In addition to hundreds of millions of potential consumers and the ease of doing business, Indonesia has high prospects in the cosmetics sector. New cosmetic brands have increased by 20.6% in just one year, and the dominant market share makes this tropical country a prime target for your next cosmetic brand. But how exactly to start a beauty business in Indonesia?
Overview of Indonesia’s Beauty Market
Indonesia’s beauty industry is thriving, marked by growth and changing consumer preferences. Personal care and cosmetics are among the most popular product categories in the market with a transaction value of 13,287 trillion rupiah. This strong demand is fueled by an increasingly prosperous population that values grooming and beauty products as integral parts of their lifestyle.
The skincare sector, in particular, is witnessing expansion and is projected to reach a market size of 473.21 billion USD, equivalent to 7,571 trillion rupiah, by 2028. This growth is forecasted to maintain a compound annual growth rate (CAGR) of 5.5%, signaling not only a thriving current market but also promising future opportunities for Smartpreneurs looking to enter or expand in this field.
Several factors driving this growth include beauty influencers and digital media platforms such as Instagram, TikTok, and YouTube. These influencers shape consumer behavior by introducing products, sharing beauty routines, and setting trends that resonate with their large audiences. Brands can utilize these strategies to boost product visibility and credibility among tech-savvy consumers.
Moreover, there has been a trend towards embracing Halal-certified products, which mirrors the cultural and religious beliefs of the predominantly Muslim community. The rising desire for environmentally friendly beauty goods also stems from an expanding consumer consciousness about environmental preservation.
How to Start a Beauty Business in Indonesia?
With all the potential offered by this segment in Indonesia, you might be wondering how to actually start a beauty business in Indonesia comprehensively. What needs to be prepared? Here’s how.
1. Market Research
Before starting a beauty business in Indonesia, it’s crucial to conduct market research to ensure the business is viable and aligned with its goals. Market research plays a role in understanding consumer preferences, trends, and gaps in the culturally diverse beauty industry of Indonesia.
This includes using both qualitative research methods, like surveys, focus groups, and data analysis to gather insights. By utilizing market segmentation analysis and studying consumer behavior, you can customize your product offerings to cater to the requirements of Indonesian consumers, who are influenced by local customs, climate conditions, and socioeconomic factors.
2. Legal Structures and Permits
As an international brand, you need to navigate through legal procedures and permits. Foreign-owned companies are required to establish a Foreign Investment Company (PT PMA) to comply with regulations, following the guidelines set by the Indonesian Investment Coordinating Board (BKPM).
Moreover, cosmetics brands must acquire licenses from the National Agency of Drug and Food Control (BPOM) to ensure product safety and regulatory compliance after securing a Cosmetic Notification Number. In addition, brands will also need to obtain Halal certification, which will be mandatory by 2026.
3. Product Formulation
The next step is formulation, which involves in-depth research, ensuring safety, and, alignment with the brand’s goals. The process includes selecting ingredients and additives that produce the best outcomes and adhere to Indonesia’s regulatory requirements, such as the guidelines set by BPOM and the upcoming mandatory Halal certification by 2026.
Due to these demands, formulations that work well in markets like the United States may require modifications to meet Indonesia’s standards and consumer preferences. Certain ingredients, such as lactic acid commonly found in skincare products, might be restricted under Halal rules. This necessitates the exploration of Halal-certified components. This includes conducting trials and stability tests to confirm the product’s effectiveness and safety profile while ensuring the use of Halal-approved raw materials and manufacturing methods.
4. Sourcing Ingredients and Packaging
The choice of ingredients should prioritize Halal-certified materials to meet Indonesia’s regulations, which greatly influence formulation decisions and supplier collaborations. Opting for local sourcing boosts supply chain effectiveness and cuts down expenses while catering to the rising demand for local and sustainable goods among consumers. Packaging, on the other hand, not only maintains product quality but also impacts brand positioning and addresses environmental concerns. Packaging design should consider local preferences and practical aspects like weather durability to ensure product sustainability and attractiveness.
5. Manufacturing
Establishing a beauty business in Indonesia involves a manufacturing process that covers everything; from sourcing materials to packaging the final products. This stage ensures that formulations are transformed into market-ready products that meet quality standards and comply with regulations. For brands aiming to simplify production processes and reduce complexities, teaming up with a contract manufacturer can offer significant benefits.
Indocare B2B provides contract manufacturing services tailored specifically for the beauty industry, with a focus on skincare and personal care products. With our facilities and expertise, we ensure that each product not only meets Indonesian standards but also aligns with global quality measures. By leveraging Indocare B2B’s resources, you can focus on your strengths such as marketing and distribution while entrusting us with the manufacturing process—from sourcing top-notch ingredients to ensuring formulation and packaging.
This collaborative approach enables scalability, cost-effectiveness, and quicker entry into the beauty market.
6. Branding and Marketing
After the manufacturing process is finished, we move on to branding and marketing. Creating a brand identity sets the product apart from competitors. Connects with the intended audience. This involves developing a brand narrative outlining brand characteristics and creating visually appealing packaging and labels that mirror the brand’s image and beliefs. Marketing tactics are then employed to raise awareness, stimulate demand, and boost sales.
This includes utilizing platforms like media, partnerships with influencers, retail promotions, and online advertising to effectively reach and engage consumers. By implementing marketing campaigns that showcase the product’s advantages, ingredients, and unique features, you can attract consumers’ interest and establish lasting brand loyalty over time. Consequently, this leads to growth and profitability, within the beauty sector.
7. Distribution Channels
Given the diverse demographic and geographic challenges, Indonesia requires a robust distribution strategy to maximize market penetration and deliver products to end-consumers efficiently. This distribution involves collaboration with wholesalers, retailers, and e-commerce platforms such as Tokopedia and Shopee.
Efficient distribution channels will provide valuable market data and analytics, enabling brands to adjust their marketing strategies to meet consumer needs and preferences. Thus, distribution channels not only enhance product availability but also support logistical efficiency, cost-effectiveness, and sales growth in Indonesia’s very competitive cosmetics industry.
Indocare B2B, a manufacturing partner based in Indonesia, has long been relied upon by beauty brands to realize their business dreams, not only within Indonesia but also across various countries such as Malaysia, Thailand, Cambodia, and even South Africa. Specializing in skincare and personal care products, Indocare B2B provides a wide range of formulations that have undergone rigorous research and development to meet Indonesian regulations and international manufacturing standards.
Collaborating with Indocare B2B allows businesses to benefit from cost production without compromising on product quality. This is especially beneficial for brands aiming to reduce production expenses by manufacturing locally in Indonesia or those interested in utilizing unique Indonesian materials for export markets. The expertise and strategic approach of Indocare B2B make it an ideal partner for Smartpreneurs looking to expand their footprint in the beauty industry both in Indonesia and globally.
