Posted 24.02. 2014 by Michal Wasserbauer / Last update on 13.09. 2018
Before going deeper into four costly mistakes that you should avoid when registering your cosmetic products in Indonesia, let us show you why you should even care.
The sector of cosmetic products in Indonesia is developing at a rapid pace with currently more than 33,000 items registered under Indonesia’s National Agency of Drug and Food Control (BPOM).
One of the main reasons behind the success of this sector is its growing customer base. Ten years ago, cosmetic companies sold their products in big cities across Java and Sumatra with the focus on the Indonesian upper-class.
Nowadays, Indonesia is the home of the 4th largest middle class with 19.6 million households (in 2016) that is expected to expand to 23.9 million in 2030. Thanks to a rapid pace of smartphone penetration around 4% every year, even Indonesians living in rural areas can purchase some of the cosmetic products.
International investors will also benefit from the Indonesian enthusiasm for imported cosmetic products as a majority of the population prefers commodities from abroad than the domestic ones.
Even though the Indonesian cosmetic sector is promising, entrepreneurs might be discouraged by the amount of bureaucracy involved.
The regulations issued by BPOM are quite simple, but since the beginning of Cekindo—a business consulting company in Indonesia which deals with product registration among others—we have seen so many investors struggling to meet the requirements.
That is why we decided to analyse the individual procedures and come up with the frequent mistakes investors do when registering their cosmetic products in Indonesia.
Manufacturers who incorporated a company in Indonesia can become direct distributors of their products. This is an essential requirement, and it is not even worth trying to bypass it. Unfortunately, a company set-up in Indonesia is not an easy task, and in fact, it is the reason why many producers fail their efforts to distribute their products independently and find a local distributor/agent instead.
In general, foreign nationals can start either a local or foreign-owned company. If they do not want to be dependent on an Indonesian citizen or organisation, then the foreign-owned company—called PT PMA—is the safe option.
However, PT PMA is a subject to many restrictions such as the Negative Investment List or the paid-up capital which make the process of its incorporation not only exhausting but also costly.
Cosmetics producers who do not want to use the services of local agents or distributors should get familiar with the process and requirements of business formation in Indonesia.
We have already covered this topic in our previous article on How to Register Foreign Company as PT PMA in Indonesia. You can also approach our team of consultants directly and get the answer within one working day.
Producers, who are not interested in establishing their own company in Indonesia, can register their products under a company of a local distributor or Indonesian agent.
This can get tricky since according to the Indonesian regulation you can register your product in Indonesia just under one company. It means that this company will get the right of exclusive distribution even if you do not sign an exclusive agreement.
Try to avoid signing a distribution agreement with only one distributor. You can always find a license holder service provider—Cekindo is one of them—and sign the contract with this provider.
The difference between a distributor and license holder service provider is tremendous. Instead of providing one Indonesian company with an exclusive right, you can set cooperations with as many distributors as you wish and penetrate the cosmetic market successfully.
Choosing a correct business partner is the key factor for the success of your cosmetic business in Indonesia.
As mentioned in the previous point, the distribution agreement is valid for 3 years. If you are unfortunate and sign the contract with an unreliable partner, you will not be able to terminate the cooperation before it expires.
In case you are not present in Indonesia, there is an option to hire a company to conduct market research of the Indonesian cosmetic sector. This company can also find potential local partners for you and negotiate the conditions of your future deals on your behalf.
If you do not wish to spend money on professional due diligence service, you can avoid many troubles by following this rule—never trust an inexperienced local partner.
We have seen it many times. Cheap license providers offer services of poor quality, and international investors are stuck. The only thing they can do is to wait until the 3 year-long period finishes. They do not have a right to sign another agreement or change the distributor without the approval of the current one (which they do not get).
Reputable partners might be more expensive at the beginning of your business expansion to Indonesia, but their services will save you money afterwards. Even a simple thing such as checking a company’s achievements and awards will tell you more.
Once your company is registered at BPOM, you can start the process of product registering in the following steps:
In general, this procedure takes much longer time than expected. To avoid this situation, you should have the complete and appropriate supporting documents. You can seek a professional to help you prepare and review your document.
Even though experienced agents know how to speed up the whole process, do not suppose that you can get your cosmetic products registered sooner than in 2 months and plan your revenues accordingly.
During the process of product registration and import, you have to be aware of the following:
Complying with cosmetic regulations for successful importing does not have to be difficult. Cekindo is ready to help your company and get your products into the hands of consumers soon. From market research to distributor selection, licensing, cosmetic registration or company registration, Cekindo is able to assist your company efficiently.
Contact us to get the detailed information based on your cosmetic products and a customised quotation based on your needs.