T

he global Muslim population is expected to reach 2.6 billion, or 30 percent of the total world population, by 2050 and by 2019 annual global spending by Muslim consumers will reach an astronomical US$73 billion. Such growth — both in population and spending power — is putting a spotlight on the Muslim consumer market, and that includes beauty. Halal cosmetics were estimated to make up 11 percent of a global halal market worth more than $1 trillion in 2015, according to Deloitte Tohmatsu Consulting, and Indonesia is a hotbed for further growth in the eyes of many foreign manufacturers.

Yet a new challenge lies ahead which could spell a major change in the landscape as manufacturers — large and small, international and local — must adopt to new, more regulated, manufacturing procedures. The Halal Product Certification Bill passed by the Indonesian government in 2014 requires all products sold in Indonesia to be halal-certified by 2019. So what lies ahead for Indonesia’s burgeoning beauty market?

Indonesian consumers, especially those in the millennial generation, are taking a greater interest in beauty and are more willing to show it. Indonesia’s Miss World Muslimah Pageant is testament to changing attitudes, celebrating the pursuit of holistic beauty while retaining a Muslim woman’s modesty.

Meanwhile changing attitudes among female Muslim consumers are supported by greater access to information on products and ingredients, fueling more willingness to spend on beauty products and services. Access to beauty forums and blogs allows for active discussions on whether beauty brands and products contain “halal” (permissible) or “haram” (non permissible) ingredients.

While it is mandatory for practicing Muslims to consume only food and beverages that are halal, until now the use of halal beauty products has been less strictly enforced. Regardless, there is a strong latent demand for halal certified or halal-friendly products which empower Muslim women to feel they can be beautiful in a way that does not violate their religious beliefs — essentially giving them a conflict-free consumption experience.

For beauty products to be considered halal they must not contain alcohol and be free of substances derived from “unclean” or “forbidden” animals such as pigs, dogs, insects and reptiles. Yet most beauty products by mainstream brands contain animal-derived substances, such as gelatine, or alcohol, making them unsuitable for Muslim consumers. Cruelty to animals (i.e. animal testing) is also not permitted under Islamic laws, and the equipment used for production and operational practices are also important.

Alongside fully halal-certified products, such as Citra by Unilever, brands that are not halal-certified but do not contain prohibited ingredients, and come from a company with honest business practices which meet the needs and wants of the halal market, have started recording increasing success. Brands like Lush, Simple, Nivea (Pure & Natural range) and Inglot (O2M Breathable nail polish) fit the bill in this way, and are considered “halal-friendly.”

Globally, many large multinational companies have also had success connecting with Muslim consumers in other, more creative ways, such as using more relevant brand names. For instance, the brand names “Jamal Paris Cosmetique” (France) and “Sahfee Halal Care” (The Netherlands) have been created to contain meaningful words resonating with Muslim consumers — “Jamal” meaning beauty in Arabic and “Sahfee” meaning pure.

Clever advertising and promotional strategies also allow brands to demonstrate an appreciation for the needs of the halal market. Unilever, for example, ran a Sunsilk shampoo television commercial in Malaysia in 2012 which anchored on “hijab styling” as a replacement for “hair styling” — showing that it understood women’s needs to express their individuality while conforming to culture and religion. The campaign connected so well with Muslim women that sales of the shampoo rocketed even though no hair was shown in the ad.

The halal legal regulation applies not only to a product’s ingredients, but also to the company’s operational standards such as manufacturing, packaging, and delivery processes. Amongst the large multinationals, we will see some major operating decisions taking place, followed by changes, to comply with the new law. As a first step, adherence to the new standards is needed to ensure continued access to the Indonesian market; in addition, companies may also undertake changes in anticipation to similar legal changes in other countries given the growing global halal market.

How will the enforcement of the new law, come the year 2019, change the beauty business landscape in Indonesia? A foreseeable impact may be rather immediately felt by smaller business operators rushing to meet certification standards. Many of Indonesia’s 1.3 million small and medium sized businesses (this figure includes but also goes beyond the beauty sector) stand to be outfaced by mounting compliance costs associated with the new regulations — which will range from reprinting labels to disposing of finished goods with long shelf lives that become non-compliant when the regulation takes effect.

On the flip side, for those local beauty companies that have already gained certification, the future looks rosy. A growing number of local halal-certified brands have sprung up in recent years, many of which reflect efforts by female entrepreneurs who either saw the potential gap in the market or were themselves frustrated at the lack of options previously, so decided to create their own products. Wardah, a home grown Indonesian maker of body, skin care and make-up products, has recently been reported to hold a five percent share of the local market and to have seen growth of 50 percent in revenues ever since it received halal certification in 1999 .

From a consumer perspective, halal certification will give a new level of peace of mind to Muslim consumers who will be able to purchase and use products without any concerns over violating religious laws. While having greater access to information about ingredients is good, for the average consumer going through the full list of ingredients in a beauty product is still an effortful process, and trying to ascertain whether they’re permissible is often further complicated by the fact that many ingredients go by unrecognizable industry code names.

The landscape today presents brands in Indonesia, or considering entering the Indonesian market, with both a challenge and an opportunity. Given that the halal beauty market is at an early growth stage where demand is only just starting to heat up, and the market is still rather fragmented, companies that enter full certification sooner rather than later will inevitably enjoy the benefits of first mover status down the line.

But while some companies jump onto the certification bandwagon, others may remain hopeful that President Joko “Jokowi” Widodo will hold off on orders to enact the legislation until after the general election scheduled for April 2019. Some believe that should Jokowi win, he may even use his refreshed leverage to press the House to amend the legislation and make the standards voluntary again.
_________________________________

The writer is an assistant professor of marketing and international business at the Nanyang Business School, NTU and a fellow with the Institute on Asian Consumer Research Insight (ACI).