Indonesia's Halal Cosmetics Market Continues to Boom

Indonesia's cosmetics industry is large and growing, and Halal cosmetics are no exception.

As one of the world's largest Muslim populations, with 225 million Muslim residents (about 87.2% of the total population), Indonesia is driving global demand for Halal cosmetics. The global Halal cosmetics market is expected to reach US$54.16 billion by 2022, with the cosmetics market growing 15.2% over the forecast period. According to the 2021/2022 Indonesia Halal Economic Report, Indonesia's Halal cosmetics industry, valued at US$4.19 billion, is expected to grow at nearly 8% annually by 2025.

In recent years, the purchasing power of Indonesia's middle class has improved, which has greatly affected lifestyles. Muslim life in Indonesia is increasingly modern, and urban life is increasingly modern too. No wonder Indonesia's consumption of Halal products consistently ranks among the world's top two. With this in mind, among the leaders of the global Halal economy, Indonesia is in an active position in trade and investment, with the potential to further leverage its advantage: the Halal market.

A glimpse of Indonesia's Halal cosmetics market

From January to August 2020, Indonesia's total cosmetics product exports were US$135.67 million. During the pandemic, the industry shifted from cosmetics to skincare. Wardah, a brand of Paragon Technology and Innovation, is a pioneer in Indonesian Halal cosmetics and skincare. The company owns one of the largest cosmetics manufacturers and is one of Indonesia's major local players; the Wardah brand alone successfully generated about US$214 million (about Rp 3.05 trillion) in revenue in 2020.

With its potential for developing Halal products in the country, Indonesia has also set a goal of becoming a Halal industry hub by 2024. This therefore gives Indonesian Halal cosmetics manufacturers a market advantage in Halal cosmetics.

Indonesia's Halal certification regulations

In October 2014, the Indonesian government issued a new regulation requiring Halal certification for products circulating in Indonesia—namely Law No. 33 of 2014, concerning the Halal Product Assurance Law. This law applies to all products imported, distributed and traded in Indonesia. In particular for cosmetics, the obligation of Halal certification was determined from 17 October 2021, and stakeholders must comply with the deadline by 17 October 2026.

According to the Jakarta Globe, quoting Minister of Religious Affairs Yaqut Cholil Qoumas: 'As we begin implementing the second phase of the new Halal quality system from 17 October 2021 to the same date in 2026, the Halal certification mandate for pharmaceuticals, cosmetics and waste products is now in effect.'

Under the regulations implemented in the country, foreign companies wishing to export food, beverages, cosmetics, pharmaceuticals, medical devices and other products to Indonesia must first pass Halal certification.

Outlook for Indonesia's Halal cosmetics industry

In the coming years, the outlook for the cosmetics industry of Southeast Asia's largest economy remains bright. According to leading data analytics company GlobalData, the size of Indonesia's beauty and personal care market is expected to grow from Rp 7.3 trillion (about US$5 billion) last year to Rp 1.51 trillion (about US$7 billion) in 2023. Euromonitor International also predicts that Indonesia and Vietnam will become Asia's fastest-growing cosmetics markets.

A key driver of Indonesia's Halal cosmetics consumption is the rich opportunities across different segments within the same beauty industry. As of 2017, social media's influence on Halal cosmetics was significant, with Indonesians accounting for more than 6% of Instagram's total monthly active users. Modern Muslims in Indonesia are highly engaged with social media, fashion and beauty. In addition, beyond social sharing, the rapid growth of e-commerce such as Tokopedia and Shopee, as well as beauty platforms such as Sociolla, provides products with more convenient channels to reach consumers across the archipelago.

The new Halal regulations bring new opportunities to Indonesia's cosmetics industry. In addition to giving on-site cosmetics manufacturers a competitive advantage over off-site brands in the domestic market, Halal-certified local cosmetics companies can also increase their market share in overseas markets such as Europe. According to Pew Research Center findings, Europe's Muslim population is expected to grow from 5.9% in 2010 to 6.8% in 2020, 7.8% in 2030, 9% in 2040, and 10.2% in 2050.