Beauty Industry: Growth Spots in East Africa
The East African region is fast emerging as a lucrative market for cosmetics and toiletries as economic
restructuring and regional integration measures adopted by many governments in the region in many countries has created a rising middle class that craves for new consumer and luxury goods.
As far as Kenya is concerned, the key drivers of the Kenyan economy include a strong population growth, a growing number of people belonging to the middle-class and an educated workforce. Increased growth of the beauty and personal care market in Kenya, combined with the fact that Kenya is now recognised as the sales and distribution hub
for the larger East African market, has attracted international brands such as Estée Lauder, Oriflame and L’Oréal, among others to set up regional offices in Kenya.
The market for cosmetics and beauty, personal care products in Kenya is estimated to be worth $496million in 2014 and expected to grow at CAGR 7.8% till 2018. The cosmetics market is led by hair care products – sales of hair care products continue grow at an average of 6.8% per annum. Kenya’s population of almost 53 million is an adequately ready market for cosmetics and beauty products of all kinds. These products are becoming almost essential needs for the expansive and rapidly growing population.
Kenya also benefits from a dynamic private sector in which Kenya seems to have become the regional leader. Therefore, Kenya presents promising opportunities in the beauty and cosmetics sector by offering avenues for greater regional expansion through its well-developed infrastructure.
The beauty and cosmetics market in Kenya is more mature and multinationals are edging out local companies. In 2012 Estée Lauder entered the Kenyan market, launching Clinique and received a very positive response. Other recent entrants to the Kenyan market include Sleek, Flormar, Revlon, Maybelline, SuzieBeauty Cosmetics and House of Tara. Last year, Estee Lauder introduced its third biggest brand, MAC Cosmetics, to East Africa when it opened its the first outlet in Kenya.
Kenya’s cosmetic industry has been an investment hub as new entrants like New York Listed Estee Lauder, Swedish Oriflame and American skin care giant Revlon have come into the market scene in the last five years
A new entry into the Kenyan cosmetics and personal care market is L’Oréal East Africa, which last year acquired the health and beauty division of Interconsumer Products Limited, one of Kenya’s largest makers of beauty and personal care products for about $35.5 million. Interconsumer Products was a plum target, making lotions, shampoos, hair gels and creams. It was an opportunity that L’Oréal could not ignore. As a result of this acquisition, L’Oréal is now owner of Dark & Lovely, a cosmetic product that is well established in the East Africa region.
Revlon entered the Kenyan market, signing a $1m franchise deal with the Kenya retailer Nakumatt Holdings. Unilever’s Kenya division is the country’s market leader for personal care products. In the near future, multinational and local players could operate in tandem, albeit an uncomfortable one, with local players offering more customised solutions, and multinationals generally focusing on more standard products.
Going forward, however, there is no reason to believe that local players will be unable to match the scale of multinationals through broadening their product offerings and developing a wider presence across the pricing spectrum, while retaining their ability to customise. Multinationals are safe for the time being, but the future will present a steep challenge in terms of how they can balance in-depth customisation with commercial viability. L’Oréal’s success with the acquisition of ICP in Kenya is something to watch out for because this could determine the future course of action for other multinationals in the industry.
Unilever Kenya is the market leader in the personal care industry. The company has been present in Kenya for a long time, and has established a strong distribution network. Brand loyalty has also been entrenched by marketing and promotional campaigns, as well as the provision of good quality products at affordable prices.
Procter and Gamble (P&G) entered the Kenyan cosmetics market in June 2014 when it launched a range of mass-market beauty products, targeting a slice of the multi-billion shilling cosmetics industry of East Africa. P&G unveiled the Camay cosmetic brands, entering a turf currently dominated by Unilever, Cussons PZ and L’Oreal.
P&G’s decision to launch the cosmetic brands of deodorants, beauty soap, body lotion and fragrance was based on an in-house research that showed “a gap” in the multi-million dollar markets. Camay’s launch in Kenya becomes the first in Sub-Saharan Africa although P&G has been selling these brands in Egypt since the early 1980s.
Kenya currently has little capacity for local production but that is likely to change as the cosmetics industry grows. Meanwhile L’Oréal launched new hair anti-breakage products in its Dark & Lovely line.
Meanwhile, data from the Kenya National Bureau of Statistics indicates that in Kenya imported essential oils and perfumes were worth more than $180 million in 2013. The figure is likely to be much higher this year: 45% of women and 29% of men in Kenya are willing to spend on beauty products, according to our survey conducted in Nairobi.
Kenya’s personal care and beauty industry is growing steadily – dominated by hair care ($116.5 million in sales in 2014) and skin care ($96 million).
But industry watchers say the country is about to hit a growth period, especially in the colour cosmetics field, as new brands enter the market. Due to its geographical position and relative market sophistication, Kenya is generally seen as a regional hub which provides entrance into the East African Community (EAC) region.
Mid-market cosmetic brands like Victoria’s Secret, Sleek, Petal Fresh, Freeman, Mary Kay, Simple, Bath & Body Work, Black Opal, Flori Roberts, Ombia (Austria) are popular in Kenya. Locally produced emerging brands include SuzieBeauty.
Popular haircare and hair accessories brands include Golden Perfect, Imaj, Fashion Idol, Hair Culture, Organics, Rio, Glitter & Glam, Africa’s Best, Alba Botanica, Avalon Organics, Lady Rainbow, Freeman, L’Oreal, Babyliss, Ceriotti. Grape and Eve. Kenya’s use of personal care cosmetic products ranks third behind South Africa and Nigeria in sub-Saharan Africa. In the coming 5 years, beauty and personal care market is expected to see a steady increase in volume, increased competition among local and international players and widening of product base to suit varying consumer profiles.
The increasing reach of retail outlets in residential areas and their ease of accessibility for local residents have made these the preferred channels of distribution to reach consumers in Kenya’s urban centres. In recent years, the rising popularity of mall-culture among the Kenya’s urban population has further strengthened the value of this important distribution channel to reach Kenya’s rising middle class. However, most middle- and lower income group consumers still purchase their products from outdoor markets and supermarkets, which stock a wide variety of products at affordable prices. The high-income consumer groups however prefers to do their buying at health and beauty retailers located in wealthier residential markets and shopping malls.