Consider what he’s up against: At Aeon supermarket on the outskirts of Jakarta, Unilever’s Rinso detergent was recently priced at 75,500 rupiah ($4.60) against a discounted 29,800 rupiah for local rival Wings Group’s SoKlin. The capital’s food stalls that use sweet soy sauce—a staple of dishes from chicken satay to “nasi goreng”—buy Wings’ Kecap Sedaap label that’s 3,000 rupiah cheaper than Unilever’s Bango brand. Some of the corner stores sprouting across the country say they can’t directly stock Unilever goods because the company doesn’t take small orders.

Urbanization is driving consumers in emerging markets like Indonesia from supermarkets and hypermarkets to small, neighborhood mom-and-pop shops and mini marts, and inflation has fostered penny-pinching habits. That has the maker of  Persil, Vaseline and other country-specific brands struggling to re-tailor its strategy. Caught on the wrong foot by nimble local players that have eaten into its market with freebies, slashed prices and rapid product upgrades, the London-based company last month reported a 30% plunge in 2024 net income in the country—the sixth consecutive annual decline.

Unilever’s local rivals’ “game is simple: just cut the price,” said Willy Goutama, an equity analyst at PT Maybank Sekuritas Indonesia. “They are willing to operate at a loss if that means gaining market share; Unilever, like many multinationals, tends to prioritize profitability…Most of the time, Unilever is too late to react.”

For Fernandez, 58, who’s taking over after the abrupt ouster of Hein Schumacher this week, fixing operations in Indonesia is urgent. It’s among a slew of challenges, which include spinning off the ice-cream business and cutting costs, as he’s pushed by the company’s board to transform the sprawling group faster. With annual sales of around €2 billion, Indonesia accounts for just over 3% of Unilever’s global sales. But as problems in the Southeast Asian nation are increasingly mirrored elsewhere, it has become a test case for Unilever’s developing-markets operations, which rake in around €35 billion annually, or about 58% of total revenue.

Getting strategies right in emerging markets is crucial for multinationals like Unilever, Nestle SA and Procter & Gamble Co. that rely increasingly on the rising middle classes in these countries to drive growth. But a new cohort of ambitious domestic players is threatening market shares and profit margins. Local brands have already taken a majority share of the food and beverage market in Indonesia, overtaking multinationals—a trend that’s accelerating, according to a study by Boston Consulting Group. 

Multinational companies’ strategies that worked for decades in emerging markets have slowly unraveled as hungrier homegrown  companies have gained in size and sophistication and as geopolitical and macroeconomic uncertainties have tipped the scales toward buying locally—from the Gaza-conflict-led boycott of western products to the emerging tariff wars being driven by U.S. President Donald Trump. 

“Historically, MNCs led the premium segment, supported by the perception that foreign brands were superior, aspirational, and symbolized trendiness and quality. However, in recent years, that ‘halo effect’ has waned and local brands have substantially increased their quality and competitiveness,” according to consulting company Bain & Co. 

Unilever, which was one of the first multinationals to arrive in Indonesia during the sunset years of Dutch colonial rule in the 1930s, is now floundering even as the world’s fourth-most populous nation’s economy expands at an annual clip of 5%. The company’s market share has steadily eroded: Between 2016 and 2023, it lost 3-4 percentage points in home products, 11 points in personal-care goods and 15 points in ice-cream, according to Euromonitor International. Officials at the group’s Indonesian unit didn’t respond to requests for a comment. 

Fernandez is well aware of the company’s challenges in the country. “There are some serious long-standing issues that are related with a lack of differentiation of our portfolio against a very strong local competitor that tends to operate with a significant discount on pricing,” Fernandez, then the company’s chief financial officer, said during Unilever’s capital markets day in November. “We will correct whatever we need to correct.” 

With his experience in emerging markets, Fernandez may be well placed to turn things around with more localization as opposed to the current top-down strategy, Citigroup Inc. analyst Lakshmi Rowter in Jakarta wrote in a note on Tuesday. The executive, who joined Unilever in 1988, has overseen some of the group’s best-performing markets, including Brazil and the Philippines. He was also president of the Latin America division.

But as Indonesia—the country with the world’s biggest Muslim population—heads into the Ramadan season, its “local competitors are chasing growth and giving heavy distributor promotions,” suggesting the company’s sales slump will persist, the analyst said.

Globally, retail sales for the consumer products industry—spanning food, beverages, and household and personal care products—rose 7.5% in 2024 to $7.5 trillion, with emerging markets the biggest growth engine, according to Bain. Over the period, Unilever’s underlying sales advanced 4.2%, as its operations in Indonesia, India and China struggled. 

Cost cuts and streamlining operations across the group can go so far,  but growth will eventually need to come from expanding sales, especially from less-saturated emerging markets.

Unilever sells its goods in almost all of the world’s 193 countries. The recent global wave in inflation has reined in spending, especially in richer countries, where shoppers have traded down to supermarket-owned labels. In emerging markets, local companies like Wings have turned into formidable rivals. 

Wings, founded in 1948 in Surabaya by two Indonesian entrepreneurs who made laundry soap in their backyard and peddled it on bikes door-to-door to households, corner stores and bazaar stalls, has steadily expanded over the decades. The privately held company now sells personal care and home products as well as food and beverages, targeting the mass market and often going head to head with Unilever’s higher-priced offerings.

Groups like Unilever say their ability to invest heavily in innovation and economies of scale make them more effective in the long term. But market share once lost can be hard to regain. Western companies are likely to struggle to reverse the impact of the Gaza-conflict-driven boycott calls. Anna Manz, Nestle’s chief financial officer, said in November that the world’s biggest food company had lost half a percentage point of sales growth to boycotts. Unilever wasn’t spared. 

While the boycotts will likely hit a trough as the conflict in the Middle East winds down, the “recovery for Unilever will be slow if it doesn’t address its other issues around pricing and distribution,” said Maybank’s Goutama.

Unilever’s products like Clear shampoos and Pond’s facial wash take coveted eye-level spots in more premium supermarkets in Indonesia like Farmers Market and Foodhall. But in mid-range groceries and mini marts like Indomaret and Alfamart toward which sales are increasingly gravitating, they are relegated to less-prominent spots.

Small West Java shops like the one run by Adi—who, like many Indonesians goes by just one name—dot the Southeast Asian archipelago, providing essentials to people who live and work in the neighborhood. Adi buys Unilever products from larger grocery stores and resells them. “I don’t get stocks directly from Unilever because they usually have a minimum [order],” unlike local producers, he said.

Domestic products also often go for half the price of international brands, and in a country where the minimum wage can be as little as $150 a month, every little bit counts.  For Fernandez, the danger is finding Unilever boxed into an ever-shrinking universe of customers because its goods are beyond the reach of the rest. 

“Unilever products are already so expensive and they rarely have any big discounts or free gifts,” said Ahmad, a sales clerk at Aeon supermarket.