In depth: A look at the beauty industry in Egypt, globally

CAIRO - 26 May 2018: With the Egy Beauty Expo set to take place in Cairo between September 1-3, 2018, and an ever-growing interest in make up, age-defying creams and various other cosmetic products, Egypt Today delves into the economics of the cosmetics industry in Egypt and the region; an industry that is expected to reach an accumulated $54.6 billion in absolute sales value of premium and mass beauty products internationally between 2016 and 2021.

A look back

Estimated at $444 billion in 2016, the global value for the overall beauty industry has seen more and more players joining the field in the past decade, many of whom have recently been pegged by research as game-changers, after they have influenced more and more men and women to use organic, free-from, cruel-free products.

Since the industrialization of the beauty industry in the early 20th century, according to Statista, the production and sale of cosmetics has been controlled by a mere handful of corporations, led by L’Oreal. Combined, the top 14 players in the field, all of which are multi-national, were estimated to make $130 billion in revenues for the financial year 2015/2016. Albeit records are not available to confirm the exact amount they made, an annual growth of four percent recorded for the year 2016, according to Statista, suggests that this estimation was surpassed. The global cosmetics industry is broken down into six main categories, namely, skincare, hair care, make-up, perfumes, toiletries and deodorants and oral cosmetics (oral products that maintain good oral hygiene and freshen the breath), leaving plenty of opportunities for companies from emerging markets to enter the industry.

Although multiple research and overall statistics suggest that the past 50 years has seen an overall increase in the purchase of products, with the beauty and cosmetics market estimated to generate $445 billion in global annual sales in 2018, the global financial crisis of 2008, according to “The Beauty Economy Outlook for 2018,” published by Custom Direct Promotions (CDP), has led many to shift away from premium products and toward mass products. Brands like Givenchy and Christian Dior lost ground to brands like L’Oreal and Inglot, which have enjoyed significant growth since then. In fact, L’Oreal’s Communications Manager in Egypt, Nahla Mokhtar, told Egypt Today that L’Oreal’s mission is to have 1 billion new customers globally by 2020.

After the 2008 crisis, the non-necessity sector really took a hit, leaving annual growth at a mere 1% in 2009. Despite the next year seeing a growth of 4.2 percent and 2011 and 2012 both witnessing an annual growth of 4.6 percent, the market once again took a hit with the rise of do-it-yourself treatments spread through social media, which have caused “seismic disruption as cultural ideals of beauty and diversity change,” according to “The Beauty Economy Outlook for 2018.” The report also finds that social media was also able to increase women and men’s interest in taking care of the way they look, leading them to focus more on their health and maintaining their natural glow. As a result, the report suggests that skincare will be the most profitable product category for the next few years. Likewise, according to a report published in May 2017 by Euromonitor International, a market research provider, social media and beauty bloggers have become “the key drivers of consumers’ preferences as they present the latest trends and offers from different sources and companies that may suit many consumers’ needs.”



Similarly Statista’s analysis suggests that skincare is set to remain the most profitable product category, projecting an annual growth of $20.1 billion between 2014 and 2019. Skincare has already had many great years, topping the global sales for a number of years now; in 2016, skincare accounted for 36.1 percent of the global market. Confirming this is the fourth quarter statement for the beauty and personal care industry, released by Euromonitor International in December 2017, which suggests that “Skincare experienced the most significant upgrade compared to baseline forecasts,” an achievement that they attributed to Brazil, Japan and key Western European countries, the main upgraders in the industry, gross domestic product (GDP) and product pricing.

In 2016 and 2017, the industry made a comeback, reaching a 10-year high of five percent annual growth, suggesting an even higher annual growth in 2018, according to Statista. Expectations, based on multiple research, suggest a 5-6 percent increase in 2018, and many researchers expect emerging markets to have a key role in the development of the industry.



Local products take the market

In a market strained by currency float, subsidy reduction, increasing customs (60 percent custom duty on cosmetics) and cost hikes due to increasing rents, salaries and more, and as prices of imported goods have more than doubled, consumers have had to cut back drastically on their use of luxury cosmetic products, especially since most are either imported or largely dependent on imported raw materials. Financial stress, coupled with the rise of Generation Y, which according to multiple research, are more concerned about the way they looks than any other generation that came before it, have left many looking for cheaper alternatives to imported cosmetic products. Now, it seems, is the optimum time for Egyptian companies like Eva, Luna and Amanda to increasingly penetrate the market.

“Egyptian pound flotation and the 60 percent increase in customs on cosmetics, which are considered luxury goods, led to prices of all cosmetic products and beauty services doubling,” Mahmoud el-Degwy, Head of Hairdressers Division at Cairo Chamber of Commerce, previously told Egypt Today. Degwy also commented on the opportunities available to local brands in the Egyptian market, suggesting that a decline in cosmetic products imported in 2017 has left local players at an advantage. “The percentage of customers who purchase beauty products decreased this year by 40 percent. Last year, Egypt imported cosmetics worth LE 5 billion ($275 million), this year the percentage has decreased to LE 3 billion due to the difficulties and challenges importers face, so the profits decreased by more than 50 percent.”

Local players who do not import their raw materials, meaning they are not subject to the decision issued by the Ministry of Health on March 22, 2017, stipulating that cosmetic-producing companies should pay LE 50,000 annually for each type of raw material imported, have a great advantage over international or multi-national brands. To help local players grow, Dewegy hopes that the government will ease regulations and procedures to facilitate production processes and cycles for Egyptian brands, especially smaller ones looking to grow. “We [Hairdressers Division at Cairo Chamber of Commerce] want the government to facilitate all possible procedures for Egyptian companies so we can overcome this crisis—they should not place more obstacles in front of investors looking to build more cosmetics companies in Egypt,” suggest Dewegy.

An article in Cosmetics Business, penned by Paul Cochrane, however, suggests that Egypt’s cosmetics market has actually “maintained steady growth over the past year [2017] despite the downturn in the economy, the depreciation of the Egyptian pound and some serious regulatory challenges.” With the International Monetary Fund (IMF) projecting Egypt’s economy to grow 4.5 percent in the fiscal year 2017/18, Cochrane expects that there is much room for the beauty industry to bloom and grow. In fact, research carried out by Euromonitor International suggests that the market actually grew by 18 percent year-on-year, in value terms, in 2016, totaling LE 1.6 billion ($90.5 million at the time). The study suggests that the positive performance of lip products, most notably, lipsticks, and brands growing ability to tailor their products and their adverts to attract more customers, especially those under 15 years of age, whom constitute 31.3 percent of the Egyptian population, according to the Central Agency for Public Mobilization and Statistics, has significantly increased their sales.



An older Euromonitor International published in 2013 had suggested that although the Egyptian economy is unstable, investing in the cosmetic industry guarantees long-term gains. As people limit their purchases due to financial difficulties, the report had argued, the volume of sales for many companies will decline alongside the declining demand. Despite “a mounting divide between demand for premium and mass products” and consumers becoming more “careful about spending,” the report concluded that due to significant price increases, growth in current value terms will continue, even as volumes sales growth rates lag.

In its 2018 Market Overview, Egy Beauty Expo suggests that the expansion of local manufacturing has strengthened the cosmetic sector, attracting more investors and tailoring to more consumers than before. Although the industry is far from failing, the Expo’s overview suggests, “fixing Egypt’s pharmaceutical pricing policy would help in increasing growth for the next five years for cosmetics, making generic cosmetics a better alternative for Egyptians who will be able to sell at more reasonable prices compared to international brands.” Still, the Expo suggests that there is increasing interest in investing in this sector in the Egyptian economy, highlighting the great opportunities available in the industry.

Commenting on this, Noha Lewis, Luna Brand Manager, previously told Egypt Today that they are welcoming new customers every day due to a rising inclination toward good-quality, cheaper products, as opposed to the more expensive ones. “Surprisingly, A and B classes who don’t suffer from a financial crisis tend to purchase our products these days. This explains people wanting to save more money as the crisis has also led to price increases on other goods, including food and transport,” Lewis explains.

Likewise, Reem Adel, Amanda Brand Manager, suggests that although price hikes have led to new customers choosing Amanda, there has not been an increase in their consumer base. In other words, Adel claims that those who have chosen to opt for Amanda due to its more suitable prices are balanced out by the number of customers who had to abandon Amanda’s products as they were no longer able to afford their prices. “It is a stable status,” Adel says. “We are forced to reduce the profits to cope with the market conditions as we can’t afford to bring down product quality.”



A report by Allied Market Research, market research provider, looking at global opportunity analysis and industry forecasts in Egypt between the years 2017 and 2023 seconds those suggesting that Egypt’s cosmetic market is experiencing growth driven by changes in lifestyle and increased demand for appearance enhancement. The report further suggests that there is a rising trend, led by social media platforms and the exposure of more herbal-based remedies and products, to use herbal cosmetics. Individuals who have sensitive skin or chemical-shunners are joining the consumer base of the industry due to this change, meaning that the consumer base is not simply growing in conjunction with population growth but also with the development of new products. Not to mention the growing halal cosmetics market that many Muslims have opted for. The global halal cosmetics market size was valued at $16.32 billion in 2015 and is expected to grow rapidly over the next few years.

In line with this, Irina Barbalova, manager of the research program for the global cosmetics and toiletries industry at Euromonitor International, confirmed to Cosmetics Design-Europe, “The needs, values and expectations of beauty consumers in 2018 will continue to evolve in tandem with behavioral shifts steaming from more health-conscious lifestyles, ethical consumerism, digital connectivity as well as more authentic brand experience.” The industry-expert further explained that “heritage brands” have to step up their game if they wish to stay relevant and contemporary.