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Indonesia’s insurgent brands boom, investors roll up sleeves

Published on March 15, 2024

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Each year, Bain & Company unveils a list of what it calls “insurgent brands” in America’s fast-moving consumer goods sector. These brands are distinguished by their independence and absence of large corporate ownership. They are characterized by their ability to either directly challenge the dominant players in the market or innovate by establishing entirely new categories for themselves. Interestingly, we observe many brands with similar characteristics in the Indonesian market.

The archipelago is predicted to be the world’s fourth-largest economy by 2045. Estimates suggest its GDP per capita could reach between US$7,500 and US$10,000 by 2030. When you put these ingredients together, you end up with a market where disposable incomes are set to explode and inevitably fuel the growth of high-value consumer sectors like wellness, luxury goods, cosmetics, beauty clinics, and more.

Melina Anlin is VP of Investment at AC Ventures and a former Senior Manager at Bain. She recently sat down with Leighton Cosseboom on an episode of the Indonesia Digital Deconstructed podcast to discuss the market dynamics of Indonesia’s increasingly vibrant consumer sector and the rise of local insurgent brands. 

Cultivating bargaining power

When asked about the impact of insurgent brands in the food and beverage sector, Melina pointed out that they tend to challenge the status quo by offering unique product narratives and leveraging digital marketing and social media to authentically connect with modern consumers, especially those in younger generations.

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

“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,” explained Melina. 

“This digital-first approach not only enables rapid fine-tuning based on real-time feedback but also builds the brand’s online presence and loyalty. As a result, insurgent brands often transition more smoothly into offline channels, sometimes even attracting the attention of traditional retailers seeking to associate with their online success and growing consumer appeal. This dynamic shift grants innovative insurgent brands newfound bargaining power in the market.”

The cost of agility

Leighton asked about the importance of influencers and KOLs for securing a prominent position on platforms like TikTok Shop or Shopee Live, and how their pricing affects digital strategies for emerging brands.

“Looking back five to six years, a brand’s entry into e-commerce platforms like Tokopedia, Shopee, Lazada, and Bukalapak presented a golden opportunity to establish a presence with relatively low investment, competing for market share in a less saturated environment. However, the scenario today contrasts starkly with the past,” said Melina. 

“The cost of establishing and maintaining an online presence has surged significantly. Notably, platform take rates have escalated from nominal fees to, in some cases, 10-15% 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 also emphasized intensified competition on local e-commerce platforms. As the space grows more crowded, each dollar spent on advertising must work harder to cut through the noise, she said, requiring a strategic mastery over the platforms’ algorithms to ensure a positive return on investment. This is a sharp departure from the earlier days when visibility and consumer reach were more straightforward to achieve.

Melina 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

With the arrival of new players like TikTok Shop in Indonesia, which initially offered lower take rates to capture market share from incumbents, Melina noted a temporary easing of costs. TikTok Shop’s entry into the market shook things up, she said, offering brands a more lucrative advertising package. But even this relief is beginning to wane as competition heats up and promotional costs begin to normalize across platforms.

Despite these challenges, Melina 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. The digital landscape, by comparison, empowers brands with the ability to experiment and evolve rapidly, a critical advantage in today’s fast-paced market.”

Digital natives and domestic value-adds

Discussing the direct-to-consumer (D2C) business model, Melina 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.”

She suggested that “digital native” is likely a more accurate description for insurgent brands that leverage e-commerce platforms for an early foothold in the market.

That said, Melina 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 has an abundance of raw materials and natural resources, yet historically, local brands have sourced locally, then exported raw materials for processing, then imported them back into the country for final retail sales. This has always been costly, but many new local brands are doing things differently. Bali-based Yava is a great example. It sources and processes everything locally. This approach not only harnesses Indonesia’s wealth of raw materials right at the source but also empowers local communities and allows for premium, domestically value-added products to appear on our supermarket shelves. Consumers get a superior product at a more affordable price, and the brand ultimately gains more control over its profit margins.”

She also pointed to a company called East Java & Co, a local insurgent brand that operates similarly, selling a variety of spices, honey, tea, spreads, jams, and more. 

“East Java and Co is another one that sources and processes locally. Their commitment to quality—choosing only the best, chemical-free ingredients—reflects a growing trend of local brands leveraging Indonesia’s natural abundance. It’s rewarding to see these brands crafting products that not only serve the domestic market but also have the potential to be exported and appear on shelves overseas.”

Family-owned brands pass the torch

The pair wrapped up the discussion by addressing the generational transition taking place within local family-owned brands, noting a growing openness to external investments and innovations. Leighton pointed out that, traditionally, these businesses favored centralized decision-making and were hesitant to dilute ownership.

Melina agreed, but said we are currently witnessing the “passing of the torch” from one generation to the next. This change, she explained, is ushering in a broader recognition of the advantages that partnerships and external investments can offer.

She added, “A lot of these businesses are already super capital efficient and very healthy in terms of their financial positions. This combined with the next-generation leaders being more open to taking external capital presents a real opportunity. Investors like AC Ventures have a chance to provide not just growth capital, but also strategic support, helping these brands scale in new ways and enhance operational efficiencies.” 

AC Ventures has multiple insurgent brands in its portfolio already. 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.