Navigating Local Brand Winter: Strategies for Survival Amid Rising Costs and Competition

The local brand industry in Indonesia is currently facing a critical juncture, aptly termed a “Local Brand Winter” by Hypefast, mirroring the challenges of the notorious “Tech Winter” in the global tech sector. This stark reality signals not just a slowdown in industry growth and waning investor enthusiasm, but also the heartbreaking closure of cherished homegrown brands that once thrived.

By the end of 2024, several popular consumer brands have announced their closure for various reasons; and more yet have closed their doors within the first half of 2025. While this seemingly sudden occurrence may come as a surprise to many, especially to everyday consumers, those who have been observant towards the changing dynamic of Indonesian local brand scene have long forecasted this trend.

As the leading House of Next Generation Brands, Hypefast has observed a significant rise in local brands reaching out over the past ten months to seek potential funding. Many of these brands expressed various struggles, chief among which is the shortage of capital needed to sustain their operations amid growing competition and escalating costs.

While the threat of Local Brand Winter does not discriminate, impacting local brands across various categories and industries, Hypefast has observed that this trend is particularly noticeable in the beauty sector. Here, intense competition from the influx of Chinese beauty brands has emerged as a significant disruptor.

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The Shift: From Momentum to Survival

Before 2024, particularly between 2021 and 2023, the local brand scene in Indonesia was full of promise. This is most evident within the beauty sector, where several promising beauty brands secured high-profile investments and experienced significant growth, leveraging on e-commerce platforms like Shopee and Tokopedia to kickstart their business, making their products easily accessible, enabling these brands to cast a wide net within the market.

Local brands were mostly expected to provide a value proposition that are alluring in comparison to well-established brands that have long been available to the masses, where price brackets, unique selling points and product offerings are fairly well established. However, the arrival of new competitions, primarily beauty brands from China, rapidly changed the competition landscape and the industry by surprise.

The entry was evidently done with remarkable preparation and expertise; brands come equipped with innovative products which offer not only unique, but also relatable and desirable, value propositions. Coupled with larger capital that allowed them to implement aggressive marketing strategies, they were able to quickly capture the market. Based on Hypefasts's internal data, these foreign brands are able to allocate 30–40% of their revenue solely to marketing, three to four times higher than the 10% marketing budget local brands can typically afford while maintaining profitability.

The brands have also demonstrated strong familiarity with the Indonesian market; where most if not all brands were able to emulate the approach and the look and feel that is typically known as a signature among Indonesian local brands. This strategy is proven to be effective, as Hypefast's survey discovered that 60% of our respondents mistakenly identify a foreign brand as an Indonesian brand.

This fierce competition puts local brands in a difficult position; local brands are faced with the daunting challenge of differentiating themselves from both established national players and emerging global competitors. The landscape is saturated with options, making it increasingly difficult for these local businesses to capture the attention of potential customers who are often drawn to the allure of larger, more recognizable brands.

In addition to the challenge of attracting and retaining customers, Hypefast advises local brands to put more focus on strengthening their fundamentals, especially in respect to their finances.

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Strategic Recommendations: How Local Brands Can Stay Resilient

In light of these challenges, Hypefast offers several actionable strategies for local brands to strengthen their foundations and weather this tough cycle.

Prioritize Cash Flow Over Profit on Paper

One of the most common misconceptions among founders, particularly those in the early stages of building their businesses, is the tendency to equate profit with overall financial health. While it is certainly encouraging to see positive profit margins reflected in financial statements, it is crucial to understand that a business can appear profitable on paper yet still encounter significant cash shortages that threaten its operations. This disconnect arises because profit is an accounting measure that reflects income earned minus expenses incurred, whereas cash flow represents the actual liquidity available to a business at any given moment. Cash flow is what keeps the business running day to day, enabling it to pay employees, settle bills, invest in growth opportunities, and manage unforeseen expenses.

For local brand founders, this distinction is vital. They must meticulously manage various aspects of their business, including expenses, inventory levels, and operational efficiencies, in order to maintain a healthy cash position. This involves not only tracking incoming revenue but also being acutely aware of outgoing cash flows.

If founders feel that their knowledge in this area is insufficient, seeking guidance from experienced financial professionals can be invaluable. These experts can offer insights into best practices for cash flow management, assist in creating detailed cash flow projections, and help identify potential areas for improvement within the business's financial operations.

Don’t Chase Growth at the Expense of Sustainability

One can argue that one of the more prominent legacies of the startup boom, especially in the tech sector, is normalizing pursuit of growth, often at all costs, as a primary indicator of success. However, recently it has been made painfully clear to a lot of us that growth should not come at the expense of sustainability.

While it is understandable that many entrepreneurs and business leaders are eager to scale their operations quickly, one must exercise caution. Rapid growth can lead to a range of issues if it is not managed properly. One of the most significant pitfalls is the tendency to burn cash recklessly in the pursuit of market share. This approach can create a façade of success that ultimately collapses when the financial realities become too challenging to ignore. It is essential to understand that sustainable growth means building a business that is both profitable and cash flow-positive.

Remember this: Fast growth, if not accompanied by stable cash flow, can lead to a precarious situation where a company may find itself unable to cover its short-term obligations, leading to potential insolvency.

In conclusion, while the allure of rapid growth can be tempting, it is vital for businesses to prioritize sustainability in their growth strategies. By ensuring that growth is accompanied by profitability and positive cash flow, companies can build a solid foundation that allows them to thrive in both good times and bad, ultimately leading to enduring success and stability in an ever-changing market landscape.

Secure Funding When It’s Available

Hypefast advises brand founders to be pragmatic about fundraising. Waiting for the perfect valuation can be risky when market conditions are volatile. If funding opportunities arise, even at less-than-ideal terms, it’s often smarter to take the capital and use it to sustain operations and fund strategic growth.

We acknowledge that there are a myriad of other actions and strategies that may be required in order for local brands to not just survive, but thrive. However, it would be prudent to first focus on the aforementioned points and ensuring strong resilience before looking too far ahead, while maintaining a curious attitude over various shifts in consumer preferences, behaviour and needs in order for local brand founders to be able to capture growth opportunities once the business fundamentals are strong enough.

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Looking Ahead: From Survival to Self-Sufficiency

It must be recognized that with all the recent changes, both anticipated and unforeseen, in the local brand landscape, it is clear that we have entered a new era where local brands must genuinely excel to endure and prosper. With the unavoidable increase in competition on an unprecedented scale from both global and other local brands, we are optimistic that this will create an environment where future generations of local brands will be significantly stronger, more competitive, and imparts even more value to its customers than its predecessors.

In the meantime, the ultimate goal for local brands in this climate is to become self-sufficient. That means building businesses that are not just profitable, but resilient; ideally with enough cash flow to support themselves without overreliance on investors or loans.

At Hypefast, we continue to champion the resilience, creativity, and potential of Indonesian local brands. While Local Brand Winter may present challenges, we believe that with the right strategy, bold leadership, and community support, the next wave of thriving local champions is just around the corner.