Market Trends: The African Beauty Market

By on October 10, 2015
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Market Trends

Various multinationals in East Africa say that they are striving to offer the East African consumers quality products so that it saves them time from making numerous trips abroad such as going to Dubai to buy the products that are not cheaply available in East African countries.

Cosmetics giants such as Revlon and L’Oréal have spent the last decade acquiring smaller companies which specialise in ethnic hair products 

The launch of Revlon products in Kenya through a recent franchise deal with Nakumatt Supermarket chain is just one example of efforts at meeting the demands of the African consumers for cosmetics. The decision by Revlon to set up a shop in Kenya is a step towards not only filling a gap in the East African cosmetics market but also a signal to other international cosmetic brands to reconsider the East African market as a new avenue for investments.

Manufacturers have rapidly understood the need for product tailoring in order to best answer consumers’ expectations. As a pre-requisite to effectively deliver the right products to African consumers, manufacturers needed to better understand African skin and hair specificities. To gather more insight on these specificities, L’Oréal initiated the “L’Oréal Institute for Ethnic Hair and Skin Research” in Chicago and also established an evaluation centre in South Africa dedicated to consumer insight and development studies. In November 2012, L’Oréal also organised the 4th edition of the “African Hair and Skin” workshop in Kenya in association with the Kenya Association of Dermatologists in order to boost understanding on ideal care for African hair and skin.

This demonstrates strong commitment to develop knowledge on hair and skin of African consumers. Same is the case at Unilever where investments are made to learn more about black skin pigmentation and hair biology to complement their research.

Unilever and L’Oréal are also investing in building close ties with local dermatologists and hairdressers who play a critical role in East African consumers’ day-to-day life and counseling and are seen as “trusted advisors”.

Another option to penetrate the lucrative East African market for cosmetics  and beauty care is to develop exclusive brands or products specifically for African consumers. For instance, L’Oreal and Unilever have established product ranges suitable for African consumers, like ‘Dark and Lovely’ by L’Oreal subsidiary SoftSheen-Carson, and Unilever’s Motions range. This is particularly suited for hair care products where the African consumer requirements are very distinct.

Another strategy is to design specific formats and/or packaging to address price sensitivity in the East African markets. By launching scaled-down versions and reduction of pack sizes – this way manufacturers can reach more consumers, given the level of income in Africa.

Counterfeit Products

Unwittingly, many East African consumers have for many years used products that were merely a copy and not the original ones. East African consumers have been through this cycle of fake products and are now more aware of the perils of using counterfeit cosmetic brands.

It is estimated that almost 30% of cosmoceuticals in East Africa are counterfeit or have substandard active ingredients. Consumers in East Africa, therefore, have no choice but to buy expensive products so as to get a higher quality product.

It is also known that in Kenya, only 2,800 pharmacists are working in the cosmetic industry, a number a far below of that what is required for the efficient production of quality products and that number happens to be around 8,000. On top of this, these 2,800 workers have little or no on-the-job training that is demanded for a smooth production process.

The Dubai Factor

This has led to a new trend of sourcing in the East African markets. In recent years, many East African consumers  travel abroad  just to procure genuine beauty products and cosmetics. Dubai has emerged as a popular sourcing point for many consumers in East Africa because of its geographical proximity to the region and the excellent air connectivity offered by many airlines. Trade fairs like Beautyworld Middle East have been attracting a growing number of East African buyers and visitors. There was an increase of 12% in the number of African visitors to Beautyworld Middle East exhibition in Dubai in 2014.

Dubai offers the East African consumers and importers an ideal market place. The availability of vast range of products at competitive prices attracts East African buyers to Dubai’s booming cosmetics market. Buyers from East Africa can select from a vast range of merchandise and buy just the quantities they require and then transport the goods back to their home countries at very competitive freight costs.

Secondly, there is also the question of sourcing products from different countries and even continents. For instance, an East African importer may be interested in facial products from Europe, toiletries from the Far East and herbal cosmetics from the USA. But this would place immense logistics constraints and would involve travelling around the world and opening of Letters of Credit (LCs) with a host of banks. Often, all these obstacles would prove insurmountable and many exporters would be put off by the sheer magnitude and complications of the whole exercise. Buying from Dubai helps East African buyers circumvent all these problems.

ONLINE SALES

Against this backdrop, E-Commerce will surely be a growth lever in a region where internet usage is increasing and where many retailers are starting their business online. B2C web portals like Kaymu and Jumia, Amazon-style websites, are already operating in many East African countries, with almost a thousand orders per day in certain territories. Thanks to a wide-range product offer – partly thanks to a marketplace offer – and targeted services to East Africa consumers like cash payment upon delivery, or 5-days delivery, the online business is expected to develop rapidly and be fueled by the emerging middle class.

Online market has great potential in years to come. Statistics show that online shops made $7.2 billion globally two years ago. Still, the satisfaction that the consumers require is not met with this source as well. Online sales are dominated by the accessories luxury goods segment, which represented an estimated 41% of online penetration in 2013. Apparel accounted for an estimated 30% of online luxury sales in 2013, while beauty products and hard luxury (jewellery, such as high-end watches) lagged behind with 16% and 10%, respectively. The rapid increase in internet usage over the past decade reflects the vast potential that exists in online retail in East Africa.

The advent of smart mobile phones and access to the internet, as the African telecommunications sector leapt forward in heaps and bounds, allows easy access, while the availability of mobile payment options significantly reduces operating and opportunity costs.

SALES TRENDS

Africa represents about six per cent of the total global cosmetic sales. On average an East African client spends anything between $33 to $275 a month on personal care and beauty products and that this demonstrates that the East African woman prioritises her beauty needs in her pre-arranged budget.

Beauty products: Consumer Behaviour

• Source: On-field surveys conducted in 5 countries of study area namely, Kenya, Uganda, Tanzania, Mozambique and Ethiopia.

As of now, the three multi-national giants have their eyes on major African countries. L’Oreal is focusing on Nigeria and South Africa; Unilever on Kenya and Ethiopia; and Procter & Gamble (P&G) is expanding all across the continent.

Unilever’s stated objective is to double its revenue in Africa by 2017 by targeting, not only major markets like South Africa or Nigeria, but also emerging countries with strong potential like Kenya and Ethiopia. To attain this growth, Unilever has set up several strategies. In terms of products and brands, Unilever plans to introduce them more massively, such as hair products coming from the US, and to tailor some of them to African consumers’ needs. This fitting is the key to giving brands and products an “African touch” and responding consumers’ prospects.

With Unilever’s Motions, its recognised product range suited for African customers, Unilever also plans to target consumers from a wide-range of revenues, from low to high-ends, but also to push its brands into rural areas, where more than 60% of the population in East Africa actually lives.

In terms of procedures, Unilever is investing in new factories and upgrading old ones. To meet the rising demand for its products in East Africa, Unilever will open an R800-million new factory in South Africa and spend $17.1million on upgrading an existing one. This shows Unilever’s dedication to serve African consumers, and to demonstrate their long-term involvement and commitment to sustainability on the continent.

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