Indonesia's beer-sales regulations: How marketers will react

Toughening its stance on alcohol distribution and consumption, Indonesia—a Muslim majority nation—has cracked down upon the sale of beverages with an alcohol content ranging from 1 per cent to  5 per cent in minimarts and neighborhood convenience stores.

Beer and pre-mixed alcoholic drinks that primarily fall into this category will only be available at large supermarkets and hypermarkets. The ban does not extend to hotels, bars and restaurants.

This tough regulation, passed ostensibly on moral and health grounds and to curb a spike in underage drinking, will obviously hurt the revenues of brewers in a big way. Commented John Galvin, managing director of Diageo Indonesia, which distributes Guinness in the nation, “The ban relates to all retail stores in Indonesia—both modern and traditional—and only exempts a few hundred super and hypermarkets. The industry will lose 55,000 outlets and circa 50 per cent of beer volume in the country. Diageo expects it to impact us in the same way as it impacts the whole industry.”

Heineken, the market leader, has a majority stake in Multi Bintang, the producer of the popular local beer Bintang.

Mark Campbell, director of regional corporate relations for Heineken Asia Pacific, echoed Galvin’s sentiments. “This retail channel is very important to our company Multi Bintang," he said. "It accounts for up to 50 per cent of our sales network.”

According to a recent report published by McKinsey’s Asia Consumer Insight Centre titled “The evolving Indonesian consumer”, stores such as Alfamart, 7-Eleven, and Indomart have grown fastest at 32 per cent a year between 2000 and 2011. The convenience factor combined with service levels and product availability is what makes convenience stores a natural first choice.

“With such an important distribution channel becoming inaccessible to the beer manufacturers, the revenues will get squeezed and they will almost certainly have a ripple effect on the advertising spends of the major players," said Himanshu Shekhar, CEO of Mindshare ASEAN. “We will see a downward revision soon.”

Opinions are mixed on how the ban will affect the advertising industry. Some in the industry do not share Shekhar’s pessimism.

Indonesia is already a dark advertising market vis-à-vis alcohol. While alcohol companies are forbidden to advertise on mainstream channels such as television and print, most of the brands have a strong presence on social media in Indonesia. “While they don’t do in-your-face banner ads, brands such as Heineken, Bintang and Guinness are quite active on Facebook, Twitter and YouTube,” said David Chalklen, executive director of digital at Leo Burnett Group and ex country manager of Vocanic. “Heineken also has a budget for sponsored posts, and I don’t really see any change in the spends here.”

JWT Indonesia’s CEO Lulut Asmoro agrees with Chalklen. “With restrictions having been in place for some time now, alcohol majors have devised enough forms of sublime and innovative advertising to connect with their core audiences,” said Asmoro.

While digital budgets may remain unchanged, point of sales marketing will gain extra traction, as brands will compete with each other for that privileged shelf space in Indonesian supermarkets and hypermarket.