The Indonesian cosmetic industry is vast and growing, and the halal cosmetic segment is no exception.
As one of the largest Muslim populations in the world with 225 million Muslim residents (about 87.2% of the total population), Indonesia is driving the global demand for halal cosmetics. The global halal cosmetics market is expected to reach US$54.16 billion by 2022, registering 15.2% growth for the cosmetic segment during the forecast period. According to the Indonesia Halal Economy Report 2021/2022, Indonesia’s $4.19 bn halal cosmetics industry is expected to grow by nearly 8% a year until 2025.
In recent years, Indonesia has seen an increase in their middle-class population purchasing power which plays a large influence on lifestyle - Muslims in Indonesia are living increasingly modern, urban lives, supplied with the latest technologies, trends and fashions. It is no wonder that Indonesia ranks second in the world for halal product consumption. Bearing this in mind, amongst the leaders of the global halal economy, Indonesia is in a positive position in terms of trade and investment with the potential to further capitalize on their strengths: the Muslim market.
A glance of the Indonesian halal cosmetics market
Between January and August 2020, Indonesia's cosmetics product exports totaled US$135.67 million. During the pandemic, there was a shift in the industry from make-up products to skincare. Wardah, a brand under the Paragon Technology & Innovation Company is a pioneer of halal cosmetics and skincare products in Indonesia. The company owns one of the largest manufacturers of cosmetics and is one of the local key players in Indonesia that have successfully generated revenue of approximately US $214 million (around Rp 3.05 trillion) in 2020 from the Wardah brand only.
Following its potential for halal products in the country, Indonesia has also set a target to become the halal industry center in 2024. As such, this gives halal cosmetic manufacturers in Indonesia a market advantage for halal cosmetics.
In line with the above, in October 2014, the Indonesian government issued a new regulation that requires halal certification for products circulating in Indonesia, namely Law Number 33 of 2014 concerning Halal Product Assurance Law. The law applies to all products that are imported to, distributed and traded in Indonesia. Especially for cosmetics products, the obligation for halal certification has been set since October 17, 2021, and stakeholders must comply with the deadline by October 17, 2026.
“Halal certification mandate for drugs, cosmetics, and worn and utilized products now comes into force as we begin to implement the second stage of the new halal quality regime from Oct. 17, 2021, to the same date in 2026," according to the Religious Affairs Minister Yaqut Cholil Qoumas as quoted from the Jakarta Globe.
With the regulation imposed in the country, foreign companies looking to export products to Indonesia that require halal certification must first gain halal certification through a body within their own country. The Institute of the Indonesia Ulema Council (MUI) has a list of approved bodies and partners on their website for clarification on which agencies are considered to uphold the international standard of HAS (Halal Assurance System) 23000. BASF as the global benchmark from Germany is a prime example of a company that has turned this regulation to its advantage, offering 145 ingredients for personal and home care products that have been certified by the international halal standard of HAS 23000.
Prospects for Indonesia’s halal cosmetics industry
The prospect for the cosmetics industry in Southeast Asia's largest economy remains bright for the coming years. According to Globaldata, a leading data analysis company, it is estimated that the market size of beauty and personal care in Indonesia will reach Rp 1.51 trillion (about US $7 billion) in 2023 from Rp 7.3 trillion (about US $5 billion) last year. Euromonitor International also predicts that Indonesia, along with Vietnam, will become the fastest-growing cosmetics market in Asia.
A key driver in the uptake of halal cosmetics in Indonesia is the wealth of opportunities in different segments within the same industry of beauty. As of 2017, the impact of social media on halal cosmetics have been significant with Indonesians making up over 6% of Instagram’s overall monthly active users. Modern Muslim in Indonesia is highly connected to social media, fashion and beauty. Additionally, beyond social sharing, the rapid growth of e-commerce such as Tokopedia, Shopee as well as beauty platforms such as Sociolla have provided easier access for products to meet consumers across the archipelago.
Halal regulations have brought about new opportunities for the cosmetics industry in Indonesia. Besides giving on-site cosmetic manufacturers a competitive edge over off-site brands in the domestic market, halal-certified local cosmetic companies can also grow their market share in overseas markets like Europe whereby, according to findings from the Pew Research Center, the Muslim population in Europe has been forecasted to grow from 5.9% in 2010, to 6.8% in 2020, 7.8% in 2030, 9% in 2040, and 10.2% in 2050.