BW Confidential - Issue #11 - September/October 2012 - (Page 51)

Market watch: Middle East credit: JFR Regional overview Market shifts Beauty in the Middle East may be seeing slightly slower although more sustainable growth than in the past, but there is still much untapped potential in the region by Alex Wynne here is no doubt that business has slowed in the Middle East beauty market since the pre-2008 days of annual growth rates exceeding 30%. Nevertheless, the market remains underdeveloped in many countries, and even in the largest established markets—Saudi Arabia and the United Arab Emirates—much potential remains in make-up and skincare, while fragrance is expected to continue growing. In 2011, the beauty market in the region was up 13% according to Euromonitor. “The beauty and personalcare market in the region is growing strongly, fuelled by strong organic growth from countries like the UAE and Saudi Arabia,” Euromonitor beauty and personal care research analyst Nicole Tyrimou says. “The bulk of the growth in countries like Iran and Egypt, which are among the top value markets, is largely inflation driven (+23% in Iran and +11% in Egypt for 2011). Category dynamics are varied by country with a clear shift from more traditional products towards more specialized and upscale formats”. Political overtones But what has been the impact of recent political events on the business? “In some countries in the Middle East we still see very dynamic T business, and various sources quote a 10% increase in the market [for this year],” Clinique (Estée Lauder Companies) vice president and general manager for Europe, the Middle East and Africa Jean-Christophe Jourde comments. “Market growth is driven strongly by Saudi Arabia as well as Kuwait. We have not seen any slowdown due to the political environment.” Certain markets—notably Syria due to the current conflict and Bahrain and Egypt following the Arab Spring, have seen an impact on their beauty business. In those markets tourism has been been transferred to other destinations, such as Dubai or Saudi Arabia. “Some markets have benefited a lot from the Arab Spring. Tourists who were going to Egypt or Bahrain, mainly Saudis and Gulf nationals, today have no choice but to stay in Saudi Arabia. This is affecting Saudi sales positively, and others are coming to Dubai,” Clarins Group Middle East president Osama Rinno explains. Fragrance is still the leading beauty category across the region, representing more than two thirds of the market. The region’s consumers spend an average of $380 per year on fragrance, according to sources, and much of that spend is on local brands. In general, the average spend on cosmetics and fragrance is very high. Make-up has gained traction in recent years, and now accounts for around 23% of business, while skincare represents around 10%. “The base for skincare is still very low. It used to be around 7-9% of the total market and now it is around 10%,” distributor Creation president Serge Kotovsky comments. Boosting skincare Much of the work that brands are doing in the region revolves around boosting skincare, whether that is in the selective, pharmacy or mass channel. “In order to focus on the development of luxury skincare, we have to spend a lot of money developing the benefits of the product,” Kotovsky, whose brand portfolio includes Shiseido, explains. “We need to animate the counter with beauty consultants that can explain the products.” Nevertheless, returns on selective skincare remain lower than in other segments— both because the space needed to sell products is larger, and because culturally, a lack of female beauty consultants created barriers to advice and services. n n n 51 September-October 2012 - N°11 - BW Confidential

Table of Contents for the Digital Edition of BW Confidential - Issue #11 - September/October 2012

Cover
Contents
Comment
Update
- Brand & retail news recap
- Companies on the move
Take note Market facts, figures & trends
Best of BW Highlights from our e-publication
Launches The latest in fragrance, skincare & make-up
Interview Collistar ceo Daniela Sacerdote
Insight: Fragrance Creation
- Category overview
- Industry factfile
- Viewpoint
- Emerging markets
- Naturals
Wellness
- Spas management
- Spa case studies
Retail
- Sephora & emerging markets
- Store concepts
Digital focus Pinterest strategies
Strategy spotlight Trends to inspire
Market watch: Middle East
- Regional overview
- Industry viewpoint
- Prestige retailing
Radar Six up-and-coming beauty brands
Packaging Trends in luxury
Last word Sagentia's Peter Luebcke on devices

BW Confidential - Issue #11 - September/October 2012