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Emerging Markets: A New Spin

By: Briony Davies
Posted: August 28, 2008, from the April 2007 issue of GCI Magazine.

Although the markets in Brazil, Russia, India and China are still going strong, manufacturers are eager to discover the next “it” market for cosmetics and toiletries. Euromonitor International’s latest findings indicate a number of promising markets not currently getting the proper amount of attention. Analysis of the less dynamic markets also reveals countries best avoided if a manufacturer does not already have an established presence. South Africa, Vietnam and Pakistan are among the increasingly hot markets, while both the U.S. and Germany rank, yet again, among the worst performers in global cosmetics and toiletries.

South Africa Emerges

South Africa’s developing middle class has put the country firmly on the C&T industry’s radar, and its strong growth over the past five years is expected to continue through 2011. South Africa has a sizeable and fast-growing black middle class—nonexistent under pre-1991 apartheid—estimated at 15% of the total population of 49 million in 2005. Overall, blacks’ disposable income surpassed that of the white population for the first time ever earlier this decade, and this new-found wealth is stimulating sales across cosmetics and toiletries. The $2.1 billion industry grew by 47% between 2001 and 2005, and is set to grow by an additional 5% each year through 2010. Still one of the lowest-spending markets in the world in per capita terms, South Africa nonetheless offers sustained value growth into the longer term and fresh opportunities in an industry that is increasingly facing tough competition and market saturation in the key, high value countries.

Dynamism in South Africa’s cosmetics and toiletries market cannot solely be attributed to improved economic conditions; industry players can also take some credit. In catering to the unique set of needs of the country’s black middle class, these players have created one of the world’s largest ethnic hair care markets—as well as a sizeable ethnic market in skin care. Black South African consumers have shown a desire for deep conditioning products that will relax and tame unmanageable frizz. Forty-three percent of all hair care sales in South Africa come from the ethnic category, with the strongest demand for conditioners (60%) and up-market salon hair care (58%). However, offering functional benefits is not enough to attract consumers, and this is where South Africa differs from other ethnic cosmetics and toiletries markets.

Historically, products made especially for black South Africans were cheap and poorly made. As a result, this group equates price with quality, and disdains mass brands that overtly cater solely to black consumers. Encouraging these consumers to trade up is, therefore, of little difficulty, but mid-priced brands do have to be careful to keep packaging of their ethnic line extensions similar to that used for their regular range. The sole indication that Unilever’s olive oil Sunsilk shampoo is aimed at the ethnic market is the substitution of a black model for the white model featured on the labels of its other products.

It seems South Africa’s ethnic population is willing to trade up to premium-image hair care tailored to its needs; the challenge for manufacturers is to encourage the same kind of spending from the country’s white consumers. The lessons learned from developing a thriving ethnic hair care market are now being taken into other sectors, particularly skin care—although color cosmetics, depilatories, bath and shower products, baby care and deodorants also hold promise in South Africa’s newly prosperous market. In fact, South Africa could be key to unlocking growth in Africa as a whole.