Saturday, July 16, 2011

Magnum Cafe and Sunsilk Hair Studio as a Phenomenon

Magnum and Sunsilk are Unilever brands. Currently Unilever opens Magnum Cafe and Sunsilk Hair Studio in Grand Indonesia Shopping Mall (Jakarta Indonesia).

Unilever discovered that Indonesian adult began to look for ice cream (previously only fruits and sweets) as dessert about 2 years ago. It was an indication that adult segment had grown (1). Then, Wall's Magnum as one of the company's popular brands for the adult ice cream market was relaunched on 11 November 2010 with three new variants: Classic, Almond, and Chocolate Truffle. Wall's Magnum is targeting:
- People: Adults, who are always busy, who needs something to treat themselves
- Product: packaged ice cream stick covered with European-quality chocolate
- Price: premium
- Place: everywhere
Marissa Nasution is the brand ambassador. She explained at the launching program, "Being an active woman in the entertainment industry, it is difficult to find leisure time where I can pamper myself. Amidst the juggling of activities, I need to feel special, noticed, treated like a princess. I am proud to be appointed as Wall’s Magnum Brand Ambassador because I can get what I need.” (3)

Unilever launched another Sunsilk line-up, "Sunsilk Co-Creation", on 9 June 2010 (the product is available since 1 June 2010). The line up consist of Sunsilk Soft & Smooth, Sunsilk Damaged Hair Treatment, Sunsilk Black Shine, Sunsilk Hair Fall Solution, Sunsilk Anti Dandruff, Sunsilk Clean & Fresh, Sunsilk Straight & Sleek, Sunsilk Bouncy Curls. This new line-up was developed in partnership with world hair experts like Jamal Hammadi (attended the grand opening of Sunsilk Hair Studio) and Thomas Taw (attended the launching program). In Indonesia Sunsilk is targeting:
- People: females
- Product: packaged shampoo, conditioner, and serum
- Price: premium
- Place: everywhere
On the launching program, Julie Estelle gave her comment, ”I am happy and proud to be chosen as Sunsilk's brand ambassador. As an Indonesian woman who actively involved in various activities and tight schedule, I always want beautiful and healthy hair, so I use Sunsilk Co-Creation. With Sunsilk Co-Creation, Indonesian women can have the touch of world hair experts at home." (5)

1. Magnum Cafe (3)
Everyday people are queueing to get into Magnum Cafe. The cafe that was originally planned to open for only 3 months (until 15 June 2011) is extended and even planned to be opened in other cities in Indonesia, such as Bandung and Surabaya.

Location: Grand Indonesia Shopping Mall, 5th floor

Value Preposition:
- Modern victorian cafe design (in partnership by Ismaya Group)
- Menu is designed by Aldo Volpi (a famous italian chef), such as:
  • Ice Cream: Magnum Waffle, Waffle De Aristocrat, Crème de la Crème, Goblet of Chocolate, Razzle Dazzle, Crown Jewel, Nobble Nibble, Pas De Trois, A Knight’s Tale, Court Jester, The Emperor, Commander’s Fried Rice, Royal Kingdom, Royal Feast.
  • Drinks: Magnum Signature (Summer Tango), Magnum Shake (Truffle Royale), Magnum Chocolate (Ice Queen)
- Photo Booth

Picture 1. Magnum Cafe

2. Sunsilk Hair Studio
Sunsilk Hair Studio is expected to operate for about 2 months (until 31 July 2011).

Location: Grand Indonesia Shopping Mall, 2nd floor

Value Proposition:
- Mirror Salon design
- Hair and Make Up Consultation
- Hair Treatment and Styling with seven trends: Fierce Crop, Country Braids, Ponnytail Upper East, Perfect Waves, Hollywood New Edge, First Lady, dan Retro Red Carpet (in partnership with Qiqi Franky)
- Lounge, Fashion Boutique, and Photo Booth

Picture 2. Sunsilk Hair Studio

SUMMARY
Both Magnum Cafe and Sunsilk Hair Studio are Unilever efforts to endorse the brands and educate customers.
In case of Magnum Cafe, it allows customer to have an enjoyable experience with the ice cream and it also allows Unilever to build product image in consumer's mind. Hence, even when customers buy the product in retail store, customers is expected to have an impression about the product and increase the overall customers' satisfaction on the product.
In case of Sunsilk Hair Studio, there are several offerings and it may be difficult for customers to choose the product that fit them. The hair studio will allow Unilever to target the right customers and offer the right products. Hence, it will increase customers' satisfaction and trust to the product as the solution of their hair problem (if any). Furthermore, it will also enhance word-of-mouth when the customers tell others about their experience after being treated in the hair studio.
Similar practice is usually implemented on nutritional products (like Nutrifood's WRP) or cosmetics product (like P&G's SK II, Kao's Shiseido). The success of Magnum Cafe and Sunsilk Hair Studio may make this method become a popular marketing practice among FCMG companies.

Sources:
1. Inilah Alasan Walls Magnum Menggarap Pasar Es Krim Dewasa Belakangan
2. Belgian Chocolate in Every Bite of New Wall's Magnum Ice Cream
3. Perkuat Brand Awareness, Magnum Cafe Dibuka
4. Pertama di Indonesia, Sunsilk Hair Studio Hadir di Jakarta
5. Sunsilk Meluncurkan Sunsilk Co-Creations: Kreasi Terbaru Sunsilk bersama Tujuh Pakar Rambut Kelas Dunia

Electronic Payment Systems in Indonesia (mid 2011)

As online shopping sites surged in Indonesia, so does electronic payment system that facilitates transactions between buyers and sellers in digital world.

INTERVIEW with an Online Shop Owner
This week I had a chance to have a conversation with an online shop owner in Bandung (Indonesia). I asked him about electronic payment system. He mentioned that some shops had accepted payment through Telkomsel T-Cash, however he still only accepted payment through fund transfer instead. Popular banks for fund transfer is BCA (in the city), Mandiri (further from the city), BNI and BRI (more further from the city).

BACKGROUND
Online banking in Indonesia is growing. One of the indicator of this matter is total unique visitors to online banking sites. Comscore, a leader in measuring digital world, researched this and the result is the visitation in Indonesia went up to 72% in a year, more than other countries in Asia (1).


Online Banking Category Visitation by Market (in millions) (1)

Local bank presence in Indonesia is considerably strong as two local banks came up in top three online banking destination. The top three were Mandiri, BNI, and Citigroup (1).

Online banking allows account holders to do financial transaction in digital world, such as bill payment and fund transfer, which facilitate online shopping. Another popular service is e-money. While most banks offer e-money in card format, Non Banks institutions such as telecommunication companies offer e-money to transfer fund between subscribers, such as T-Cash (Telkomsel), i-Vas (Telkom) and Dompetku (Indosat).

T-Cash has 5.3 million subscribers until first quarter 2011, grew from 4.7 million subscribers in the end of 2010, and targeted to have about 8 million subscribers or grow by about 70% in the end of 2011 (5). 

Indonesian Government introduced a regulation about fund transfer (2) to public on 3 May 2011 (3). According to this regulation, non-bank institutions that run financial transaction within the country have to be licensed (approved by The Government). Government officials said that the regulations was created to protect banks and customers and currently there were about 70 non-bank institutions that had the licenses (4).

FURTHER DEVELOPMENTS
The current electronic payment methods, through fund transfer via online banking or e-money, is still lack of security for both the buyer and the seller since both methods rely on trust between buyer and seller. There are possibility where the buyer doesn't pay what he order or the seller doesn't deliver what he offer.

These year, there are two other electronic payment that is expected to be launched:

1. KasPay (7)
Kaskus.us has buy - sell forum in its site. To facilitate its users, Kaskus Network will provide online payment service, KasPay. Kaskus is developing partnerships with banks, not only big banks, but also small banks to accomodate users' need. KasPay will facilitate payment, but the payment method still remains through credit card and ATM. It is expected to be finished by the end of this year.

2. KlikPay (6)
BCA as a leading private local bank is preparing a service rumored to be called KlikPay. it was modeled after PayPal, a successful electronic payment platform in US. It is expected to be introduced to market after second quarter this year.

SUMMARY
As transaction in digital world becomes more demanding and no payment solutions has been well established, companies are trying to gain this momentum. Licenses to run financial transaction has been given to several companies, therefore customers will possibly be given numerous offers of electronic payment solution within this two years. Companies that have already had well-established IT system  will surely be advantageous.  

Sources:
1. Comscore: Online Banking on the Rise in Southeast Asia
2. Undang Undang tentang Transfer Dana
3. Sosialisasi Undang-Undang Nomor 3 Tahun 2011 tentang Transfer Dana
4. Indonesia Enacts Non-Bank Money Transfer Regulation
6. E-commerce di Indonesia: BCA akan Meluncurkan KlikPay, Bank Mandiri Siap dengan Tokone
7. Kaskus Akan Buka Layanan Logistik Barang

Sunday, July 10, 2011

Expansions of Multi National FMCG Companies to Indonesia

Picture 1. FMCG Growth in Asia (6)

Last year FMCG (Fast Moving Consumer Good) industry experienced growth, not only in Thailand, but generally in Asia. On the contrary with Asian market, European market growth was remain slow (2.0% in 2010) (3).

In Indonesia FMCG industry grow double digit (more than 10%) in 2010 (compared to 2009). Total sales in 2010 is about IDR 129.2 trillion (USD 15 million) Between January to April this year,  FMCG sales have reached about IDR 49.19 trillion (USD 5.7 million) and it is projected that until the end of this year it can grow up to 12 - 15% (2).

Shifting consumer behavior of Indonesian household shopper is also an important factor that drive the growth. While previously most Indonesian household shopper is a female, now 26% of them is a male (74% of them is still a female) (1).

Beside Carrefour, Giant, and Hypersquare, now there is another supermarket chain come to the market, Lotte Mart. Even though number of Supermarket and Mini Market keep increasing, but wet market is still remain dominant in certain segment.

Picture 2. Product Distribution in Indonesian Market

RECENT NEWS

Existing Multi National Companies are investing more in Indonesia, such as Unilever and P&G.

1. Unilever (4)
Unilever owned some production facilities in Cikarang (West Java) and Rungkut (East Java). Recently Unilever is building another factory in Rungkut (East Java) as it is going to discontinue its factory in Germany. The new factory is expected to produce soap for South East Asia market.  

Indonesia had an important role for Unilever around the world - Josef Bataona (Human Resources Director of PT. Unilever Indonesia, Tbk.):
  • Unilever considered that Indonesia has huge potential as consumption keeps increasing. However, Unilever's production facilities in Indonesia is not only to supply local market, but also export to Asia and Australia. The target is that in the future Unilever Indonesia could take India's position as the biggest in Asia. 
  • Unilever has about 5,200 work forces. Among them, there are 48 managers who work for Unilever in other countries like Singapore, Malaysia, and Germany. 
Unilever allocated EUR 300 millions budget for expansion, including increasing capacity from 2010 to 2012 - Sancoyo Antarikso (Secretary, PT. Unilever Indonesia, Tbk.)

2. P&G (3)

Currently P&G has no production facility in Indonesia. Most P&G products are produced in (imported from) Thailand. In the last three years P&G has successfully recorded double digit growth in Indonesia. Now P&G is investing USD 100 millions to build a production facility in Indonesia - Sam Kim (President Director of P&G ASEAN).

SUMMARY

FMCG industry in Indonesia is expected to have double digit growth this year. As FMCG market in Indonesia is getting more appealing for investment, more FDI (Foreign Direct Investment) comes to Indonesia. It is clear that more product will be produced and pushed to market. As capacity and variety of product increase, the need of raw materials and quality work forces are also surged. While an industry is growing, its supply chain tends to grow as well.

References:
1. In a Shift, One in Four Indonesian Household Shoppers Now Men
2. Nielsen: Penjualan produk konsumsi cepat habis bisa naik 15% hingga akhir tahun
3. Europe’s FMCG Market Remains Sluggish
4. P&G Investasi USD100 Juta Bangun Pabrik
5. Unilever Relokasi Pabrik Sabun ke Indonesia
6. In Thailand, Challenges and Opportunities for Fast Moving Consumer Goods

Monday, July 4, 2011

Indonesian Music Industry Landscape (Mid 2011)


Picture 1. Global Music Industry Turnover

As Music Industry turnover is declining globally, Indonesia is also experiencing the same pattern. This drives changes in Indonesian Music Industry, especially from 2009 when RBT (Ring Back Tone) service is introduced to Indonesian customers for the first time. 

BACKGROUND

Music industry in Indonesia is filled with multinational, local, and indie music record companies. Some notable music companies are as follow:
  • Mutinational Record Company(s): SMEI (Sony Music Entertainment Indonesia), Universal Music Indonesia, Warner Music Indonesia
  • Local Record Company(s): Musica Studios, Nagaswara, Aquarius Musikindo, Trinity Optima Production
  • Indie Record Company(s): Masterplan Records
As Indonesia is a developing countries, level of piracy in digital music industry is still considered high. Hence, most artists and music recording companies relied to sales of physical devices (especially Audio CD) through music store chain.

Picture 2. Previous Distribution Model 

Now music recording companies also engage direct sales and collaborative product/service with telecommunication industry. The most common form of the collaboration is RBT (Ring-back Tone). As the music company become more dependant to telecommunication companies as a channel to market its products, growth in telecommunication industry will give impact to music industry as well.

Picture 2. Current Distribution Model

Direct sales, in this case, is that Music Recording Company sells an album through alternative channel. Some examples(15):
  • SMEI (Sony Music Entertainment Indonesia) sold Cinta Laura's album titled "KFC Ayo Ngedance Bareng Cinta Laura" (translation: "KFC Let's Dance with Cinta Laura") through KFC (Kentucky Fried Chicken) food chain (about 400 restaurants). The album was successfully sold up to 1 million copies (by last February 2011).
  • SMEI sold Gita Gutawa's Album to Bukopin Bank. Bukopin Bank will give the album for free upon opening new account with minimum balance IDR 1 million (about USD 120).
Note: Cinta Laura and Gita Gutawa are Indonesian local music artists.

There are nine mobile telecommunication network providers in Indonesia:
  • GSM: Telkomsel, XL, Indosat, Hutchinson 3, Axis
  • CDMA Telkom Flexi, Esia, Smart Fren, and Sampoerna Telekom.
The big three (Telkomsel, XL, and Indosat), in total, have about 90% market share(9).

Picture 4. Mobile Network Subscribers in Q1, 2011(11)

Ring-back Tone (RBT) is the song or sound that is heard on the telephone line by the calling party after dialing and prior to the call being answered at the receiving end(1). Music companies provide the song while telecommunication companies sell RBT service to subscribers. An audio CD of a local artist is priced around IDR 40,000 (around USD 4)(2), while RBT costs around IDR 9,000 (around USD 1) per month. RBT is usually only about 40 seconds long. It’s shorter than full track, but RBT gives roughly 40% revenue from production cost that will be shared to music label, artist, and songwriter. In the end, the music company will get 10-20%(3). Total transaction of CD and cassette sales is roughly only one-tenth RBT sales(5). RBT is one solution to battle piracy since it’s a service from provider.

Following the success of RBT, telecommunication companies are trying to market full track songs, some notable milestones are:
  1. Telkomsel offers digital music in the form of full track download and RBT service through Langit Musik since 18 January 2010. The service can be accessed by Telkomsel’s subscribers from http://www.langitmusik.com/wap
  2. Indosat launched Indosat Backstage in collaboration with Univesal Music Indonesia and Musica Studios. The service is launched on 10 June 2011.
  3. Nokia has bundled it handsets with Ovi service which offers local songs (including Indonesian songs). On 4 August 2011, in partnership with three local telecommunication providers (Telkomsel, XL, and Indosat), Nokia Indonesia introduced(6): Nokia Unlimited (unlimited internet for mobile phone), Nokia Internet Messaging Unlimited Package (unlimited messaging), and Ovi Internet Package (unlimited access to Ovi service, including unlimited music download) for IDR 2,000 (about USD 0.2) / day or IDR 20,000 (about USD 2) / month (at this moment, the third service is only offered to customers of Telkomsel)
  4. 4. Telkom, bundled its internet service product with music download service in collaboration with MelOn (a digital music sales company originated from Korea)(7). It is hosted in http://www.melon.co.id and it will cost IDR 25,000 (about USD 3) per month for unlimited download(8).
OPPORTUNITIES AND CHALLENGE

In accordance to increasing number of telecommunication subscribers, number of potential subscribers for both RBT and full track download are also increasing. The market has potential to grow further. As an example, Langit Music currently has more than 12 millions subscribers. In 2010 It successfully pushed 72,000 RBTs, 15,000 full track songs, 3,000 mini songs, and 300 music videos to be downloaded from its site. And booked 30% growth compared to the previous year. This year It is targetted to grow 60% or equal to 20 millions subscribers in 2011(13).

The success of Cinta Laura album which offers music with dance genre/beat and the success of new group bands like SM*SH which offers music with similar genre show that Indonesia starts to follow trend in United States. Dance music has boomed in Western area since several years back with the success of artists like Lady Gaga and Rihanna and it's just started here.

On the contrary, full track songs are available to be downloaded for free through torrent or file sharing sites such as 4shared and Indowebster. A non profit organisation, Heal Our Music, recently did a survey. In April 2011, it monitored 15 sites that provide free music download and found out that there were about 104 millions download in that month only(14). While current regulation is considered to still not be able to stop or make people think twice before download pirated songs(11), it also shows huge market opportunities if illegal download activities can be shifted to legal and paid download activities.

Different with RBT which can be enjoyed by others, track download is more personal. This is another challenge due to the fact that Indonesian people like to share and DRM will avoid them to do so. In this state, both music industry and telecommunication industry may just want to see responses from the market and investment will possibly be slowed down until it really shows acceptable results.

SUMMARY

Digital music business in Indonesia is still considered new and potentially growing in at least the next few years. Along with growing market of smart phones (especially BlackBerry and iPhone) and mobile internet service, synergy between music recording companies, mobile phone content developers, and telecommunication companies seems to be the future of digital music industry. Although there are also challanges, efforts and strategies that are (possible to be) pursued to mitigate these risks.

Sources (viewed on 27 June 2011):
1. Wikipedia
2. Disctarra (a local music store chain)
3. RBT Penangkal Pembajakan
4. Menghitung Profit dari RBT
5. DRM Membawa Gairah Baru Industri Musik
6. Nokia Gaet Empat Operator untuk Paket Internetnya
7. Telkom Dukung Speedy dengan Konten Music Digital
8. Speedy Music Unlimited
9. Review of Prepaid SIM Card in Indonesia
10. Prospek Bisnis Full Track Download Menjanjikan
11. Beban per Pelanggan XL Terendah
12. PAPPRI: Tata Niaga Musik Harus Direstrukturisasi
13. Telkomsel Pertimbangkan Akuisisi Penyedia Konten
14. Musik Indonesia di Ambang Kehancuran?
15.  Nyaringnya Penjualan Album Langsung