Indonesia's cosmetics industry is looking bright, defying global economic challenges with strong growth fueled by its large and youthful consumer base. The sector's expansion is driven by rising consumer awareness, increasing demand for personal care, and the growing presence of small and medium enterprises (SMEs) that are becoming increasingly competitive both domestically and abroad. 

Amidst the current global economic downturn, characterized by inflationary pressures and reduced consumer spending power, Indonesia's cosmetics industry stands out with a projected annual average growth rate of 5.35% from 2024 to 2028. That translates to a 48% increase in total revenue from US$1.31 billion in 2021 to $1.94 billion in 2024, as reported by Statista. This growth is supported by Indonesia's demographic profile as the fourth most populous country globally, with a predominantly young population that frequently uses cosmetic products.

"The size is quite promising," noted Sancoyo Antarikso, Chairman of the Indonesian Cosmetics Company Association (Perkosmi), highlighting demographics as a key growth driver, as quoted by Antara. Further driving this growth is the expansion of e-commerce, which has significantly simplified market access for both consumers and businesses. This digital shift has been crucial in maintaining sales momentum, particularly as global economic conditions have led to tightening consumer spending in many other sectors. 

Est. Revenue of Cosmetics by Products in Indonesia, 2018-2028 (in Bn USD) 

Source: Statista 

Despite its positive trajectory, the industry faces several challenges. A major issue is the lack of a comprehensive ecosystem that includes not just manufacturing but also a reliable supply chain and advanced technology. Solihin Sofian, Chairman of the Indonesian Association of Cosmetics Companies, pointed out the industry's heavy reliance on imported raw materials, which weakens the supply chain.  

"We are only building cosmetic factories, but we are not developing a cosmetics ecosystem," he told CNBC in an August 27 report, adding that technological advancements are urgently needed. 

Moreover, the influx of imported products, particularly from China, has increased competition, putting pressure on local brands. In the same report, Anugrah Pakerti, CEO of AVO Innovation Technology, noted that the rise of foreign goods, facilitated by the rapid expansion of e-commerce platforms, has created anxiety among local players.  

"Compared to three years ago, during the pandemic transition period, the influx of foreign goods has been significant, putting pressure on local brands," he explained. 

The Role and Potential of SMEs  

SMEs dominate Indonesia's cosmetics industry, comprising 89% of the sector’s businesses, and play a crucial role in job creation and innovation according to data from the Ministry of Industry. By the end of 2024, the number of cosmetic SMEs in Indonesia is estimated to exceed 1,500, spread across various segments, including skincare, makeup, perfume, and body care products.  

The Ministry of Industry provides crucial support to these SMEs through training, technical assistance, and marketing facilitation, aiming to bolster their production capacity and innovation. Programs like the annual cosmetic startup competition, which started in 2019, have been instrumental in identifying and nurturing innovative SMEs. In 2024, 15 selected cosmetic SMEs will receive coaching, with further awards planned for November.  

"This competition is part of the Competitive Advantage Improvement Program for SMEs, particularly in product development," said Alexandra Arri Cahyani, Director of Miscellaneous and Chemical, Textile, and Craft SMEs at the Ministry of Industry, as quoted by Indonesia.go.id. 

Supported by government initiatives and export facilities, local products have increasingly reached global markets, contributing to export values of $770.8 million for cosmetics, fragrances, and essential oils from January to November 2023, according to data from the Coordinating Ministry of Economic Affairs. The sector has seen success in Africa, with companies exploring opportunities in Zimbabwe and Eswatini, reflecting the international potential of Indonesian cosmetics. 

Indonesia's abundant natural resources, including traditional knowledge of medicinal plants, offer additional advantages, with the growth of locally certified halal cosmetic products presenting opportunities in markets with high demand, such as the Middle East and Africa.  

Looking Forward 

While the Indonesian cosmetics industry shows promising growth, addressing existing challenges is critical to sustaining its momentum. Enhancing supply chain resilience, embracing technology, and fostering a supportive ecosystem will be key factors in maintaining the sector’s competitive edge.  

With continued government support and strategic initiatives, Indonesia's cosmetics industry is well-positioned to shine on the global stage, contributing significantly to the national economy.