Colour Cosmetics in the UAE Research Proposal Topics

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Colour Cosmetics in the United Arab Emirates

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Colour Cosmetics in the United Arab Emirates

HEADLINES

• Sales of colour cosmetics grew by 10% to reach AED407 million in 2009

• Product and brand loyalty help colour cosmetics weather the economic downturn

• Lip products fastest growing in 2009 with 11% current value growth

• Unit prices remained stable in 2009, with 0.2% being the highest price increase recorded for a category

• Bourjois SA led colour cosmetics with an 11% retail value share in 2009

• Colour cosmetics is expected to post a constant value CAGR of 5% over the forecast period (Source Euromonitor, Colour Cosmetics in the United Arab Emirates , Category Briefing | 23 Jul 2010)

TRENDS

• In spite of the negative impact of the recession, demand for colour cosmetics has been driven by the expanding retail landscape, the constant launch of new product developments, the United Arab Emirates’ cosmopolitan population and, more importantly, the large young female population in the United Arab Emirates.

• Following the continuous success of Dubai’s Beautyworld Middle East, the capital Abu Dhabi is looking to capture a portion of the cosmetics and toiletries pie. In February 2009 Abu Dhabi hosted Beauty Vision, the capital’s Beautyworld-like exhibition hosting more than 100 companies and 1,000 products in the beauty and personal care industry. With its neighbour Dubai deeply immersed in the global financial crisis, oil-rich Abu Dubai aims to emerge as the region’s new business hub. Beauty Vision has offered its participants three unique experiences entitled Vision Match, Vision Concierge and Vision Lounge.

• Sales of colour cosmetics grew by 10% to reach AED407 million in 2009, although this was a lower growth rate compared to the 14% review period CAGR, which mainly reflected lower volumes as well as small- scale trading down to cheaper brands. Colour cosmetics continued to benefit from the United Arab Emirates’ cosmopolitan community, which translates into varied trends and looks, and hence varied colour cosmetics. Demand from Asian consumers is influenced by Bollywood stars, while local nationals and Middle Eastern expatriates follow the trends adopted by Middle Eastern pop and cinema stars, especially from Egypt and Lebanon. In addition, the exposure of the United Arab Emirates’ female consumers in general to the various nationalities present fuels demand for a wider and innovative range of colour cosmetics.

• Lip products posted the fastest growth in 2009 with a current value sales increase of 11%, thanks to the popularity of lipstick, which accounted for 75% of total value sales of lip products in 2009. Lip products benefit from the different nationalities present in the United Arab Emirates, each with different cultural preferences and styles. Within lip liner/pencil, Asian expatriates prefer mass brands Revlon ColorStay and Mikyajy 22K, while European expatriates mostly go for premium brands like Clinique Quick Liner for Lips.

• Eye liner/pencil remained a key category within colour cosmetics – with current value growth of 10% in 2009 and a share of 10% of total sales of colour cosmetics in this year. This growth was due to the well-established demand for eye liner/pencil in the United Arab Emirates, where the products have never gone out of style. Actually, demand has slightly shifted from the pencil to the liquid eyeliner, especially among high-income earners, in response to current make-up trends.

• Facial make-up products are the most popular in the United Arab Emirates, as they accounted for 33% of total value sales of colour cosmetics in 2009. Facial make-up is commonly used in contrast to eye make-up, lip and nail products. Facial make-up’s popularity also related to climactic factors as women generally do not prefer wearing eye make-up during the morning; but they would still use facial make-up such as a powder base or liquid foundation and blush.

• The large percentage of low- and middle-income Asian expatriates secures demand for economy and standard brands. In eye make-up, for example, certain brands have succeeded in establishing a presence among these consumer groups, namely NYX’s Candy Glitter Liner and Mikyajy’s Sabaya Glitter Eyes, thanks to their attractive prices of AED30 and AED45, respectively.

• Premium outlets such as Paris Gallery and Areej continue to add stores as new retail space becomes available. Premium cosmetics continues to be a significant product area among both resident consumers and tourists as prices remain just slightly above those available in duty free and significantly cheaper than in most Western countries. (Source Euromonitor, Colour Cosmetics in the United Arab Emirates , Category Briefing | 23 Jul 2010)

COMPETITIVE LANDSCAPE

• Bourjois SA led colour cosmetics with a retail value share of 11% in 2009, benefiting from the popularity of Chanel in the premium range and Bourjois in the standard range. The Chanel and Bourjois brands held retail value shares of 6% and 5%, respectively, in 2009, banking on their established customer loyalty and key launches during the year. Among a number of launches, Chanel launched the Christmas Collection Aqualumiere Gloss and Bourjois launched the Black Collection Ombre Stretch Eyeshadow. Bourjois was followed by L'Oréal Middle East FZE and Parfums Christian Dior SA, which held retail value shares of 10% and 8%, respectively. In terms of brands, Procter & Gamble Gulf FZE’s Max Factor and Beiersdorf AG’s Nivea Beauté were the two largest brands by retail value share in 2009, each with 7% of sales. Both brands elicit strong customer loyalty in the United Arab Emirates, a popularity that was pronounced amid the current crisis, which spurred demand for standard brands within some categories in colour cosmetics.

• Despite the stiff competition in the market, leading companies and brands managed to solidify their positions, banking on the entrenched customer loyalty. Such a scenario held true for companies like Bourjois SA, L'Oréal Middle East FZE, Estée Lauder Cos Inc and Givenchy SA. Both Bourjois and L’Oréal benefited from some growth in demand for standard colour cosmetics, while premium brands Estée Lauder and Givenchy banked on product innovation.

• Although colour cosmetics is dominated by international brands/manufacturers, domestic players have proved themselves capable of grabbing a portion of sales. Kamal Osman Jamjoom – owner of the Mikyajy brand – for example managed to increase its value share from 3% in 2005 to more than 5% in 2009.

• As usual, colour cosmetics welcomed tens of key new launches in 2009 within both the premium and standard segments. Despite the low consumer spending, customer loyalty for premium brands has supported new launches like Chanel Christmas Collection Les 4 Ombres, for example. In addition, with the smoky eyes trend in place, Benefit launched Smokin’ Eyes... Sexy Eye and Brow Makeover Kit. New arrival Smashbox was particularly active with some key launches like the Blockbuster Limited Edition Palette and the Photo Finish foundation range; likewise the Illamasqua brand was recently launched in the United Arab Emirates with the opening of Bloomingdales. The range of highly pigmented colours and product formulations have all earned Illamasqua a cult status that will appeal to many female consumers in the United Arab Emirates.

• There were several launches as well within the standard bracket like the Black Collection Crayon Effet Smoky Eyeliner Pencil and Effet 3D Max Lipgloss Rose Gold from Bourjois, Teint Delight Gel Foundation from Nivea and Minx Eye Candy from Mikyajy.

• The tax-free environment and 100% foreign ownership – at the Dubai Airport Free Zone – has been luring international companies to establish a presence in the United Arab Emirates. In 2008/2009, 10 colour cosmetics majors had established their regional offices in the free zone. These companies include Chanel, Clarins, Estée Lauder, Procter & Gamble, Loewe, Guerlain, Revlon, Givenchy, Christian Dior and Elizabeth Arden. (Source Euromonitor, Colour Cosmetics in the United Arab Emirates , Category Briefing | 23 Jul 2010)

PROSPECTS

• In addition to Beautyworld, Dubai is expected to maintain its position in the colour cosmetics business with two major projects underway, the Beauty and Fragrance Park in Jebel Ali and Beautyland in Dubailand. The Beauty and Fragrance Park is set to feature a number of facilities like test labs, wholesale outlets, cooling stores and warehouses, while Beautyland will house a beauty academy.

• Forecast data is being significantly restated versus last year’s forecasts. Although in the previous forecasts the impact of the global financial crisis on volume and value sales had been factored in, it had been expected that the economy would recover in 2010. However, the Dubai Debt Crisis that erupted in November 2009 has kept the local economy mired in recession, and the forecast have been accordingly revised with relatively slow growth in 2010 as well now on the basis that the economy will only recover in 2011.

• Colour cosmetics is expected to post a constant value CAGR of 5% over the forecast period. This rate is similar to that achieved over the review period, indicating that colour cosmetics in general is fairly resistant to economic pressures, but also that expected economic recovery in 2011 will sustain growth for the forecast period.

• The four main product areas in colour cosmetics – facial make-up, eye make-up, lip products and nail products – are all expected to post value CAGRs of around 5% during the forecast period. Lip products will be the most dynamic with a value CAGR of over 5%, taking into consideration that lip products are already fortified with moisturisers, which are in turn beneficial in the United Arab Emirates’ climate. In addition, lip products in particular are highly popular among the local population in comparison to other consumer groups.

• Competition across colour cosmetics is expected to intensify during the forecast period, especially with the expanding retail landscape and the expected recovery in the United Arab Emirates’ economy by 2010.

• In addition to promotional offers, manufacturers/brands are expected to tackle competition with a focus on pre-sales advice, where sales of colour cosmetics will depend on demonstrations and in-store trials, the same as fragrances. Actually, this trend was notably common during the last quarter of 2008, with leading premium brands like Clinique and Clarins holding promotional demonstration and trial sessions.

• Aside from the premium launches, the year’s standard launches from Bourjois, Nivea and Mikyajy are expected to prove highly popular, at least during the early years of the forecast period, as the United Arab Emirates’ economy is not expected to recover before 2011.  (Source Euromonitor, Colour Cosmetics in the United Arab Emirates , Category Briefing | 23 Jul 2010)

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