Beauty and Personal Care Growth in Sub-Saharan Africa
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Beauty and Personal Care Growth in Sub-Saharan Africa
- 1. Subtitle Person Name, Professional Title Beauty and Personal Care in Sub- Saharan Africa AFRICA HOME AND PERSONAL CARE MARKETS JOHANNESBURG Rubab Bangash- Shaikh Abdoolla, Analyst
- 2. © Euromonitor International 2EUROMONITOR INTERNATIONAL Network and Coverage
- 3. © Euromonitor International 3EUROMONITOR INTERNATIONAL
- 4. © Euromonitor International 4BEAUTY AND PERSONAL CARE GLOBAL OUTLOOK, 2017 Regions North America Latin America Europe Middle East & Africa Asia Pacific Australasia USD$ 94 Billion 8% USD$ 65 Billion USD$ 30 Billion USD$ 148 Billion USD$ 116 Billion 3% 3% 7% 6% Market Size Year on Year Growth (%): (2016-2017)
- 5. © Euromonitor International 5BEAUTY AND PERSONAL CARE CONSUMPTION Beauty and Personal Care: Map Showing the Most Consumed Category in Each Country
- 6. © Euromonitor International 6 BEAUTY AND PERSONAL CARE GROWTH IN SUB-SAHARAN AFRICA ZAR 7,4% Naira 8,8% CEDI – 22% XOF 7,5% XAF 5,6% TZS 5,8% KES 8,2% ETB 16,65% AZ 33% USD 7,2 billion Retail Sales 2017 Retail Value Growth (LC) 12,7% Value Growth 2017 9,5%
- 7. © Euromonitor International 7KEY TRENDS IN SUB-SAHARAN AFRICA Rising Population On-going Urbanisation Rise in White Collar Employment Personal Grooming And Hygiene Formal Channels of Distribution Social Media Exposure
- 8. © Euromonitor International 8CHALLENGES Retail Infrastructure Bureaucracy Political & Economic Stability
- 9. © Euromonitor International 9 Hair Care: Competitive Landscape HAIR CARE IN SUB-SAHARAN AFRICA
- 10. © Euromonitor International 10 HAIR CARE RETAIL IN SELECTED AFRICAN COUNTRIES
- 11. © Euromonitor International 11VISUAL REPRESENTATION OF SHOPS IN CAMEROON Beauty Specialist RetailerSupermarket
- 12. © Euromonitor International 12 SKIN CARE RETAILING IN SELECTED AFRICAN COUNTRIES
- 13. © Euromonitor International 13CASE STUDY: SOUTH AFRICA ZAR 49 billion Economic Climate E-commerce
- 14. © Euromonitor International 14 Sales of Beauty and Personal Care: Retail RSP-NGN billion-2017 CASE STUDY: NIGERIA Urban Women RETAIL SALES 2017 $1.5 BILLION Ethnic Beauty
- 15. © Euromonitor International 15SUB-SAHARAN AFRICA GROWTH OPPORTUNITIES
- 16. © Euromonitor International 16 Key Takeaways A flexible approach is required Rising Disposable Income Millennials embrace global trends Formalisation of retail channels Internet SUMMARY
- 17. Thank you Rubab Bangash-Shaikh Abdoolla, Analyst Rubab.abdoolla@Euromonitor.com https://www.facebook.com/euromonitorinternational https://twitter.com/Euromonitor https://www.linkedin.com/groups/744327
Editor's Notes
- Good Morning All. Thank you for joining us for this presentation today. My name is Rubab Abdoolla. I work as an analyst for Euromonitor International. I am based in their Cape Town Office. My main research focus is the Beauty and Fashion industry in South Africa and French speaking African countries such as Cote D’Ivoire and Cameroon.
- Euromonitor International is a global research company, and we have been in the industry for the last 40 years. We have 14 office locations, we provide in depth analysis of the FMCG industry in 100 countries and provide demographic, macro and socio economic data on consumers and economies on 210 countries.
- We cover the following industries and one of the industry that I cover is Beauty and Personal Care.
- This map shows us the market size of the beauty and personal care industry in USD terms for the year 2017. Global retail sales in 2017 was $465 billion and per capita spend on beauty and personal care products was $62. More mature markets such as Europe and America are experiencing lower growth of 3% and tend be increasingly value as opposed to volume driven, with the premium BPC posting strong growth. In contrast to this, emerging markets such Latin America and the Middle East which are experiencing strong year on year growth of 8% and 7% respectively. Asia Pacific is another big market where growth is coming primarily from new product development, a thriving premium segment, routine expansion and a rising middle class consumption. We are expecting a long term growth of 3% in global beauty and personal care market over the next five years.
- The map gives us the most consumed category in each country and we can see that with the exception of South Africa, for the other countries skin care and hair care is the biggest consumed category. In South Africa, fragrance is the highest consumed category in value size. South Africa has a big market for premium fragrance, think in terms of a Tom Ford fragrance that retails for R2700 a 30ml a bottle or a Paco Rabane that retails for around R1500. In other African countries, hair care and skin care is big business. It is important to note here that in our research for hair care, we do not include wigs and weaves. We will also do not track unpackaged skin care products and products sold through informal channels of distribution, which is big in Africa. In fact, as per our estimates, in some countries only 25% of their retail volume is through formal channels of distribution and the rest will be through traditional retail formats such as open markets, kiosks and tabletops. The graph to the right shows that South Africa has a higher per capita spend relative to other African countries. A more developed retail sector, a thriving premium beauty sector with a strong presence of high value brands such as La Mer, La Prairie, Estee Lauder Re-Nutriv, brand availability are some of the reasons behind. Other countries have a non-existent premium market, bigger informal sector and make use of artisanal and home made beauty products that will not be tracked under our research. The other countries show a smaller consumption of beauty and personal care products. However, this datagraphic needs to be interpreted with caution. The reason being that firstly, South Africa has a bigger formal retail sector, which means that we are tracking a higher proportion of their sales as opposed to the other African countries. A lot of these countries make use of natural ingredients or their own local mixtures that can be purchased informal markets and come in an unpackaged format, and therefore not tracked under our research. The per capita consumption as an indicator by itself is not a reliable one as it assumes that everyone is consuming exactly the same product, while in actual fact we know that consumption patterns will be very much be income dependent and lifestyle dependent.
- In 2017, SSA had USD 7.2 billion in sales and experienced a value growth of 9,5% for the 9 countries that we research, which is stronger than the 3% global growth experienced by more mature markets. In terms of local currency growth, for the 9 countries, growth was an average of 12,7%. Cameroon, Ethiopia and Angola registered double digit growth as can be seen here on the map. In some of these markets, as disposable is increasing, consumers are embarking on a beauty and personal care regime for the first time. These ‘new’ users are fuelling growth in the mass and essential product segment. In markets such as Ethiopia, where sanitisations campaigns run by the government and an improvement in basic hygiene is leading to growth in products such as bar soap, although off a small base. To put things into context, the market size of bath and shower in South Africa is ten times the size that of Cote D’Ivoire and Ethiopia. Although skin care and hair care are some of the biggest categories in the majority of these markets, some markets such as Ethiopia are experiencing strong growth in categories such as bath and shower. An improvement in basic hygiene and sanitisation is leading to growth in basic personal care products such as bar soap. In Ethiopia, the government, multinational companies and NGOs have been running campaigns promoting good hygiene habits such as washing one’s hands with soap to prevent diarrhoea. As more people are sensitised and change their sanitation, the demand for basic personal care products such as bar soap have experienced strong double digit growth in countries such Ethiopia, although off a small base.
- Africa is a market of over 1 billion people, with a growing young population. Younger and more educated African, are likely to earn more than their parents and therefore have more disposable income to spend on discretionary items such as BPC. Urbanisation, female empowerment, greater consumer uptake, retail exposure across both essential personal care and beauty products are driving growth. Social media exposure which is giving rise to alternative models of distribution is driving the relevance of niche brands, essentially giving a voice to start up brands, previously hindered by inadequate space where to reach out to consumers, blogger and celebrity influence which is driving the personal grooming and hygiene trend al helping the industry flourish. With the formalisation of the retail sector, through the opening of more supermarkets and chained retail outlets, international brands are able to market their products to more consumers Rising population, growing middle class, strong economic growth Africa is the world’s second most populous continent. It has a growing young population, which is expected to command nearly 20% of the world’s population by 2025. At the same time, rapid urbanisation and more people joining the labour force across the continent, leading to a rise in consumer expenditure is contributing to growth across consumer goods, including Beauty and Personal Care. An overall personal grooming trend is further driving growth, especially among the younger digitally connected consumers. They are highly aspirational, they want to use products that make them look good and feel successful and we see beauty and personal products, especially across the more premium range as being a status symbol. The modernisation of the retail landscape is making beauty and personal care products accessible to a wider customer base, although traditional retailing is very much pronounced in Africa. . Finally, social media has been contributing to the rise in demand of some beauty categories. Beauty influencers are gaining traction across SSA, where they post about products they are using and what has been working for them. This in turn helps in the promotion on certain brands and categories. However, this trend will mostly impact the mid to high income category. Word of mouth is particularly strong in Africa, which can make or break a brand. Niche local brands that do well very often have word of mouth and personal recommendation from users to stand behind their success. Social media helps in doing just that. It promotes the usage of certain products on one hand, and it also acts as a social selling platform on the other hand for some brands.
- The continent has its own set of challenges and complexities which vary from country to country. Retail infrastructure is the major one. Sure, we are moving in the right direction where more formal retail outlets are opening, but the truth remains that in some countries more than 70% of sales is still through traditional outlets. Infrastructure is general is quite poor in some SSA countries such that in the literal sense, the route to market is very rocky, if there is one to begin with. Secondly, doing business in SSA is plagued with bureaucracy and red tape making it costly to do business in Africa. Political and economic stability complicate things further. High inflation, high taxes and fluctuating currencies create instability for multinationals, which very often are the biggest players in these markets Lack of retail infrastructure; counterfeit products Bureaucracy: registering new businesses, bringing new products to market, finding the right logistics Political and economic stability: changes in government often done in hostile environment, turn to violence, uncertain economic conditions, fluctuations in exchange rate making it harder for multinationals High inflation, high taxes and currency risks
- The hair industry in 2017 was estimated at USD$ 13 billion in 2017 in SSA. When it comes to the competitive landscape the industry is dominated by international players such as L’Oréal, P&G Unilever. The only local players present in hair care is Amka Products which is a very strong player in products targeted at the black ethnic hair market in South Africa and Kenya, and NN Fems Industries in Nigeria. The way we would read this graph here is that L’Oreal has a presence in all of the 9 countries that research and 34% of their sales in hair care for the brands that we are tracking come from South Africa and 28% from Nigeria. The success of these international brands come down to strong brand equity and awareness, extensive distribution channel, optimal shelf positioning in formal channels of distribution-which local niche brands do not always have. Social selling is assisting smaller local brands bring their products to their target market and this is something we have seen in countries such as South Africa, Kenya and Nigeria where internet penetration is high. In South Africa, the brand Portia M-a skin care brand made from Marula Oil- is a very good example. They are seen as highly aspirational brands and popular among mid to high income groups across Africa. They are heavily advertised using celebrities and consumers want to be associated with these brands as it demonstrates their success and newly acquired status, it’s like to show that they have arrived in life. Being well reputed brands, they do not struggle to get visibility through premium shelf storage across the formal channels of distribution such as supermarkets or hypermarkets in certain countries. The route to market for international brands is much easier as opposed to local and niche brands. However, this is where social selling comes in and this has been facilitated by social media platforms such as Instagram and Facebook. We have seen niche local brands gaining popularity through social media, and then slowly making their way through independent stockists before finally becoming established local brands in well known retail channels. One good example from South Africa is Portia M, a skin care brand that uses Marula Oil and positions itself as skin care brand made by African women for African women. It’s like having a brand that speaks to its target market at a personal level
- Route to market is key for any product and understanding the different retail channels in Africa, is even more important. Each market is different, one less developed than the other and yet having the same growing appetite for beauty and personal care products. In the case of hair care specifically, how does the product reach the final consumer? In a market like South Africa, where modern retail penetration is above 70%, the route to market is relatively easy as opposed to let’s say a country like Cameroon. If we look at this datagraphic for example, in South Africa the bulk of sales is through hypermarkets, supermarkets, beauty specialist retailers, so that would be your PnP, Checkers, Makro, Dischem, Clicks, RedSquare, Body Shop etc.. Same goes for Kenya, with a retail penetration of around 30% we see a lot of these products being sold through formal channels of distribution. However, in the case of Nigeria and Cameroon, with 5% of modern retail penetration in NIgeria, we see a bigger portion of sales going through ‘Others’ which in this case is outdoor markets. In fact in Nigeria, almost 40% of sales is through outdoor markets and 31% of sales is through independent small grocers. Let’s have a closer look at Cameroon. In a market in Cameroon, 36% of sales in haircare is through outdoor markets. There are no hypermarkets and 23% of sales is through supermarkets. Chemists and pharmacies would figure here in this data because we track medicated shampoos under haircare and this is where they are primarily sold
- As you can see in the second picture, this is an example of a beauty specialist retailer in Cameroon and they have a wide variety of mass beauty products and one premium product. A lot of these products do not have official distributors in the country but because of their popularity locally, they are brought in through informal cross border trade. We will not track them in our data. Now let me tell you a story about this picture. When my analyst was doing her storechek in Cameroon and she sent me this picture, the first two brands I noticed was Huda Beauty and Clarins. Huda Beauty is an Emirati brand and there are a lot of fakes on the market and I told my analyst that Clarins is surely a fake too. She insisted that the Huda is fake but not the Clarins. So she went and did her own investigation. It turns out that the product is in fact an original and brought into the country by what locals call a ‘Mbengist’. That was a new word to me. Never heard of it, it’s not French. What is a Mbengist exactly? They basically people who have migrated and have now made it in life. The Mbengist will usually come home with a stock of European brands and give them to local shops to sell. And this is not unique to Cameroon. It’s a trend that we have seen in Kenya and Nigeria as well. In fact, Nigerians shop a lot in South Africa, both for beauty and fashion products, and re sell them in their home country where people know about the brands but do not have access to them unless they are travelling.
- In terms of retail distribution channels, in countries like Kenya, 45% of sales is through supermarkets and 23% is through beauty specialist retailers. In Cameroon, 36% of skin care products are sold through outdoor markets and then 22% is sold through supermarkets. In Nigeria, 36% of sales is through outdoor markets and then around 40% is through supermarket and beauty specialists. South Africa is different, with a more developed retail infrastructure, the bulk of sales for skin care goes through supermarkets, parapharmacies such as Dischem and Clicks and beauty specialist stores. We have only 1% of sales that goes through outdoor markets.
- Let’s have a look at South Africa. The Beauty and Personal Care market is worth ZAR 49 billion. In terms of competitive landscape, international players dominate the market for reasons that we have identified before-brand equity and awareness, extensive distribution channels, most innovative and often the ones that offer more promotions. The economic climate has led to new purchasing behaviour where there is a rise in the popularity of private label brands, mostly in the personal care industry. Consumers are more cautious with their spending where they research prices and products online before making their purchase. Now this type of behaviour is taking away sales from some retailers that have not aligned their prices with their competitors and it’s also cutting down on impulse buying behaviour Over the last couple of years, we have seen the emergence of private label brands within the personal care category, not so much within beauty. In fact private label brands have been registering strong growth within personal care categories such as bath and shower, baby products, skin care and oral care to name a few. They are generally priced slightly lower than international brands and several factors are behind their success. First the current economic situation is driving value seeking behaviour among consumers and a lot of them had downtraded to lower priced brands, and this is where private labels comes in. A change in customer perception is also contributing to their growth, where previously it was associated to inferior quality but now this is slowly changing. When it comes to industry performance, despite the many economic challenges that the country is facing, such as rising unemployment, declining disposable income, rising taxes to name a few, the beauty and personal care industry has proven to be a resilient one. Last year the industry grew by 7% in value terms. The question is, if from an economic point of view, everything looks so gloomy then who and what is driving this growth? First of all, let’s understand one thing. When our income goes down, we don’t stop consuming beauty and personal care products altogether. You don’t stop wearing makeup, you don’t stop taking showers, OK Cape Town is different, we have a drought. You change your purchasing behaviour. You downtrade to price competitive brands. And here we have seen brands such as Essence doing VERY well, registering very strong growth. They are constantly introducing products that are in line with the latest beauty trends but priced very competitively. Let’s take for example their range of nail polish. They have a wide range of trendy colours that retails for around R30, if I’m not mistaken that’s the cheapest on the market right now. Who is driving that growth? Mid to high income consumers and the younger generation is driving growth. Another purchasing pattern that has emerged is where consumers, especially the digitally connected ones, have become more cautious and risk averse in their purchase. When they want to buy a product, they go online and they compare prices across multiple retailers before making their final decision. The interesting thing about South Africa is that even if price comparison and research is done online, a lot of these consumers, will still choose to go in store and do the final purchase.. Each market is different. Success of multinationals: Brand Equity Extensive Distribution Networks Innovation and Promotions
- In Nigeria, the beauty and personal care industry is estimated to be $ 1,5 billion in 2017. After the economic recession in 2016, brought about by the crash of commodity prices, beauty and personal care experienced a decline but it still slowly recovering Urban working women are the biggest drivers of the beauty and personal care industry. They have a preference for natural orientated products such as coconut oil. The economic climate is leading to value seeking behaviour and consumers are looking for product with added benefits, skin lightening properties being the most popular ones. Beauty products aimed at the ethnic consumer are doing very well, for example products that claim to suit the complexion and hair types of black people in particular. Local African brands that target this customer group are doing exceptionally well such as Zaron.
- Over the next five years, South Africa and Nigeria will maintain their lead as the biggest markets in SSA. Being a more mature market, South Africa is expected to register long term compounded annual growth of just under 4%. Lower forecasted economic growth, constrained disposable income and rising cost of living are the reasons behind our forecast. Nigeria just under 2% as at the time of research, the economy was still coming out of the recession. Countries that are expected to register strong growth are frontier markets such as Ghana and Ethiopia, growing off a small base, where we have an emerging group of ‘new’ consumers, i.e people embarking on a beauty and personal care routine for the first time. Glocalisation- where glocal trends and ways of doing business are adapted to accommodate the user in the local market-will drive growth too. In the food industry, we have seen KFC selling pap in South Africa, in the beauty industry we are seeing an increasing number of beauty products containing ingredients that have been used across generations by African consumers such as coconut oil and shea butter.
- To sum up, some of the key takeaways from this presentation are: Africa is home to a diverse population of different income groups, religions, races, customs and languages. Traditional and artisanal products still have an important place in the beauty and personal care regime of a lot of consumers. Brands have to take that into account when introducing new products in the market. Rising disposable income and growing young urban population represents a lucrative customer base. In emerging markets, more consumers are and will embark on a beauty routine for the first time, however basic may remain for some. Although the bulk of business is still being done through traditional retail formats, we are moving in the right direction with the formalisation of retail channels and this is likely to lead to improved access and brand visibility. The use of internet and social media will provide more opportunities to brand owners, especially for aspiring start ups in some African markets-with new distribution models, which may rival international brands
- To conclude, broadly speaking African is a good place to be but you have to understand that a Pan-African approach is not going to work. Thank you for listening. Let me know if you have any questions.