Premium Positioning; Innovative Retail Hallmarks of Middle East Beauty Market

Contact Author Gayatri Bhasin, Euromonitor International
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  • The beauty market in the Middle East is characterized by international brands, which are likely to continue to consolidate their leading positions over the next few years.
  • Fragrances is the only major category in beauty where local brands and companies play a significant role.
  • Both premiumization and the dominance of multinational brands are being aided by the expanding retailing landscape in the United Arab Emirates, which is becoming more innovative in an effort to maintain consumer interest.
  • Iran and Saudi Arabia will outpace the United Arab Emirates in terms of growth, fueled by larger populations and more diversified economies.

Beauty in the Middle East, particularly in the Persian Gulf, is a massive market for international brand owners—with the United Arab Emirates (UAE), Saudi Arabia and Iran being the biggest in terms of overall and per capita sales, along with Israel. However, although the UAE has seen growth rates for beauty products slow considerably over the last two years due to the impact of the economic recession, Iran has seen burgeoning growth in most categories, according to market research company Euromonitor International.

The UAE remains a strong player in beauty, attracting the world’s most significant beauty brands and retailers. Despite the financial constraints experienced by many in the UAE over the last two years, women have continued to purchase beauty products, albeit at a slower rate, perceiving them as an affordable luxury and a harmless indulgence.

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The beauty market in the UAE and the Middle East, in general, is characterized by international brands, premiumization and an expanding retail landscape. According to Euromonitor, the most significant categories in value terms in the UAE are color cosmetics, hair care, fragrances and skin care. Women in the UAE spent an average of $73 on color cosmetics in 2009, compared with $69 in the U.K. and $53 in France, indicating how important a market it is for these products.

International brands dominate the competitive landscape in the Middle East, with the big multinationals such as Procter & Gamble, Unilever, L’Oréal and Beiersdorf leading the way. Fragrances is the only major category in beauty where local brands and companies play a significant role. The three major domestic fragrance manufacturers Ajmal, Rasasi and Designer Shaik accounted for a 21% share of value sales in 2009, according to Euromonitor. These companies benefit from strong demand for traditional perfumes from the affluent Emirati population, demand which is not as sensitive to the current economic climate. This also explains why fragrances saw the smallest decline in growth in 2009 when compared with other categories, falling to 9% from an average of 12% between 2004 and 2009. While domestic manufacturers are making their mark on the fragrances category in the UAE, large multinational companies tend to dominate the beauty landscape and are likely to continue to consolidate their leading positions over the next few years.

Premiumization has also been a key trend in the UAE. While it was expected that a period of economic difficulty would signal a sharp shift away from this trend, it has proved more resistant. Fragrances and color cosmetics are the two categories with significant shares for premium products. The share held by premium fragrances remained stable in 2009, at 72% of value sales. Fragrances is mainly driven by premium products, which is why it is one of the most significant categories in beauty, and this position was sustained throughout the financial instability of 2008 and 2009. The share of premium color cosmetics fell by one percentage point to 45% in 2009, which is still higher than the average split between premium and mass products 2004–2009. It is increasingly evident that premium beauty products are considered an affordable luxury by women who may be willing to spend that little bit extra on a fragrance or a lipstick while foregoing a new outfit or piece of furniture, which would represent a much bigger overall spend.

Expanding Retail Landscape

Both premiumization and the dominance of multinational brands are being aided by the expanding retailing landscape in the UAE, which is becoming more innovative in an effort to maintain consumer interest. Beiersdorf consolidated its position in the market over the last few years by opening Nivea Haus in Dubai at the end of 2008, a spa that uses only Nivea products for various pampering and healing treatments and also allows clients to purchase their Nivea products on-site. A unique concept for a mass brand, this has increased the brand equity and visibility of Nivea in the UAE.

Major department stores such as Harvey Nichols and Debenhams, and specialist beauty retailers such as Faces and Paris Gallery also play a significant role in beauty sales, particularly with regard to fragrances. These stores post a weekly ranking of the top 10 best-selling women’s fragrances. The list appears on a special stand with a tester for each brand next to its ranking, gently encouraging shoppers to try them. Other than these specific concepts, the retailing landscape in the UAE in general lends itself to promoting beauty care sales, with several malls across the country offering department and specialist beauty stores. Visiting these is one of the main pastimes of most residents and tourist alike.

Immediate Outlook

Although growth of beauty in the UAE weakened considerably in 2009, it still remained relatively healthy largely due to factors like premiumization and the expanding and increasingly innovative landscape that continued to fuel demand despite the financial crisis. It remains to be seen whether fragrances, skin care and the like can continue to weather the storm in 2010 as financial constraints increase for consumers, retailers and brands alike. It is likely that even the more resilient categories of fragrances and color cosmetics will face more severe challenges for the remainder of 2010 as consumers continue to tighten their belts and brand owners and retailers are unable to offer more attractive prices. According to Euromonitor research statistics, it is likely that countries such as Iran and Saudi Arabia will outpace the UAE in terms of growth, fuelled by larger populations and more diversified economies.

Gayatri Bhasin is a Middle East research analyst for Euromonitor International.