Middle-Class Belt-Tightening: When Does Downtrading Benefit Brands?

When budgets tighten, consumers have several ways to adjust their spending. They can reduce the quantity or frequency of purchases, stop buying certain categories altogether, or continue to meet their needs by choosing cheaper products. Downtrading refers specifically to the last option: switching to lower-priced alternatives.

A statement by Roy Nicholas Mandey, initiator of AGRA and member of the Advisory Board of APRINDO, quoted by Katadata, illustrates the change in household shopping patterns. According to him, a family that could shop with four trolleys ten years ago now arrives with a single basket. A spend that once reached Rp1.8 million per visit is now considered good if it falls in the range of Rp400,000 to Rp500,000. The basket’s contents are also focused on rice, sugar, cooking oil, and instant noodles. Snacks and chocolate for children are bought only if there is money left over.

This comparison comes from a single industry player and uses nominal amounts that are not adjusted for inflation. His testimony is therefore better read as an illustration of changing shopping patterns, not as a measure of conditions across the entire market. Even so, it offers one important clue: when budgets are limited, some products are no longer a top priority.

Data from Mandiri Institute give a different picture. In 2025, middle-class food consumption grew by 0.9%, while non-food consumption grew by 6.4%. Mobile phone purchases even rose by 31.2%, according to a report quoted by Bisnis.com.

This difference in growth shows that consumption does not move uniformly across categories. However, these aggregate data do not explain how each household allocates its budget, nor whether the increase in mobile phone purchases comes from the same consumers who are cutting back on food spending.

For brands, the implication is clear: a decline in sales does not automatically mean that consumers have moved to competitors. Before concluding that brand switching has occurred, brands need to know whether customers are still buying the same product in smaller quantities, reducing their spending in the category, or genuinely choosing another alternative.

Switching to a cheaper product is not necessarily just a temporary compromise. If the substitute still meets consumers’ needs, the price gap may leave the old brand with no reason to be chosen again.

KIMCI offers clues about what consumers consider when shopping. As many as 32% of respondents prioritize quality or durability, while 27.6% choose real benefits for themselves or their families. Only 7.8% prioritize rewards, points, or bonuses, according to Databoks.

These figures measure purchase considerations, not reasons for switching brands. Even so, the results show that price is not the only relevant consideration. A cheaper product still needs to deliver quality and benefits that feel commensurate with the money spent.

This is where downtrading can open opportunities for brands that offer more affordable alternatives. Consumers who previously bought more expensive products may be willing to try a new option if they feel the same need can be met at lower cost. The challenge is to make the experience satisfying enough that purchasing does not stop after the first trial.

NielsenIQ (NIQ) data show that Indonesian consumers were already reporting this behavior before 2026. In the report Indonesia Mid-Year Consumer Outlook: Guide to 2025, 38% of consumers said they had switched to cheaper products and 36% bought more discounted items to save on daily necessities. The same report noted that the combined share of the top five brands in the cooking oil category fell from 50% in 2022 to 42% in 2024.

The decline in the top five brands’ share indicates a shift in brand positions within the category. However, these data do not explain the cause of the change or prove that consumers switched because of financial pressure. The NIQ survey also covers consumers in general, not the middle class specifically, and does not show whether consumers who switched subsequently stayed with the new brand.

Thus, the available data support the existence of thrifty behavior and indications of shifting brand positions, but are not sufficient to establish a direct relationship between middle-class financial pressure and switching to specific brands.

The next question is whether consumers will return to their previous brands when shopping conditions change. The public sources reviewed for this article do not provide longitudinal data that directly answers this for Indonesian consumers. Two studies from abroad can help explain why brand switching can lead to two different outcomes.

A study by Julia Levine and Stephan Seiler, released through INFORMS in 2023, examined bottled water purchase data around 14 hurricanes over 12 years. Ahead of a storm, demand rises and stocks may run out, so consumers buy brands they have never tried. After the storm passes, consumers return to their previous choices. The research release also noted that temporary price promotions do not necessarily make consumers stay.

In this situation, brand switching occurs when consumers’ choices are limited. Once that barrier disappears, they return to their earlier habits. Trying a new product, therefore, does not always mean a change in preference.

A different picture emerges from a McKinsey survey of 2,672 US consumers in August 2009, when the country was in a recession. On average, 18% of consumers in a packaged-goods category had bought a cheaper brand in the previous two years. Among them, 46% rated the product as better than they had expected, while 34% no longer preferred higher-priced products. Another 41% still liked the premium brand but felt its price was not worth it. The proportion of switchers also differed across categories. In the beer category, for example, only 12% of consumers switched to a cheaper brand.

The McKinsey findings point to another possibility: consumers may discover that the cheaper product meets their expectations after all, or that the price gap with the premium product is no longer commensurate with the benefits they perceive.

Both studies come from contexts different from the Indonesian market in 2026. The INFORMS study addresses supply disruptions caused by disasters, while McKinsey examined US consumer behavior during a recession. Neither can be used to directly predict how many Indonesian consumers will return to their old brands.

Nevertheless, they help clarify two possibilities that brands need to watch. Switching can be temporary when consumers are merely adapting to limited choices. Conversely, switching can last when the substitute product is judged good enough and the old brand’s price is no longer seen as worthwhile.

Longer-lasting cost-of-living pressure gives consumers more opportunities to try alternatives. Even so, the duration of the pressure does not automatically make a change in choices permanent. Consumers’ experience of using the substitute product, and their assessment of its benefits and price, still need to be taken into account.

The pressure on consumption is occurring amid changing economic conditions for the middle class. Indonesia’s retail sales index grew by 13.3% in 2015, slowed to 3.0% in 2025, and was recorded as growing by 0.5% in H1 2026, according to Krungsri Research. The institution also noted that the middle-income group’s share of domestic consumption fell from 45.4% in 2019 to 38.3% in 2024.

Meanwhile, Mandiri Institute estimates that 1.2 million people left the middle class during 2025. Bisnis.com links this change to some of the population moving into the aspiring middle class or vulnerable groups, without implying that they fell into poverty. The figures from Mandiri Institute and Krungsri use different definitions of economic groups, so they cannot be compared directly. These data provide context on changes in economic position and consumption, not evidence of brand switching.

In this situation, downtrading can be an opportunity for brands that offer more affordable prices. However, rising sales do not necessarily mean that a brand has gained loyal customers, let alone greater profits.

At least four situations need to be distinguished:

The difference between acquiring buyers and retaining customers becomes visible when promotions end. A sales increase during a discount period does not prove that consumers chose the product for its quality or benefits. They may simply have taken advantage of the lower price.

The same applies to loyalty programs. KIMCI data show that respondents prioritize product quality, durability, and benefits more than rewards, points, or bonuses. This finding does not prove that loyalty programs are effective only for first purchases. However, it is a reminder that incentives are not the only consideration for consumers, so the effectiveness of such programs on repeat purchases needs to be examined through transaction data.

For brands offering more affordable products, downtrading is potentially beneficial when the product meets consumers’ needs, buyers return without having to be continually prompted by discounts, and margins remain adequate. Conversely, if sales rise only during promotions, a brand may gain additional volume without building a lasting customer base.

The available public data do not show how many brands in Indonesia meet these conditions. To find out, purchase panel data by brand and category are needed, which can show who is switching, whether they buy again, and how price changes affect volume and margin.

Two brands can experience a sales decline of the same magnitude yet face different problems. The first brand’s customers may still be buying its product, only less often or in smaller quantities. The second brand’s customers may have found a substitute product that they feel adequately meets their needs.

The first brand needs to understand when purchase frequency or quantity can recover. The second brand needs to understand what led customers to choose another alternative, and whether that reason still applies when their financial conditions change.

Financial pressure provides context for why consumers need to rearrange their spending. However, to understand its impact on a brand, sales figures alone are not enough. Brands need to know whether their consumers are reducing purchases, leaving the category, or starting to choose other products.

Downtrading becomes an opportunity for a brand not merely when consumers buy cheaper products, but when the more affordable option can retain buyers without sacrificing business viability. Without data on switching and repeat purchases, a rise in sales is not enough to conclude that a brand has won new customers, and a fall in sales is not enough to confirm that it has lost them.

References

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