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The 67 countries that constitute the region of Africa and the Middle East (AME) are markedly different in economic, religious, social and cultural terms. Several countries, especially those in the Middle East, have high levels of per capita income and strong growth prospects, while some parts of southern Africa are impoverished. Such discrepancies mean that country markets for consumer packaged goods are vastly different; this is apparent via analysis of the fragrance sector, which varies greatly from country to country. In this global report, Euromonitor International explores the region’s key markets of South Africa, Saudi Arabia, Morocco, Egypt and Israel, and highlights how fragrance manufacturers and retailers need to be aware of country-specific customs to ensure success.
With sales of $300 million in 2005, the South African fragrance market is the foremost in AME, and is almost twice the size of the next largest, Saudi Arabia. Fragrance also is one of the fastest-moving sectors in the South African market with consistent double-digit growth recorded over the last five years. The mass segment clearly is driving sector expansion as the emerging empowered black female middle class trades up from body sprays (classed as deodorants) to “bridge fragrances.” Particular to South Africa, bridge fragrances blur the gap between perfumes and body sprays and, according to Euromonitor International’s definitions, are classified as mass.
Indigo, a local player, is exploiting the potential in this area and has seen its share of the fragrance market increase rapidly from 18.5% in 2004 to 21.1% in 2005. This is attributed to its distribution of six of the top 10 fragrances on the market. In contrast, expansion of the men’s market has been promulgated by the premium segment—men in South Africa tend to view fragrances as noncommodity items, although the decision to stock fragrances made by Markhams, a leading men’s clothing retailer, has increased awareness of the sector.
Changes in the retail distribution structure in South Africa also are providing impetus to fragrances as a whole. Edgar’s, a leading department store, has increased both its number of outlets and floor space dedicated to fragrance sales. Further expansion of stores that offer credit—including Edgars, Markhams as well as Truworths and Foschini’s—are likely to drive sales given that fragrances are considered too expensive to purchase with cash. According to Nielsen’s global Consumer Confidence Index, South Africans show a very different spending pattern to the rest of the world when it comes to the use of spare cash. Once consumers have paid off essential living expenses, the average global consumer puts money away as savings. In South Africa however, more than 50% of consumers’ primary use of surplus cash flow is to pay off debts, credit cards and loans. As a result, department stores will triumph over pharmacies in the five years to 2010, and are expected to take the lion’s share of sales in AME’s largest and most dynamic fragrance market.
With 2005 sales of $194 million, fragrances are similarly important to the Saudi Arabian cosmetics and toiletries market, accounting for 14% of total sales in 2005. In contrast to South Africa, the premium fragrance sector is almost twice the size of mass, with premium making substantial gains over mass (7% year on year growth in 2005 vs. 4.5% for mass) as per capita incomes rise as a result of increased GDP. In 2005, fragrance manufacturers attempted to exploit increased consumer confidence via a flurry of new product launches from both international and domestic players. Dramatic changes in shares occurred in 2005 as Mahmoud & Abdel Khalel Saeed, owner of the largest production facility in the Middle East, increased its share of sector sales by 1.6 percentage points to knock LVMH Moët Hennessy–Louis Vuitton off the top spot. The Body Shop performed well in mass fragrances in 2005 due to its “masstige” repositioning and the popularity of its customized initiative, indicating that Western trends are being transferred to Saudi Arabia. Indeed, many products are launched in the Gulf before Europe due to high demand by upper-class Saudi consumers.