 8.7% and in 2008, the growth rate surged to 55.1%. In the following two years the growth rate was lower at 1.7% in 2009 when consumption reached 70,787 tons and 9% in 2010 when consumption totaled 77,158 tons.

The trend is expected to continue in the coming years.

Marketing Practices

Profile of major players

PT. Unilever Tbk
The company was originally named Lever Zeepfabrieken N.V which was established in 1933 by the Dutch colonial government. In 1967, Unilever took control of the company under the law on foreign capital investment.

In 1980, the name of the name of the company was changed with PT Unilever Indonesia. In 1981, the company floated 15% of its shares on the Jakarta and Surabaya Stock Exchanges and it became a public company with a new name of PT. Unilever Indonesia Tbk.

Unilever started operation in the country in 1933 producing soap with a factory in Angke, North Jakarta. In 1936, started producing margarine and vegetable oils. The company continued to grow and in 1941 Unilever produced toothpaste and cosmetics, utilizing the factory of NV Colibri in Surabaya, East Java.

Unilever established a subsidiary PT. Ellida Gibs with a factory in Rungkut, Surabaya in 1982.  In 1988,   its bath soap was produced by PT Ellida Gibs originally by NV Colibri.  

In 1990, Unilever expanded its business to beverage industry producing dip tea.  It continued diversifying products with ice cream in 1992. Unilever built a new factory in Cikarang, Bekasi, in 1995. The new factory produces liquid detergent and food products.

In 2000, Unilever in cooperation with PT Anugrah Indah Pelangi established PT Anugrah Lever (PT AL) to operate in the manufacture, development, marketing and sales of ketchup, chili sauce and other sauces with the brands of Bango, Parkiet and Sakura and other brands under license for PT AL.

In 2001, Unilever built a tea factory in Cikarang, Bekasi and in 2005 it operated a new factory in Cikarang producing liquid shampoo.

Unilever in cooperation with Teacher Resources Berhad established a new company PT Technopia Lever (PT. TL) in 2002 to operate in distribution, exports and imports of cleaning materials with the brand of Domestos Nomos. In 2003, Texchem Resources Berhad sold its entire stake in PT. TL to Technopia Singapore Pte. Ltd.

In 2003, PT Unilever acquired PT Knorr Indonesia (PT KI) from Unilever Overseas Holdings Limited. PT. KI produces manufactured foods in containers and food seasoning.

In 2008, Unilever took over a fruit essence factory from PT Ultrajaya Milk Industry & Trading Company Tbk (Ultra) with the brands of Buavita and Gogo.

Currently, the core business of PT. Unilever Tbk consists of personal care, home care and foods. Its products of personal care include toothpaste (Pepsodent, Close Up), bath soap, and liquid soap (Lux, Lifebouy, Dove), shampoo (Sunsilk, Clear), Deodorant (Rexona, Axe), body lotion (Citra, Vaseline), face powder (Ponds). Its products of home care include detergent (Rinso, Viso), dish cleaning soap (Sunlight), cleanser (CIF, Vixal), mosquito repellent (Domestos Nomos), water purifier (Pure It), floor perfume (Wipol). The products of its food division include margarine (Blue Band), ketchup (Bango), food seasoning (Royco), tee (SariWangi) fruit juice (Buavita), and snack (Taro), ice cream (Wall's). PT. Unilever has a distribution center in Cikarang built in 2002.

PT. Lion Wings
Originally it was named PT. Lionindo Jaya established in 1891, as a joint venture between the Wings Group in Surabaya and Lion Corporation from Japan. 

Lion Corporation is a leading producer of consumer products in Japan producing toothpaste, toothbrushes, cosmetics, soap, shampoo, detergent, dish cleaning detergent, cleaning material for household goods, and foods and drugs. Lion Corporation has chain of subsidiaries in Southeast Asia such as Singa Selatan Sdn. Bhd in Malaysia, Lion Corporation Thailand and  Lion Corporation Singapore Pte. Ltd).

PT Lionindo Jaya produces and sells various types of consumer goods. In 1981, its first product was toothpaste sold with the brand of Ciptadent. Currently PT. Lion Wings has exported part of its production to more than 55 countries in the world. In 1995, the name of the company was changed with PT. Cipta Segar Harum.

With a change in the composition of its shareholders early 2004, the name of PT Lionindojaya was changed with PT Lion Wings. Currently Wings Group holds the majority of its shares. 

PT. Lion Wings occupies 12 hectare plot of land in Cakung, East Jakarta.  In that area, there are three factories. In 2009, one unit of factory was built producing plastics (Blowing & Injection) to feed its factories producing plastic bottle and toothbrush handle. 

PT. Lion Wings produces dish washing soap (Mama Lime, Mama Lemon, Mama Apple, and Oxy), toothpaste (Ciptadent), and toothpaste for smokers (Zact, Dentor Systema), toothbrushes (Ciptadent), and baby toothpaste (Kodomo), and shampoo (Emeron), mosquito lotion (Lavenda), baby product (Kodomo).

In addition to toothpaste, PT. Lion Wings produces toothbrushes with the brands of Ciptadent and Systema, and baby toothbrushes with the brand of Kodomo. 
 
PT. Lion Wings receives supplies of basic materials from a number of its sister companies like PT Unipack Indosystems (supplier of label for sachet shampoo), PT Mitra Indotra Abadi (supplier of toothpaste boxes). 

PT. Ultra Prima Abadi
Originally the company was named PT. Brushindo Cemerlang, which was established in 1984 to operate in toothpaste and toothbrush industry. Later it was renamed PT. Ultra Prima Abadi (PT. UPA).  

The brand for its toothpaste and toothbrushes is Formula. Other than Formula, PT. UPA also  produces toothpaste with the brands of Durodent, ABCdent and  Formula Junior.

PT. UPA is a  subsidiary  of the  Orang Tua Group, which has around 50 subsidiaries operating in various business areas. Among the  products of the Orang Tua Group are consumer goods including toiletries with the brand of Honeysoft,  health drink (You C-1000, Kratingdaeng Kiranti, Balancea, refresher solution Panjang Jiwo, and  Orang Tua), biscuit (Tango, Oops, Fullo, Mio), candy (Blaster, Capilanos, Cannon Ball, Station Rasa, MintZ, Oops), snack (Kaya King), beverages (Frutz, Ruzz Pulpz, Teh Gelas), jelly (Vita Jelly), fermented milk (Vitacharm), liquid milk (Vitamilk), nutritional beverage (FitActive), instant noodle (Mie ABC), battery (ABC).

Market share

The country's market size for toothpaste is around 77.2 thousand tons in 2010. The market is dominated by five brands Pepsodent, Close Up, Formula, Ciptadent and Total Care.
Pepsodent is a product of PT. Unilever Tbk, which is a pioneer in toothpaste industry in Indonesia operating since 1933. With a large production capacity and more complete variants of around 12 variants Pepsodent has a 60% share of toothpaste market in the country. Its market segments are from middle to high class members of the community.

Close Up is also a product of PT. Unilever Tbk launched in the 1990s. Close Up has also fairly succeeds in market competition with a market share of 9% and with market segments of middle to high class members of the community.

Other popular brands include Formula produced by PT. Ultra Prima Abadi, with a market share of 10.5%. Its market target is also middle to high class members of the community. Following Formula is Ciptadent which is produced by PT. Lion Wings with a market share of 9.4%. Ciptadent's market segments are middle to lower class members of the community. Another brand which is quite popular is Total Care produced by PT. Filma Utama Soap with a market share of 5.4% and with market targets of middle to high class members of the community.

Less popular brands with small share of the marker include Enzim, Sensodyne, Smile Up, Daun Sirih, etc.

Enzim, which is produced by PT. Enzim Bioteknologi Internusa, is a different type of toothpaste, produced without detergent material that it has no foam. All other products of toothpaste contain detergent hat cases foam. Enzim is a premium class, therefore, is relatively expensive. It prices range from Rp10.000 to Rp70.000  depending on the sizes  which range from 50 ml to 100 ml. The prices of other types of toothpaste are around Rp6.000 per 190 grams.  Enzim, therefore, is used mainly by high income people....




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