Amalia Hayati, a beauty reviewer in Indonesia, often lists local cosmetic and skincare products that have been mushrooming over the past two years.
“With the emergence of local makeup products [firms] such as BLP and Rollover Reaction, which compete with foreign brands, I have started to try local cosmetic products. Now, half of all my skincare products are from local brands,” Hayati told DealStreetAsia.
Hayati is not the only one. A lot of consumers in the archipelago have shifted their preference towards local brands over the past two years. Little wonder then how the easy-to-profit industry in the largest Southeast economy is increasingly evincing investor interest to expand their direct-to-consumer beauty and skincare portfolio.
Take BASE for instance. Established in 2019 by Yaumi Fauziah Sugiharta and Ratih Permata Sari, the local skincare company raised funding last year to expand its operations. Its products are explicitly tailored for the ‘Indonesian skin type’ through its algorithm technology.
“Although the beauty market in Indonesia was huge in 2017, which was potentially projected at $3 billion, the market is still dominated by global and East Asian brands that are formulated either for Caucasian or East Asian skin, but not Indonesian skin type,” Sugiharta said.
BASE secured its pre-seed funding from startup generator Antler in May 2019. It further raised an undisclosed round from East Ventures and Skystar Capital in its seed round in September 2019.
“I think local players still have a lot of chances to grab the market…..there is better consumer branding compared to previous years,” said Melissa Irene, partner at East Ventures. The Southeast Asian early-stage focused venture capitalist has invested in three beauty startups – BASE, skin-analysis technology firm Nusantics, and beauty e-commerce platform Social Bella. Going forward, the VC, which is co-founded by Willson Cuaca, plans to invest in a few more beauty startups in the country.
Beauty trail amid COVID
According to global research firm Euromonitor, Indonesia’s beauty and personal care market is estimated to grow to $8.46 billion in 2022 from $6.03 billion in 2019. The Industry Ministry stated that the cosmetics sector carved out a 7 per cent growth in 2019. The ministry had initially targeted the industry to grow at 9 per cent by 2020.
However, with the COVID-19 crisis looming large on the sector, the growth rate may witness a slight slowdown as people are mostly confined to their homes with their focus increasing on wellbeing.
SYCA cosmetics, established by Pamela Wirjadinata and Monica Tan to focus on lip tint beauty products, has felt the adverse impacts of the pandemic on its business strategy and sales. “The offline store has shut down during the large-scale social restrictions (PSBB) policy. We also planned to make an offline showroom and make up class, but it was delayed due to the uncertainty,” said Wirjadinata.
However, the startup managed to survive as it closed its pre-seed funding from Indonesia’s SALT Ventures earlier this year – it could adjust customers’ needs and ramp up its online growth through e-commerce platforms Tokopedia, Shopee, and Sociolla. It also sells its products through Instagram.
In 2019, SYCA claimed to have sold on an average, 795 units per month. The sales growth could reach 98 per cent or, touch a monthly average of around 1,572 units in 2020.
“We want to focus on our digital sales, stick to our brand entity, and maintain our loyal customers. Next year, we will expand to skincare products and will raise another fund,” Wirjadinata added.
Meanwhile, Rose All Day Cosmetics also has had to re-adjust its initial plan after finalising an undisclosed funding round from AC Ventures and the new Indonesia’s Grup Investasi Asia (GIA) Ventures.
“Our initial plan for this year was to grow our numbers of SKU (product types), be more aggressive with expanding our team and marketing expenses, and offline through having pop-up stores. Our offline stockists are so far located in Jakarta, Surabaya, and Bali. Due to the pandemic, we have [had] to pause the offline expansion and shift our product launches accordingly. We expect to see our skincare range expand by the end of this year,” Tiffany Danielle, one of the co-founders of Rose All Day Cosmetics said.
However, one respite. Despite offline sales going down, online sales have increased. In July 2020, the local Indie brand claims to have touched total sales in tandem with last year, boosted by traffic on its e-commerce platform and website.
According to Danny Sutradewa, managing partner at SALT Ventures, the beauty sector can recover fast from the crisis – after all, local players now have their community and loyal customers on online platforms. In today’s day and age, it’s critical for brands to gain the trust of customers – especially the Gen Z and those from the millennial market.
“Over 50 per cent of Indonesia’s population is dominated by women. When the income increases, they would spend their money on beauty products to make them look good,” Sutradewa said.
SALT Venture plans to invest in skincare products soon. “We’re in talks with some companies,” he said.
Road ahead: Surviving amid competition
“The agility and ability to adapt quickly in Indonesia’s fast-changing market are one of the advantages for Indie brands ….I think there’s a huge potential for local brands to dominate the market and compete with international brands,” Monica Christasia, CEO at BLP Beauty said. The company has tied up with a slew of manufacturers that make products for multinational brands.
BLPBeauty influencer Lizzie Pharra-led BLP is one of the initial local Indie products firms that was established in 2016. Being a profitable company since the first year, BLP has been approached by several local and international VC firms and is currently open to roping in risk capital investors. “We’re still open to new investors,” she said.
Meanwhile, Hanifa Ambadar, founder and CEO at Indonesia’s media company Female Daily Network (FDN), added: “Local cosmetic brands are more innovative in [terms of] product packaging, engaging [with] customers, and [are] more transparent with their product contents than big brands, like L’oreal or Unilever. They can defeat international products, as they are more agile and fast.”
She believes local beauty and skincare products keep getting attention from investors or venture capitals, as they can quickly generate income compared to other tech companies.
For French beauty care company L’oreal, factors such as Indonesia’s young population, digital market, growing e-commerce are sprucing up demand for natural beauty products. Going forward, Umesh Phadke, president director at Loreal Indonesia, revealed that it is not closed to collaborating with local players to cater to the market.
“We have one of the largest L’Oréal factories in the world in Indonesia. Therefore, we are already collaborating with the local cosmetic industry in terms of raw materials,” Phadke told DealStreetAsia.
Loreal has forged tie-ups with retail convenience stores, e-commerce, and department stores to supply their products to customers.
Furthermore, Ambadar believes that local Indies beauty and skincare products keep getting attention from investors or venture capitals, as they can quickly generate income compared to other tech companies.
Indonesia's beauty startups
|BASE||Skincare products||Antler, East Ventures, Skystar Capital||Undisclosed/ seed round|
|Rose All Day||Cosmetic and skincare products||AC Ventures, GIA Ventures||Undisclosed/ seed round|
|SYCA||Cosmetic products||SALT Ventures||Undisclosed/ seed round|
|Nusantic||Skin analysis technology||East Ventures||Undisclosed/ seed round|
|Storie||Life-style community platform||Surge, Omidyar Network, Blume Ventures, |
Lightspeed Venture Partner, Alpha JWC Venture
|Undisclosed/ seed round|
|Sociolla||Beauty e-commerce platform||Jungle Ventures, Temasek Holdings,|
Pavilion Capital, EV Growth, istyle.Inc, East Ventures,
|Series E round / $110 million|