The author, Michelle Sjamsury, is a Partner at EY Indonesia
Much has been said about the caution around Southeast Asia’s private equity (PE) market last year, but for Indonesia, 2025 was a year of relative vigour compared to previous years, with the light of optimism coming from one of its most dependable sectors in times of uncertainty: the consumer sector.
According to EY’s Southeast Asia Private Equity Pulse 2025, the PE deal value in the region declined 43% year-on-year (yoy), while deal volumes fell a more modest 12%. The moderation is mainly attributed to geopolitical volatility, specifically concerning US tariffs.
While Indonesia was also adversely affected by geopolitical dynamics, it managed to close numerous deals, with the consumer sector leading the charge.
“In 2025, Southeast Asia’s largest market was buoyed by the announcements of transactions related to a local beauty brand, a quick-service restaurant chain, a bakery and a confectionery brand.
These deals highlight investors’ sustained confidence in Indonesia’s domestic consumption themes, even amid an economic downturn. Beyond a population of around 280 million with a strong economic growth rate of 5%, Indonesia’s economy is structurally more resilient to global shocks because it is powered primarily by domestic consumption, with the country’s household consumption accounting for as much as over 54% of the national GDP.
Indonesia’s economy is structurally more resilient to global shocks as it is powered primarily by domestic consumption.
For PE investors, what makes Indonesia particularly interesting is its geographic and competitive fragmentation. The country spans more than 6,000 inhabited islands, leading to highly localised distribution networks and consumer preferences. This fragmentation has historically made scaling nationally difficult, but it also provides significant whitespace for brands to expand and consolidate.
Deeper due diligence
Interestingly, while investors continue to back Indonesia’s consumer sector, the pool of target companies to choose from is narrowing. This is not because of a drop in quality or quantity of companies, but because there has been a shift in how investors assess consumer companies.
Over the past year, we have observed that investors are applying tighter evaluation criteria and raising their expectations of target companies. This manifests in different ways across investors.
While investors continue to back Indonesia’s consumer sector, the pool of target companies to choose from is narrowing.
For some investors, an assessment of a company’s operational scalability involves looking beyond traditional markers such as supplier concentration and diversification. Geopolitical tensions can result in longer lead times, higher raw material prices, and periodic shortages, leading many companies to increase buffer stock levels. This often creates working capital pressure, so investors probe the sustainability of these practices.
There is also heightened scrutiny on operational efficiency when it comes to strategies like outlet expansion, with investors deeply examining new outlet payback, cannibalisation risk, and scalability of operations.
For investors targeting omnichannel players, the focus is on factors like distribution and last-mile delivery, as well as fulfilment costs, order density, and the system’s ability to handle higher throughput.
It is increasingly evident that, compared with earlier cycles when revenue growth often drove valuations, private equity investors today appear more focused on margin sustainability, cash flow resilience, earnings durability and capital efficiency.
PE investors today appear more focused on margin sustainability, cash flow resilience, earnings durability and capital efficiency.
Beyond assessing liquidity, investors increasingly focus on the company’s ability to generate real, distributable cash, as this determines how much value can be extracted from the business—whether through dividends, shareholder returns or supporting leverage.
Aiming for investability
Although the consumer sector continues to attract investment interest in Indonesia, there is no escaping the fact that consumer purchasing power is not as strong as it used to be.
Stagnant incomes, high food inflation, job insecurity, global economic pressures and middle-class erosion have contributed to the weaker purchasing power. These trends have made households more cautious, reducing discretionary spending and slowing consumption-led growth. This slowdown in consumer spending is consistent with global trends and is reflected in a noticeable shift in consumer purchasing behaviour.
According to EY’s State of Consumer Products Report 2025, consumers are buying less and seeking better value, marking a structural shift that suggests volume may no longer be the most meaningful growth metric going forward.
The report highlights that 83% of consumers want better quality from brands, 78% prioritize better value, and 67% expect brands to “offer something new.” At the same time, private labels are rapidly gaining ground, expanding shelf presence and improving in quality and appeal.
Businesses need to adapt to remain relevant. Those that do this well are the ones that move beyond the familiar survival strategies: expanding portfolios, stretching price points, opening new channels, or automating internal processes. Instead, they are those who are willing to adopt a more ruthless, disruptive, and innovation‑led approach.
This shift can take multiple forms, as suggested in the report. Successful companies don’t try to defend an overly broad portfolio. Instead, they expand selectively into adjacent categories where they have a distinct competitive advantage. Rather than relying on pricing and promotions to drive volume, they focus on reinventing and innovating within categories, reshaping how consumers perceive value. And instead of spreading themselves thin across every channel, they concentrate on high-growth segments where their brand can deliver outsized impact.
These realities and strategies are increasingly shaping what investors look for in target companies. Consequently, companies must adapt if they want to be considered investable.
Being investable is not merely about having a strong business; it also requires demonstrating it.
Being investable, however, is not merely about having a strong business; it also requires demonstrating it. This can only be achieved through robust and reliable financial reporting.
For mid‑sized Indonesian consumer companies, this is often a considerable challenge, as many still rely on manual or fragmented systems, creating inconsistencies in revenue, inventory, and working‑capital data. Addressing these fundamentals is essential to strengthening a company’s position ahead of any investment process.
Businesses with clean, timely, and transparent financials move through diligence faster and often secure better valuations. This is key to unlocking a strategic advantage for any consumer company seeking investment, particularly from private equity suitors.
