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The New Fragrance Mecca: Africa/Middle East

By: Briony Davies, Euromonitor International
Posted: October 3, 2008, from the April 2006 issue of GCI Magazine.

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Mass fragrance sales grew 4.5% in current value terms on 2004. The rise in visitors during Haj and Omrah seasons contributed greatly to this growth as lower-end fragrances were the gift of choice for family members that had not made the journey. Religious and cultural influences also shape the fragrance sector in Saudi on an ongoing basis—oriental perfumes such as oud, sandalwood and amber account for a high proportion of sales as they are permissible in Islamic tradition.

Israelis Prefer Premium

Israeli fragrance sales eclipsed $130 million in 2005. Economic recovery through 2004–2005 stimulated growth, especially in the premium category. In 2005, the share of premium fragrances accounted for a weighty 88% of total sales, illustrating the fact that Israeli consumers perceive the high-end products as necessary symbols of status. With a current value growth rate of about 5.9% in 2005, men’s premium fragrance was the most dynamic subsector. In addition to the economic improvement that was responsible for this growth, there were supplementary factors that stimulated value sales.

Intense Growth

Israel’s position as the third largest market for fragrances in AME will be sustained to 2010 as economic recovery fuels fragrance development. Growth rates are expected to be stimulated by two additional factors. The first, retailers will continue to implement large scale discounts on premium fragrances, especially during holiday periods, in order to increase footfall into their stores. This strategy is most likely to be adopted by the supermarkets/hypermarkets channel, many of them started to invest heavily in developing in-store pharmacies over the last year to stave off competition from the pharmacy/drugstore channel. The global trend for discounting is extending to the AME region. The second factor is that major players in the fragrance environment will continue to introduce new brands at a rapid rate to take advantage of Israeli consumers’ high awareness of new product development and Western fashion trends.

Cause for Concern

Multinational manufacturers across the region are increasingly aware of the threat posed by counterfeit cosmetics on brand value and consumer safety; this makes them eager to rally for tighter regulations to inhibit grey market sales in AME where counterfeiting is endemic. Indeed, counterfeiting appears to be on the increase in global terms with an 800% annual increase in the number of fragrances seized at the EU’s external borders, according to the European Commission. In South Africa, a concern for the established cosmetic houses is the flow of cheap Chinese imports onto the fragrance market. The strength of the rand has given locals an opportunity to bring in these cheap brands to attract the lower-income groups.

Some of these are exact rip-offs of established brands, but because the names are slightly different, they are legal. The high price of fragrances in Egypt, where the devaluation of the Egyptian pound against the dollar has caused a bottle of Chanel No. 5 to retail at more than the average monthly salary, is driving the contraband/parallel fragrance market forward. Those who can afford to purchase premium products still prefer to buy from retailers that sell cheaper smuggled fragrances.