Nestlé shuns price hikes as Indonesians tighten purse strings

Nestlé, one of the top consumer goods suppliers in Indonesia, will avoid raising prices further after a 5% hike this year began to hurt demand.

Faltering sales volume amid higher product prices is happening throughout the consumer goods industry, said PT Nestlé Indonesia President Director Ganesan Ampalavanar. He expects commodity costs to fall in the second half of 2023, which would help the company maintain its product prices.

“The trend is: consumers are cutting their expenses, that’s why if we keep taking price increase, they’re going to cut more and more,” he said in an interview in Jakarta.

Stable prices of Nestlé’s products including instant coffee Nescafe, powdered milk Dancow and Milo chocolate drinks could help temper Indonesia’s inflation, which already slowed to 5.71% in October. Easing gains in the cost of food like eggs, poultry and chili helped offset a surge in energy prices last month.

Nestlé plans to lower costs by reducing imports. It has spent $320 million since 2019 to expand its local factories so that 96% of goods sold in Indonesia are made onshore, from 91% this year. By the end of 2023, the company plans to start exporting goods to halal markets in Asia and the Middle East.

—Bloomberg