The Beauty Market in Ethiopia
A growing East African market for personal care products is Ethiopia.
During the 2013-14 financial year Ethiopia imported cosmetics, perfume and toiletry products with a total value of $89million, according to the country’s Revenue and Customs Authority. As per their records, there was a 6% increase in the value of products imported compared with 2012-13 ($84million).
The total value of the cosmetics market in Ethiopia in 2014 was estimated to be worth $106million according to figures from the country’s Ministry of Trade and Industry, with the average growth rate over the last three years at 10%. Imported products account for around 90% of the market, with the
remaining 10% sourced from domestic manufacturers.
However, the total sales of beauty and personal care products in 2013 was estimated at US$ 244 million by Euromonitor International. This clearly proves the existence of a grey market and a large volume of unofficial trade that goes unrecorded in the official figures.
We therefore conclude that in 2014, the sales of cosmetics and personal care products is estimated at US$ 273 million.
With Africa’s second largest population (around 99 million people) and one of the world’s fastest growing economies (expanding at a rate of 7% annually in recent years), the potential of Ethiopia as a market for cosmetics products is beginning to be realized by the personal care products industry worldwide. Indeed, sales of a wide range of cosmetics are growing rapidly with both domestic and international cosmetics brands.
More and more women, typically from the age of 15 onwards, are purchasing increasing quantities of cosmetic products in recent times.
In addition men are purchasing cosmetics more aggressively, especially between the ages of 20 and 40. Sales of hair oils is growing and is believed to be the cosmetics product consumed the most in Ethiopia.
Sales of shampoos is also increasing among women and men, with men also buying more hair gels.
L’Oréal is now one of the leading overseas brands in the country. The growing opportunities in Ethiopia and other east African countries led the company to open a subsidiary in Kenya last year to function as a base for the region.
In both urban and rural areas increasing levels of disposable income are allowing consumers to purchase more overseas cosmetics brands. “The growth in the economy here means that people can buy foreign brands as well as Ethiopian brands.
Rising Disposable Incomes
Majority of Ethiopians live in rural areas whereas a growing number of middle-class Ethiopians, especially in urban areas and the capital Addis Ababa, are the main consumers of beauty and personal care products. Urban women aged 20-65 years are the main consumers of beauty products and cosmetics. The Ethiopian market is still in its early developmental stage as a whole. There still exist large disparities in household incomes. We forecast another five years for the rise and growth of a substantial middle class – the prime consumers for cosmetics and beauty products.
Along with the predicted rise in disposable incomes of ordinary Ethiopians, a key factor in the growth of cosmetics sales in Ethiopia in the coming years will be the improved infrastructure. As part of the country’s Growth and Transformation Plan, 72,000 kilometres of new roads are due to be constructed by the end of 2015 with plans to ensure every village in Ethiopia is connected to a highway. And there has already been a noticeable improvement in levels of access across the country. As a result, distribution is much easier now particularly because of the more extensive road network. Most cosmetic products are distributed on trucks and they can go all over Ethiopia now, including remote rural areas of the country.
Hair products are easily the most popular cosmetics products in Ethiopia valued $63million in 2014. Sales of hair oils are growing a lot, as most people here like to use them to nourish their hair on a daily basis and hence hair oils are the cosmetics products sold the most in Ethiopia. Sales of shampoos is also increasing among women and men, with men also consuming more hair gels. After soaps and shampoos, the most prevalent beauty and personal care products among Ethiopians are creams for whole body moisturising.
In addition, among women, perfumes and body lotions are also proving increasingly popular, while for men sales of deodorants are increasing although using aftershave is still not common.
All in all, the Ethiopian beauty and cosmetics sector is mainly driven by sales of hair care and skin care products. However, in recent years, strong growth was recorded in the sales of perfumes, fragrances and sun care products.
As the opportunities grow in Ethiopia, an increasing number of major international cosmetics brands are entering the market. L’Oréal is now one of the leading overseas brands in the country. The growing opportunities in Ethiopia and other east African countries led the company to open a subsidiary in Kenya last year to function as a base for the region.
L’Oréal products have quickly become popular in Ethiopia. Consumers feel that the prices of L’Oréal products are very competitive if you compare them to, for instance, to Dior. L’Oréal’s lotions are especially popular. Dior is favoured by the more affluent consumers. Multi-national manufacturer,
Unilever, has announced plans of opening a plant in Ethiopia this year.
While major international cosmetics companies such as L’Oréal have entered Ethiopia’s market to take advantage of rising income trends in a nation of about 99 million people, high end brands are currently limited to urban retailers where levels of disposable income are higher.
Ethiopia has enjoyed economic growth rates averaging between 7.5% and 10% over the last ten years. This has been the biggest driver of demand for personal care and luxury consumables in Ethiopia.
Meanwhile, the market’s problems with counterfeit products have also lessened. Previously, a growing demand for personal care products had
led to a spike in counterfeit toiletries, perfumes, cosmetics and grooming products.
The key source of counterfeit products entering Ethiopia for many years was China, but a recent tightening of regulations has stemmed this trade.
All products must now be certified and approved by the country of origin and by Ethiopia’s government. This process takes a lot of time and is expensive, but has helped to stamp out the majority of fake products.
In both urban and rural areas increasing levels of disposable income are allowing consumers to purchase more overseas cosmetics brands.
The growth in the economy has meant that people can afford to buy foreign brands as well as Ethiopian brands. Previously they could only afford local products.
In rural areas, buying habits are changing fast. Most rural consumers used
to use natural cow butter for their hair which carries a very bad odour. Now they can afford hair food, hair oils and so on.
Along with rising disposable incomes, a key factor in the growth of cosmetics sales in Ethiopia is improved infrastructure. As part of the country’s Growth and Transformation Plan, 72,000km of new roads are due
to be constructed by the end of 2015 with plans to ensure every village in Ethiopia is connected to a highway.
However, the main distribution channels for beauty and personal care products are supermarkets, specialist beauty product shops, beauty salons and drugstores in urban areas.
In recent years, there has been a noticeable improvement in levels of access across the country. Distribution is much easier now particularly because of the more extensive road network.
Most cosmetic products are distributed on trucks and they can go all over Ethiopia now, including the remote areas. Domestic brands are also benefiting from rising disposable incomes and improved access.
Zenith Gebs-Eshet Ethiopia is the leading Ethiopian cosmetics manufacturer, producing a wide range of personal care products including shampoos, conditioners, hair relaxers, pomade, moisturising creams,
lotions, nail polish, baby products, perfumes and body spray. As well as supplying the domestic market, Zenith exports to other East African countries including Kenya, Uganda, Sudan, South Sudan, Somalia and Djibouti. Exports crossed $4 million in 2014, with average growth of 20% over the last five years according to the company.
Sales at Mekab, which specializes in hair products for the local market, have also been growing sharply: at 20%-25% over the last three years and Mekonnen expects this level of growth to continue over the next few years.
Earlier this year the company launched its new Essence brand, a hair food for women available in six different fragrance variants. Sales of the product proved instantly popular.
A range of government initiatives are helping the development of Ethiopia’s cosmetics sector, initiatives such as providing land without a lease and not charging taxes on imports of machinery.
The government is also under increasing pressure however to deal with the rapidly growing concerns surrounding counterfeit cosmetics products in the country. There have been several recent reports in the Ethiopian media of counterfeit cosmetics affecting sales of overseas brands in the country, although no firm statistics were made available to SPC.
Counterfeit products pose a major problem for Ethiopia’s beauty and personal care market. A wide range of counterfeit cosmetics and beauty products are easily available in Ethiopia at considerably lower prices.
Together with the increased supply of international brands, the supply of counterfeit products has also grown.
Counterfeit products are marketed in packaging identical to renowned brand names but are of much lower quality and price. Consumers in Ethiopia with lower purchasing power often buy the counterfeit products even if they are aware that these are counterfeit products.
Ethiopia’s Food, Medicine and Healthcare Administration and Control Authority is actively working to tackle the issue. Counterfeiting has not yet affected domestic cosmetic manufacturers.