Each year, Bain & Company identifies “insurgent brands” in America’s consumer goods sector, known for their independence from large corporations and for challenging market leaders or creating new categories. 

Indonesia is predicted to become the fourth-largest economy by 2045, with GDP per capita reaching US$7,500 to US$10,000 by 2030, presenting a growing market for sectors like wellness and luxury goods due to rising disposable incomes.

Melina Anlin is VP of Investment at AC Ventures and a former Senior Manager at Bain. She recently joined an episode of the Indonesia Digital Deconstructed podcast to discuss the market dynamics of the local consumer sector and the rise of insurgent brands. 

Cultivating bargaining power

Zooming in on the F&B sector, Anlin pointed out that insurgent brands tend to challenge norms by offering unique product narratives and leveraging digital marketing and social media to authentically connect with modern consumers.

She highlighted that early traction online will often lead to increased ease of entry to more traditional, offline retail channels.  

Anlin said, “Not just in Indonesia, but globally, e-commerce marketplaces and social media platforms like Instagram and TikTok are fundamentally changing how brands emerge and evolve, offering a cost-effective test bed for product and brand refinement with minimal initial capital.”

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“The digital-first strategy allows new brands to quickly adjust based on feedback, enhancing their online presence and customer loyalty. This may often allow them to more easily move to offline channels and attract inbound attention from traditional retailers, thereby cultivating bargaining power.”

The cost of agility

“The cost of establishing and maintaining an online presence has surged significantly,” said Anlin. “Notably, platform take rates have escalated from nominal fees to, in some cases, 10-15 per cent of each transaction, marking a steep increase in operational costs for brands. Gone are the days when the platforms absorbed shipping costs. These days, the decision of who bears the shipping costs – whether the brand or the consumer – adds another layer to how brands plan their online sales.”

She went on to highlight the growing competition on e-commerce platforms, noting the increasing need for strategic advertising and algorithm mastery to ensure ROI, a significant change from when gaining visibility was simpler.

Anlin said, “Around 20 new local beauty brands are launching every month in Indonesia alone. This proliferation of insurgent beauty brands is making competition much more intense if a brand wants to be featured on TikTok’s For You Page, for example.”

A silver lining

TikTok Shop’s entrance in Indonesia, with initially lower fees, offered cost relief and better advertising deals to brands. However, as competition increases, these advantages are diminishing with promotional costs stabilising across platforms.

Despite these challenges, Anlin still sees a silver lining in the form of digital platforms’ intrinsic agility and capacity for innovation. She said, “What remains unchanged is the dynamic nature of e-commerce and social platforms, allowing brands to test, learn, and pivot strategies in real-time. This agility allows insurgent brands to make smaller, calculated bets, refine their approach based on direct consumer feedback, and progressively solidify their market position.”

She contrasted this with the rigidity of offline expansion, “Once you’re locked into a contract in the offline world, that’s it. The flexibility instantly disappears.”

Digital natives and domestic value-adds

Discussing the direct-to-consumer (D2C) business model, Anlin sought to clarify a common misconception. 

“To be honest, I’m a bit allergic to the term D2C here in Indonesia. It’s something that gets thrown around loosely. True D2C involves selling directly to consumers without intermediaries, a model that’s most prevalent in the US. In Indonesia, however, many insurgent brands sell primarily through third-party e-commerce platforms, thereby not selling directly in the pure sense. If, at the end of the day, the customer still belongs to Shopee or TikTok, you cannot say a brand is D2C, especially if it does not own the customer data.”

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That said, she also discussed how insurgent brands don’t necessarily need to win online to be successful. She pointed to a case study in the form of local granola and healthy snacks company Yava. 

“Indonesia’s local brands often export raw materials for processing and then re-import them for sale, which is costly. However, brands like Bali’s Yava are changing this by sourcing and processing everything locally. This strategy leverages Indonesia’s abundant resources, supports local communities, leads to premium local products in supermarkets, and offers consumers better prices while enhancing brand profit margins.”

Family-owned brands pass the torch

In the context of Indonesia’s longer-running, family-owned brands, Anlin explained that we are currently witnessing the “passing of the torch” from one generation to the next, which is important from an investment perspective. 

She explained, “Many of these businesses are capital efficient and financially stable, and with next-generation leaders open to external capital, there’s a significant opportunity. Investors like AC Ventures can offer growth capital and strategic support, aiding brands in scaling and improving operational efficiencies.”

AC Ventures already has multiple insurgent brands in its portfolio. For example, small home appliances brand Simplus has emerged as a top brand on TikTok, Shopee, and Lazada, tripling its sales in 2023, achieving profitability, and witnessing a record-breaking US$1 million in sales on a single day. Industry insiders are calling it the next “Philips of Southeast Asia.” 

Meanwhile, profitable brand Rosé All Day Cosmetics saw a 4x revenue growth in 2022 and more than 6x growth in 2023. The company went to market in 2017 on a bootstrapped budget of US$10,000. Due to strong performance against incumbents in the market, the startup recently raised a US$5.41 million funding round led by SWC Global.

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Image courtesy: AC Ventures

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