Is a Halal Brand in Indonesia Inducing the Value Creation or Destruction?

IS A HALAL BRAND IN INDONESIA INDUCING THE VALUE CREATION OR DESTRUCTION?

ABSTRACT

 

The current development and socialisation of halal lifestyle in Indonesia influence the society’s perspective in consumption decision. This research aims to bring a full, in-depth effect and answer the research gap. The essential data will be a qualitative method by combining questionnaire and in-depth interview followed by supporting information in the form of interviewing several business figures about their halal branded products as well as Ulama. Based our findings, 250 Muslim students responding toward halal brand Indonesia dispensed 57 percent of positive responses to halal branding by rewarding notice to the halal label on their necessary necessity supplies. We found that Indonesian reaction towards a halal brand is varied; negative-non-implementing type, negative – half implementing type, positive-non-implementing type,  positive-implementing type whereas the implementation of halal branding is rejection, acception and promotion. Besides, the market force depends on their knowledge towards a halal problem, sharia law understanding, and their market understanding.

Keywords: Halal, Halal Brand, Indonesia

 

1. INTRODUCTION

The Halal foods played a vital role in bringing the concept of Sharia law into Western culture (Russo, 2013).Islamic Sharia law is the legal system which governs every aspect of human life (BBC UK, 2009). Sharia law is based on Quran, teachings of Prophet Muhammed (Hadith) and Fatwa (Interpretation of scholars). Sharia is an Arabic word which means ‘the way’. Majority of people consider Sharia as a religious law only; other than those religious teachings, the Sharia Principles also covers the family law, finance, and business (Mullin, 2017). ‘Halal is a term designating any object or an action which is permissible to use or engage in, according to Islamic law’(Alserhan, 2015). Halal is an Arabic word signifying lawful or permitted.. Haram is opposite to Halal; which means unlawful or prohibited (Elasrag, 2016). Commonly, the term halal is used associated with food; but the concept of halal applies to all aspects of life (Tresna, 2016). Halal industry is rapidly growing in the Muslim countries as well as in the non-Muslim countries.

Every year, there are approximately 2500 new products penetrate the market, and most of them are not manufactured by Islamic-centric or Muslim-owned company (Guild, 2016). In Indonesia, companies dominating daily consumer goods are foreign-based, such as Unilever and Johnson & Johnson. In 2012, government reported that imported personal care and cosmetics are the biggest among other imported personal product (U.S. Department of Commerce, 2016). Therefore, Muslim scholars and ulama are providing the halal certificate to protect Muslim consumers in Indonesia market. Before, society’s consent of halal applied limitedly on food. Chairman of Halal Lifestyle Center, Sapta Nirwandar at Artpreneur Ciputra on the sidelines of Indonesia International Halal Lifestyle Expo and Conference 2016, Friday (7/10) said that “There are 10 Sectors that are part of halal lifestyle. Among them are food, tourism, fashion, cosmetics, education, finance, pharmacy, media and recreation, health care, fitness, arts and culture.” In short, halal and haram are universal terms that apply to all facets of life (Ahmad, 2014). Halal brand to be discussed in this paper refers to halal logo.

The demand Halal industries increases with the increasing population of Muslims and also with wider acceptance of Islamic principles around the globe (Swidi et.al, 2010). According to Malaysia International Islamic Financial Centre, the global halal economy has four major sectors: Food, Travel, Lifestyle and Finance (Rahim & Shafii, 2017). Malaysia, world’s leading halal hub, exhibit tremendous growth in both; Islamic finance and Halal industries. Malaysia is considered as top ranked in Halal economy components such as Islamic finance, Halal food, Halal tourism and Halal cosmetics and pharmaceuticals (The Halal Economy, 2014).

Indonesia is a country with the biggest Islamic population number worldwide. In the society, Indonesian muslim and non-muslim lives together in daily life and buy the same range of consumer goods available in the market. As the largest Muslim population in the world, is a potential market for Halal industry. Depend the regulations of the Indonesian government, the products should be certified halal in order to sell in the country. Indonesia Ulama Council (MUI) is responsible for issuing halal certificates (Global Islamic Economy Gateway, 2017). Halal certification was introduced in US in 1960’s with an aim to make sure that product was developed after following all the religious obligations or Sharia law. This certification can bring confidence among the Muslim customers that the product is halal. Even though, halal certification is not standardized, the requirement for such certification has recognized universally. Apart from religious perspective, the halal certification guarantees the quality and standard of food, cosmetics, pharmaceutical and other products. In other words, certification is the ‘seal of quality’, which builds the confidence and demand of halal products among non-Muslims also (Komitopoulou, 2014).

Malaysian government started to regulate Halal by law in the early 1960s (Islamic Tourism Centre, 2017). Malaysian government enacted Trade Descriptions Act (TDA) 2011 for the protection of consumers from fraudulent labelling of products as halal (Halim et.al, 2014). Malaysia developed a center for the certification of halal products. Department of Islamic Development Malaysia (JAKIM) is the sole body authorized to issue halal certification which authorize companies to use halal logo on the products. The introduction of the certification was the milestone in the development of halal industry. In order to make the country a global halal hub by 2020, the Malaysian government has undertaken many initiatives (Dar et.al, 2013). Malaysia is attempting to achieve high-income status by 2020 and move farther up the value-added production chain by attracting investments in Islamic finance, high technology industries, biotechnology, and services (Global Islamic Economy Gateway, 2017).

Australia had 22 Islamic groups established by the Australian government to issue halal certificates for exports (Murphy, 2016), Japan halal certification established in 1986 and administered by the Japan Muslim Association (Adidaya, 2016 p. 13), and United Kingdom also in 2014, with over 3,000 halal food service holes, 4,000 halal-certified eateries, and a variety of halal accommodation services, according to a recent Salaam Gateway report (Yasir, 2016).

It is easier to distinguish halal food such as meat and poultry in the market because Al-Qur’an stated clearly about which are the permitted, edible meats. Halal is a term designating any object or an action which is permissible to use or engage in, according to Islamic law’. (Alserhaan, 2018 p.16) Halal is an Arabic word meaning lawful or permitted. Haram is opposite to Halal; which means unlawful or prohibited (Elasrag, 2016) Commonly, the term halal is used associated with food; but the concept of halal applies to all aspects of life (Tresna, et al., 2016).

According to this theory, Indonesians’ local genius (2015) is threatened to be deprived of its roots, and the behavior of the younger generation will change drastically towards a hedonic life. Yet if viewed from the historical aspect, Indonesia is a religious country. This is evidenced by the majority of its people are Muslims. Islam is a religion that advocates its followers to behave that prioritizes both character and ethics both individually and socially. The phenomenon of modernization can affect the religiousness of society includes the first, secularization in the life of religion, namely the attempt to separate between the worldly authority and the ukhrawi authority. Second, the religious understanding of urban society is shifting. For rural people, religion is understood as a source of morals, ethics, and living norms, but in urban society the motive becomes technologyzation-industrialization. Thirdly, religion is regarded as an instrument of life and a tool of legitimacy.

This paper proposed halal brand a source of tool of legitimacy in the society, and examining the reaction towards the brand in collegers. Based on the socio-cultural argument of the religious Indonesian society, should the people, especially the Jakarta area prioritize the quality of Halal products (in accordance with Islamic sharia) and maintain a lifestyle that is in accordance with the character of the nation’s personality. Halal label is a fundamental value for Muslims, because it involves the value of the sanctity of religion. Based on the reality of modern lifestyle in Jakarta above, this research is interested in raising the theme of awareness of Muslim students in choosing a Halal lifestyle. This theme is aimed at measuring how much Muslim students in Jakarta care about Halal products. The research also wants to see the factors that influence them deciding on lifestyle choices that are Islamic.

Question arose whether Muslim in Indonesia also aware of the lawful status of other’s consumer goods. In this paper, we choose collegers in Jakarta as our respondents. This research is conducted in Jakarta. It has approximately 33 universities providing Islamic-oriented major. Another reason we choose the capital city Jakarta is because its diversity and external influence it exposed to in everyday life. In social theory, the social trend of metropolitan cities is heavily influenced by contemporary, sophisticated and westernized cultures. There is a paradigm developed that the advanced life is a life that always follow the pattern of the international world. This causes the basic features of urban society to tend to be materialistic, individualistic, rationalistic, and formalistic so that these attitudes also influence the way of life of the urban people. If the trends above tend to grow, it is not impossible that Indonesia will lose its identity as an Eastern country, which upholds the value ​​of wisdom, moral, and ethics (BAN-PT, 2017).

Wilson and Liu (2010) find that halal plays some roles in muslim life-part of a belief, essential daily living, ethical system, and emotional peace. Thus building a trustworthy halal brand enable business to appeal emotionally to the consumers. instilling trust in the halal brand can enhance the demand in halal market because consumer would then have confidence in a brand when they recognized it as admirable and pleasant. Further, brand trust is a significant competitive advantage which has a great impact on the behavioral intention of costumers and companies competitiveness (Borzooei, M and Asgari M, 2013). The behavior of muslim shoppers, their brand and product attitudes and allegiances, as well as their information seeking tendencies, have all been studied and found to be determined to few axtent by their religiosity (White, T and Samuel A, 2015).

Toward the Halal Consumers, consumers are faced with competing systems that may each have different interpretation of what constitute authentic halal product. A single certification system in contrast, improves producers and sellers confident to take part improve the communication of the underlying ethos of the intiative. A single definiton of the requirements of halal producers would also be a clear benefit to Muslim consumer’s decision making. It was according White and Samuel A (2015). While Mutsikiwa  and Basera   (2012) find that that although socio-cultural variables play a significant role on individual’s perception and consumption of halal food product but those are not the key determinant influencing the individual consumer. Other previous study demonstrade that variable like having religius study and year of respondents study have strong relationship with consumers usage and intention to use halal personal care in Malaysia (Teng PK and Jusoh WJ, 2013).

2. RESEARCH METHODS

 

2.1 Data

 

First session data were assembled from 250 collegers in Jakarta randomly by using questioner. They are from several university in Jakarta likely Universitas Indonesia, Universitas Negeri Jakarta, UIN Syarif Hidayatullah, Universitas Buya Hamka, Universitas Trisakti, Universitas Yarsi, included students from Bachelor and Magister Degree. In the second session we performed a Focus Group Discussion to get an in-depth view about halal brand reaction in college students. This reserch also identified the Ethical consumerism. Ethical consumerism means buying products which were ethically produced and/or which are not harmful to the environment and society. Apart from the religious principles, Halal also put forward certain values such as social responsibility, stewardship of the earth, economic and social justice, animal welfare and ethical investment (Ellasrag, 2016). The halal industry shares common values with other growth trends such as organic food, non-cruelty to animals and sustainable development (WIEF, 2016) . As we know Indonesia include many Ethnicity. Collegers in Jakarta had halal brand perceived influencing by the ethnic background.

Based on the explanation above, this research use triangulation method. Triangulation is a data collection method which uses more than one tools to the same subjected samples. This method is the most suitable for this research. The purpose of triangulation is to increase one’s understanding of the matter. This research conducted three data collection method:

1. Questionnaire. We spread a set of online questionnaire to get 250 responds from college students who attend several universities in Jakarta to get a general picture of halal label acceptance.
2. Interview. Researchers interviewed several respondents in order to gain a deeper understanding of their personal opinion behind their reaction towards halal brand. Based on the interview, we classify Jakarta college students reaction to halal brand into four categories.
3. Forum Grup Discussion (FGD). Forum grup discussion is a data gathering method by forming a discussion session consisting several respondents to gain comprehensive view regarding the studied phenomena. FGD is a continuation from the previous two methods. We invited several people we interviewed before to the discussion session.

Figure 1: Data Collection Method

3.2 Research Approach

After conducting all of the three methods, researchers interpret the obtained data using descriptive approach. This research is a field-research with case-study descriptive appraoch. Descriptive is an analysis process of deciphering huge amount of raw data, in which are regarded valubale for potentially able to give informations to answer the problem statement. Descriptive analysis aims to describe consistent patterns found among data and elaborate those findings so the result can be further interpreted and analyzed with convenient.

 

3. RESULTS

 

3.1   Socio-demographic Profile

 

The table will show the respondent’s socio demographic profile.  Majority of respondents are female 149 (59,9 %)  as compare to male 101 or (40.1 %). Most of them are bachelor students, there are  147 bachelor students and 103 magister students. Only 76 study in Islamic university include Islamic University of Syarif Hidayatullah Jakarta and University of Muhammadiyah. While the other Public University are University of Indonesia, Trisakti University and Mercubuana. Here the specific profile of our respondent:

Table 1: Respondents Profile

Characteristic	Persentage	Characteristic	Persentage
Gender		Age
Male	40.1	< 20	10.8
Female	59.9	20-30	78
		>30	11.1
Level of Study		Study at Islamic University
Undergradute	58,3	yes	30.2
Postgraduate	41.7	no	69.8

 

3.2  Ethnicity to halal percieved

 

Ethnicity	Respondent	Positive Halal Perceived Persentages from ethnicity responden
Jawa	40.9	80.0
Betawi	19.0	69.0
Minang &Aceh	15.3	93.0
Sunda	20.1	60.0
Bugis	3.7	70.0

 

 

3.3 Tipe of Repercussions

 

We divided our respondent’s reactions into two categories that are found in both questionnaire and interview. The first category is their reaction towards the halal label. Respondents who classified as positive are those who satisfy with the halal brand in the market. The negative ones are those who doesn’t find the halal brand necessary. Here are the description of each category.

1. Negative- Non-implementing Type.

These respondents do not find halal is an urgent, they viewed that in Muslim-majority country, everything is perceived as halal or permissible on a trust basis. Most of the time in buying and selling activity, Muslim customer faces Muslim sellers, and the default perception of the consumer is they are dealing with halal goods in the transaction. Another default perception is Muslims should, or must be, selling halal or lawful products to provide their own necessities and other people.  However, not all sellers are aware of the legitimate status of their goods. This faction appears to be insensitive towards the halal status they consume in daily basis. People fall to this group stated that it is too difficult to identify the halal status of a thing or a food, for something claimed as halal needs to fulfil many conditions (syarat). These people understand those conditions, such as the product’s substance, production process, packaging process, until the trading process with buyers and end user. A statement from our respondent who categorized into this faction are more or less sounds like the following statement: “If it is a food product, I check the ingredient. If there is no pork, lard, or pig-related, I usually will eat it after saying basmallah.” Beside food products, respondents categorized in this faction stated that fashion, personal care, and tourism industry does not have to, or required to, put a halal logo in their product. In conclusion, what is seen as a halal goods depend on the consumer’s belief about the particular goods, food, or services. There is an idea proposed from these respondents. After a short interview, they stated that in Muslim-majority country, a haram brand or labelling is more needed. Derived from their initial assumption about Muslim sellers are tied with halal products, they assumed that there are only a handful of haram goods in the market. Putting on halal brand on halal goods, in short conclusion, viewed as having a marketing or economic intentions in the producers’, because halal certification process includes several fees to be paid.

Mr. Sholahuddin, Vice of General Secretary of MUI  in our interview stated his opinion about the reaction from Negative-Non Implementing type. This type stated that halal branding is no more than a matter of marketing tool. “Those who perceived halal brand as solely a marketing tool has not seen the whole perspective. Like any business, a halal brand and halal branding is needed because the society asks for it. Muslim markets, Indonesia and worldwide, demand a more compatible products in the market to be consumed daily because it is ordered in Islam- to consume the halal.” Therefore, a halal brand is not only for the marketing tool, it is also function as a notification for the buyers to help them find things they need.

2. Negative – Half Implementing type.

Respondents in this group have a similar view towards the halal brand’s necessity as the first type. They found halal brand is not needed. The difference is, although they don’t find halal brand is necessary in all foods and products in the market, they will have more consideration to buy products which has halal logo on it. These customers are categorized as the supply-driven market because their need are potentially created by the producers.

3. Positive- Non-implementing Type.

These respondents gives a positive reaction towards halal brand in the market. On the other hand, they stated that the implementation are not urgent to be applied in all sectors of traded goods. Respondents fell on this category saw that halal certification has certain procedures that not all producers can keep up. For example, SMEs can find difficulties in completing their halal applications due to lack of technical knowledge and manpower, or . Therefore, they saw some halal goods might do not have any halal label on it due to other many factors but non-halal product itself.

4. Positive- Implementing Type.

Respondents fall into this faction has a distinct demography. Most of them are students in Islamic Economics major, or halal-enthusiast activist with a lot of knowledge and concern towards halal branding. It could be said that people in this faction is the most careful buyer in their shopping preference. They argued that there is a need for public education about halal products, and industries need to put a halal label on various products, such as: 1) food and beverages, including the restaurants and diners 2) leather-made garments, shoes, bags, and accessories, 3) personal care and cosmetics products. These respondents emphasized that halal consumption is as important as praying because consuming non-halal products can void all the prayers Muslims do, and can erase the Muslims faith bit by bit.

 

4. DISCUSSION

Halal certification was introduced in US in 1960’s with an aim to make sure that product was developed after following all the religious obligations or Sharia law. This certification can bring confidence among the Muslim customers that the product is halal. Even though, halal certification is not standardized, the requirement for such certification has recognized universally. Apart from religious perspective, the halal certification guarantees the quality and standard of food, cosmetics, pharmaceutical and other products. In other words, certification is the ‘seal of quality’, which builds the confidence and demand of halal products among non-Muslims also (Komitopoulou, 2014).

This research aims to get a full, in-depth understanding of halal brand reaction in collegers who is studying in Jakarta. As the center of commercial activity in Indonesia, Jakarta has more varied goods and services in the market. It is interesting to examine the decision-making process in Muslims college students among this flood of choices in Jakarta. There are three categories with respects to the perception towards halal brand implementation. This category their intention in halal brand application in the market and future possibility of halal label in extended market, such as tourism and fitness business.

• Rejecting.

Rejecting respondents are those who does not find the halal label is necessary today and in the future. They do not foresee the urgency to distinguish the halal and the haram goods in the market by the halal label. They understand the long process behind the halal certification process and still rely on trust and belief about the lawfulness of their purchased products.

• Accepting.

These respondents are accepting the halal labelled products in the market, but they do not vocal about whether they want an extended halal products range, such as a halal shampoo or halal cosmetic brush. In this category, they do not see the urge of all-halal label in all variation of products in the market. Most of them has their own criteria of what is halal, such as looking for certain ingredient, or rely on any other production label such as choosing a No Animal Testing brand, vegan brand, or kosher brand. If there is any expansion of halal brand in the market, it is possible for them to choose a halal brand products, but not will absolutely choose them over another options.

• Promoting.

These respondents are showing their supports towards the halal branding and halal products in the market besides the food and beverages. For them, a halal brand is the safest and the best possible choice for Muslim consumers. They see halal consumptions lifestyle is a part of their worship to Allah.

Figure 2: halal consumers reaction percentages

 

From this percentages indicate that the consumerism behaviour of halal brand consists three types; rejection, acception and promotion. It is due to the fact that the perception of halal in Indonesia is not entirely same.  According Islamic / Sharia law, on which the halal economy is based, aims at the welfare of humans, animals, and the environment.In the Quran and Hadith, the humans are entitled to use the environmental resources in a responsible manner; i.e., not only as a matter of safeguarding for the future generation but also as a matter of faith (Yousri, 2015). The Halal economy handle the resources as stipulated in Sharia law, which cover both scopes of production and consumption; the prohibition of wasteful behaviour, the instruction to care for other beings in ourecosystem, the emphasis on quality of deliverables and the outcome of both material and spiritual quests (Hisyam, 2017).

The Halal food shares common values with other growth trends such as organic food, non-cruelty to animals and sustainable development (WIEF Foundation, 2016). The ecoethical values contained in the terms ‘halal and tayyib’ are likely to play an increasingly relevant role as the halal sectors develop and to become clear value-added components for manufacturers and marketers in the near future. Tayyib, meaning to be wholesome and pure, is deeply rooted in Islamic philosophy and principles (World Bulletin, 2017). Sustainability is inherently part of the ‘halal and tayyib’ concept and the growing attention to sustainability is having an effect on every halal industry (ITC, 2015). While being halal makes sure that things are manufactured or slaughtered in a permissible way, tayyib sees that what we consume is backed up by an ethical supply chain. It’s important to note that Halal and tayyib apply to all aspects of life from finance to travel and even fashion (World Bulletin, 2017).

 

 

5. CONCLUSIONS

Indonesia, the largest Muslim population in the world, is a potential market for Halal industry. As per the regulations of the Indonesian government, the products should be certified halal in order to sell in the country. Initially, Indonesia Ulama Council (MUI) is responsible for issuing halal certificates (Global Islamic Economy Gateway, 2017). In accordance with the Law No 33 of 2014 on halal product guarantee, Halal Certification Agency was established for halal certification (Dar et al, 2013). However, Malaysia is considered as the leader of Halal industry and has the most developed Islamic Economy. Malaysian government started to regulate Halal by law in the early 1960s which led the country into consistent economic development and growth rate as well as political and social stability (Global Islamic Economy Gateway, 2017). In 1974, the Research Centre for the Islamic Affairs Division in the Prime Minister’s Office started issuing halal certification letters for products that met the sharia principles and it laid down foundation for the success of halal industry. Malaysia introduced first documented and systematic halal assurance system in 2000 (Islamic Tourism Center, 2017).

Regardless of religious backgrounds, the world has witnessed the potential growth of the halal economy. The concept of halal has extended beyond the food sector to various other sectors and also from Muslim to non-Muslims. The halal economy has become an alternative choice for the modern competitive world. The increase in awareness and quality of the products is the main reason behind the development of the halal industry. Lack of globalized certification for products affect the standard, that may affect the confidence of the customers. Moreover, the greed of the corporate world has started affecting the halal economy. Many of the global players have started focusing on halal products aiming at the profits from the growing market. With an effective globalized certification or quality assurance process, such companies can be controlled and the quality can be maintained.

The Halal food market is growing all over the world because of increase in population as well as the quality of products in the Halal market (IHAF, 2017). Globally, more than a religious concept, halal is considered as a mark of quality assurance. The consumers always look for good quality, safe and ethical products; which is considered as the major reason for the increase in demand for the halal goods among the non-Muslim customers (Elasrag, 2016). Ethical consumerism means buying products which were ethically produced and/or which are not harmful to the environment and society. Apart from the religious principles, Halal also put forward certain values such as social responsibility, stewardship of the earth, economic and social justice, animal welfare and ethical investment (Elasrag, 2016). The halal industry shares common values with other growth trends such as organic food, non-cruelty to animals and sustainable development (WIEF Foundation, 2016).

This research is conducted because we find a gap between the reality and the questionnaire data. Based on in-depth interview and Focus Group Discussion, we understand that collegers’ reaction towards halal brand are varied, depends on their knowledge towards halal problem, shari’a law understanding, and their market understanding. For example, we found that many respondents who fell into positive-implementing faction are those who have an above-average understanding towards halal products and economics. And those who fell into positive- non-implementing faction is those who are piety, but mostly are not the students from Islamic-related major.

Our findings in this FGD explains the gap between the questionnaire and reality from the previous research. This FGD shows that, they found themselves positive in the questionnaire because they do not find any closer choice to their actual statement towards halal branding. Throughout the discussion, we conclude that even though somebody can be classified as Positive- Half-Implementing respondents through the questionnaire, we can find the strong tendency for them to be Positive- Non-implementing from their explanation in FGD. Therefore, college student’s reaction towards halal brand are not fixed and possible to shift towards the more positive and accepting, or even promoting halal brand products in the market.

Further study is needed in order to get a full profile of Indonesian Muslim’s reaction towards halal branding products and market. Even though Jakarta is a strategic place to conduct a marketing-related business, Jakarta does not host the biggest Muslim population compared to other Province in Indonesia.

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