The Underlying Potential of the MENA Region in Fragrances

The MENA remains a region facing political and macroeconomic hurdles; however, one area where local consumers do not seem to compromise is on fragrances. The use of scent in this region is prolific and is deeply ingrained within society’s traditions and lifestyle. In light of this, despite the region’s challenges, there are promising opportunities for fragrances in terms of olfactory creations and market prospects that are based on shared cultural heritage.

The MENA region is home to over 438 million consumers with 40% of the population aged below 20, whereas 60% live in urban zones. In 2013, fragrances’ sales in MENA amounted to US$2.9 billion, whilst over 2013-2018, fragrances is expected to increase by US$1.3 billion, thus raising the region’s proportion of the global market from 6% in 2013 to 9% in 2018. The top contributors in 2013 were Saudi Arabia, UAE, Israel and Iran, representing 78% of MENA sales rising to 80% in 2018. The fragrance per capita spend is projected to reach US$8.8 in 2018, higher than the global average of US$6.8.

The MENA region, Saudi Arabia in particular, can expect further growth from consumer shifts following a fatwa released in 2012 that states that Muslims can now use alcohol-based fragrances in addition to those oil-based as the alcohol content is generally low.

The challenge remains that such market prospects hide behind the geopolitical and economic uncertainties afflicting parts of the region. The premium segment is also hampered by the black market and counterfeit brands, often sold at a fraction of the price of a genuine premium brand. Morocco, as well as markets like Egypt and Algeria, despite their substantial consumer base, are laggards. While demand and aspiration are there, distribution and affordability remain obstacles.

Macroeconomic progress vital for development

Saudi Arabia and the UAE, the two largest fragrances markets in the region, saw CAGRs of 13% and 7% respectively. This growth resulted, at least to some degree, from a favourable economic climate with rapid investment in infrastructure, including upmarket shopping malls that provide the distribution channels for the fragrances category to operate. Indeed, Saudi Arabia has become a popular shopping hotspot, especially for Hajj tourists, whereas the UAE attracts other wealthy foreigners who purchase premium fragrances amongst other luxury items.

Furthermore, the urban populations of Saudi Arabia and the UAE stand at 83% and 85% respectively, which are significantly higher than that for the whole MENA region, suggesting that urbanisation enables the fragrance industry to flourish.

Morocco’s latent market potential

Markets like Morocco could join the runners-up as they experience economic recovery. Morocco’s urbanisation stood at 60% in 2013, growing to 63% in 2018. This is likely to coincide with the emergence of a solider middle class and rising disposable income, possibly leading more consumers to trade up to higher-end products like premium fragrances.

Morocco’s fragrances category is still largely mass-dominated (76% of total fragrances sales in 2013) with direct sellers Oriflame and Avon leading the market with a combined 28% share in 2013. Direct selling remains popular as it facilitates the reach of consumers living outside major cities. Indeed, 36% of 2013 fragrance purchases were made via direct selling. Moroccans also tend to produce their own home-made solutions using home-grown ingredients.

Furthermore, Morocco could be a land of opportunity, being amongst the most politically-stable countries in the MENA. Morocco boasts a number of traditional ingredients including the eminent Moroccan rose, whose fame climaxes during the Morocco Rose Festival, and the Moroccan orange blossom, long used for its soothing properties, and is now increasingly a key ingredient in the production of fine fragrances, including Elizabeth Arden’s Red Door and The Organic Pharmacy’s Limited Edition Orange Blossom Gold Shimmer.

Fragrance use part and parcel of the region’s culture

Cultural similarities across the region mean that there exists potential for fragrances. Saudi Arabia and UAE are dominated by local players, primarily, Arabian Oud, Al Qurashi and Ajmal amongst others, that specialise in local preferences that reflect traditions, using ingredients like oud and amber wood. This also coincides with the widespread use of scent as part of consumers’ daily regimes. Indeed, consumers in the region spend about five times as much as European consumers on fragrances, whilst according to Abdulla Ajmal at Ajmal Perfumes, in an interview given for the Middle East Magazine, the average Arab male consumer uses three bottles of a scent simultaneously, one each for home, the car and the office.

In view of these practices, MENA markets like Morocco offer promising prospects, as such cultural habits can be a point of resilience to the category, although mass fragrances are still expected to lead over the forecast period due to attractive prices. Nonetheless, these factors are worth watching, especially for Arabian players, where capitalising on such cultural influences would extend their geographic coverage within the region.