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As new opportunities for skin care in key developed markets slowly dry up, much stronger growth forecasts for the category in many markets in Africa and the Middle East are likely to see the big international players making moves to increase their share of sales in the region.
In the main markets of Saudi Arabia, the United Arab Emirates, Iran and South Africa, this trend is likely to be particularly pronounced, simply because these are the largest and most robust markets, both in terms of size and volume.
Between 2005 and 2010 skin care value sales in Africa and the Middle East rose from an estimated US$1.4 billion to US$2.4 billion, equating to a CAGR of 12%. This is strong growth by any standards, particularly when compared to the performance of the global skin care market, which expanded from US$63 billion to US$88 billion over the same period, equating to a CAGR of 7%.
While unfavourable currency exchange rates negatively impacted the economy in 2009, the situation was completely reversed in 2010, helping to drive rapid expansion in the skin care market in South Africa, which grew by 12% that year to reach US$0.5 billion.
The South African skin care market is enjoying strong growth on the back of an expanding economy. Skin care manufacturers are making moves to elaborate product claims, while facial moisturisers, whitening, body care and products targeting specific functionality such as firming or treating acne are all tipped for further growth.
In particular, product claims are expected to impact the types of products that are launched in this market, as well as the way in which they are marketed. Adding value is expected to be a major trend, exemplified by the claims made by the Pond’s brand in its 2010 “7 day even skin tone” campaign.
Anti-ageing will also continue to be a considerable phenomenon, underlined by the importance of the facial moisturisers category, which achieved growth of 16% during the course of 2010.
These trends are expected to contribute to the solid growth of skin care in South Africa, which is expected to grow at a 3.7% CAGR over the 2010-2015 forecast period. The strongest growth will be seen in facial care, which is predicted a 4.2% CAGR, principally driven by facial moisturisers, which is anticipated a 4.9% CAGR, equally driven by both premium and mass products.
Premiumisation is the major trend characterising the Saudi Arabian skin care market, with the increasing number of females in the workforce being the primary driver, helping skin care in the country to grow by 9% in 2010 to reach SR1.6 billion (US$0.4 billion).
The increased household income resulting from the expanded workforce is translating into higher spending on luxury products. This means that more and more Saudis are opting for increasingly sophisticated skin care routines, which is seeing mass brands being built to resemble premium brands. It is interesting to note that the increase in masstige products has cannibalised sales of premium products, resulting in lower volumes in 2009, although a recovery was noted in 2010.
Skin whiteners and anti-agers remained the key drivers of growth in 2010, with anti-agers growing by 8% to reach SR361.9 million and representing 50% of the total category value.
However, the strongest growth in 2010 was seen in hand care, which grew by 11% to reach SR86.6 million, although this category remains almost totally dominated by mass market products. Currently, the market is dominated by big international players, including Beiersdorf, Procter & Gamble and Unilever, although a high degree of fragmentation means that even the biggest players still command relatively low shares. This trend is likely to be perpetuated throughout the forecast period.
Looking ahead, the market is likely to continue to be dominated by the premiumisation trend, which in turn is likely to lead to lower sales of prestige skin care products. To 2015, growth is likely to be in the region of 4% annually, reaching SR1.9 billion, a figure that will also be reflected by similar gains in volume terms.
Growing from a small base, significant marketing and advertising activities have had a major influence on world-beating growth rates in Iran’s skin care market, which grew by 24% in 2010 to reach IRR3.2 billion (US$0.3 billion). This rise was also helped by the fact that higher oil prices – one of the country’s leading industries – have contributed significantly to an increase in average national income.
Both international and domestic skin care players have expanded their footprints in Iran by targeting pharmacologists and dermatologists, encouraging awareness in consumers who were invariably not accustomed to specific skin care routines.
Nourishers/anti-agers achieved the strongest growth, expanding by 26% in 2010 to reach a total of IRR195 million, a rate that is expected to be sustained over the forecast period. This growth is being driven by women who are becoming increasingly aware of facial care thanks to greater familiarity with product offerings.
The Iranian skin care market remains dominated by mass products, which account for 62% of total sales, although premium products are gaining ground, particularly in the facial care category where women are more inclined to opt for better quality products if they are affordable.
Currently, the market is dominated by domestic player Shekofa Kish, which held an 18% share in 2010, while Nivea remains the single most popular brand. Other significant domestic players include ACT Cosmetics and Poober, which both gained in 2010 to reach an 8% share each.
Looking ahead, a growing youth population and changes in consumer patterns are likely to fuel further growth in this market over the forecast period, prompting a 7% CAGR, which should give the skin care category a value of IRR4.6 billion by 2015.
Skin care in the United Arab Emirates remains a small and fragmented market. Strong growth of 11% in 2009 gave the market a value of AED401 million (US$0.11 billion), offering small-scale opportunities. This was a weaker performance than the CAGR of almost 17% before the recession hit, reflecting lower consumer confidence that is only now being restored in the country and throughout the Middle East region.
An expanding retail landscape, combined with a great deal of product innovation, are the main driving forces behind market expansion, which is mainly being fuelled by gains in facial care, specifically anti-ageing and skin whitening products.
Facial care achieved the highest growth rate, expanding by 12% in 2009 to reach AED227 million – being the largest category in the market with a 57% value share. This is because facial care is very important to women, a factor that is reflected by an array of targeted products, with facial moisturisers and nourishers/anti-agers dominating, necessitated by the harsh weather.
Currently, the market is led by Beiersdorf Middle East, with a 15% share, a figure that also underlines the fragmented state of the market. Overall, skin care is dominated by international players, with both Unilever and L’Oréal also commanding low but increasing shares.
Looking ahead, market growth should be maintained with a forecast 5% CAGR, indicating an overall market value of AED520.3 million by 2015. The biggest gains should continue to be seen in the all-important facial care category, which is expected to grow at a 6% CAGR to reach AED307 million by 2015.