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Soaring demand powers personal care market

AZM Anas | December 31, 2013 00:00:00

Joynabennesa Smriti, who runs a one-room beauty services boutique in the city's Green Road area, is doing a brisk business, banking on a diverse clientele-from bankers to teachers and from nurses to even low-paid garment workers.

Armed with a diploma in beauty therapy from Singapore, the woman entrepreneur is promoting her sales pitch: Be beautiful getting healthier.

"Bangladeshi females are no longer ready to accept the long held notion-'Girls lose glory at 20'. Today, women in their 40s are happy to spend to maintain their beauty and fitness," the owner of Women's Heart said.  

Ms. Smriti is not alone who sees the sunny outlook of Bangladesh's expanding beauty and personal care industry.

Indian beauty and slimming services group VLCC has opened a new factory in Jamalpur-its first in the sub-continent outside India-to meet surging demand of skin-care, hair-care and sun-protection products. The company estimates that the combined value of fairness creams, face wash, scrubs, sun-care and hair colour products in Bangladesh is now Tk 6.5 billion-almost three times the size of 2008.

Despite being a majority Muslim nation, Bangladeshi girls are beauty conscious, helping to bloom personal care into one of the fastest-growing industries.

Positive demographics is also a key factor. Bangladesh, with the median age at 24 years, is among the world's youngest nations, compared with 36 years in China and 46 years in Japan, offering an attractive growth play for local and global beauty companies.   

Managing director of VLCC Health Care Sandeep Ahuja said "Increasing awareness about health and well-being is prompting (Bangladeshi) people to increasingly look at preventive healthcare as an option."

 "A growing middle class population with both the conviction and the resources to spend on wellness treatments are some of the factors that are contributing to Bangladesh featuring in a big way on the radar screens of beauty and wellness companies worldwide," he said.

With gross domestic product-the government's main growth gauge-growing 6.0 per cent over the past decade, Bangladesh's middle class, defined as those spending $2.0-$20 per day, is projected by the Asian Development Bank to swell from 30mn to 50mn by 2030.

VLCCA, in an analysis, said awareness about beauty and wellness is on the rise both in Bangladesh's urban and rural areas.

In northeastern Sylhet, Sharnalata Roy, owner of Women's Fashion World, said her salon is thriving on the back of money sent home by an estimated 10 million overseas Bangla- deshis who remitted a record $15bn in the 2013 fiscal year. A broad swath of half-a-million Bangladeshi diaspora living in the United Kingdom (UK) emigrated from the region.

"My business," she said, "is now far from being seasonal-young girls spend lavishly on beauty care throughout the year to get a good look".

Inclusive demand

An ex-Unilever veteran views Bangladesh as a 'unique' place for consumer goods purveyors, where they can rope in fat-walleted consumers and wage earners alike.

Noushad Karim Chowd-hury, now with privately-held conglomerate Abul Khair Group, said the working class is a big buyer of personal care products, boosting sales of miniature soaps, shampoos and skin care solutions.

 "This is the beauty of the Bangladesh market. You can't find this in Pakistan …," he told the FE.

They are workers like Dolon Aktar, who grew up in a rural backwater, but today works in Dhaka sewing denim pants for western high street brands. Having a morning bath with Tk. 3 Pantene mini pack shampoo has become a daily routine for her since landing the industrial job at Brothers Fashion in 2011.

 "I can't afford to buy anything big. So, I'm happy with mini-pack Lifebuoy soap and Pantene shampoo," said the 20-year-old girl, who takes home Tk. 7,500-8,000 a month that includes overtime payment.

Although Bangladesh is smaller than China, India and Indonesia, with a population of 154 million, its organised beauty and personal care market expanded from US$395.3mn six years ago to $687.2mn last year, according to data from Euromonitor International.

Including informal players, industry insiders say, the market could be worth $1.2bn annually.

The London-based market research firm reckons that the per capita spend on beauty and personal care products stood at $4.50 last year, just behind neighbouring India's $7.20.

Dr Zahid Hussain, lead economist for the World Bank, noted remittances, small businesses funded by microfinance institutions and manufacturing jobs have driven up rural people's income, which in turn has pushed up private consumption that today accounts for 75 per cent to 77 per cent of the Bangladesh economy.

Remittances amounted to nearly $15bn in the 2013 fiscal year, nearly double 2007's size. Apparel exports have also doubled in the past five years to $21.5bn and this industry employs four million workers, 80 per cent of them are women. The recent factory disaster and related workplace safety problems are not expected to dent growth in the medium to long term.

Dr Hussain said the personal care product sector has been a key beneficiary. "Demand for beauty care products has been boosted by increasing participation of women in economic activities outside home. This in turn has resulted from wider access to credit through micro-finance programmes and growing share of women in the labour force driven by the expansion of the garment industry," he said.

"In addition, surging remittances which increased income of rural households also contributed to demand growth," he said.

Prestige side

And growth in the sector is not just a mass market affair. Corporate executives in urban areas are growing high-end retail, visiting retailers such as Shoppers World, Vasavi, Almas Super Shop and Mustafa Mart.

While western shoppers, hammered by the economic crisis, were trading down, Bangladeshi consumers loosened their purses, helping the nation's beauty and personal care sector to chalk up 12 per cent sales growth, even in the height of the Great Recession-from 2008 to 2009, according to an FE analysis.   

Insurance industry executive Nasrun Fawzia Sarker doesn't belong to the bargain-hunters' brigade. For face powder, she uses L'Oreal, for lip liner her favourite is Noir and for sunscreen Lotus. "It's true I've fascination for brands. And that has been reinforced after my job," she said. "At the same time, I want to make sure that cosmetics products-whatever I use-are durable and don't harm my skin."

"We're bullish about the Bangladesh market and its bulging executive class," said Alan Loo, general manager of Mustafa Mart, inside Bashundhara City, one of the largest shopping malls in South Asia.

In less than a year of its operation, the Singapore-based shopping giant has opened its second outlet and appended luxury perfumes to the store collection as customer requests poured in.

"We've got an impressive collection.  Now you can buy a branded perfume at $150-$200," Mr. Loo told the FE.

Ronald Thomas, a manager with Vasavi in upmarket Gulshan district, said the retailer started life in 2006 focusing on white-collar professionals. "Our strategy has paid off - at least so far," he said.

Mohammed Ershad, a manager of Almas Super Shop at Gulshan, said the retail chain has poached corporate customers with its specialty on personal care products. "This is a paradise for those who care about beauty," he said.

Multinationals shining

A key supplier is Unilever Bangladesh, active since 1963. Once the Anglo-Dutch consumer goods goliath, whose local arm is 39 per cent controlled by the government, used to enjoy a near monopoly but today, the USA's Procter & Gamble (P&G), India's Marico and local players are throwing the down the gauntlet.

Nevertheless, Unilever is the market leader, achieving annual double-digit growth since the 1990s, its officials say.

Industry insiders say Unilever rang up Tk 37 billion in sales in 2011, the latest year for which figures were available. A company spokesman wouldn't comment on the results, however.   

Unilever and India's Marico, VLCC and Emami are the foreign players that have manufacturing facilities in the country. Unilever manufactures soap, shampoo, toothpaste, and many more while Marico, only listed foreign cosmetics group in Bangladesh, produces hair oil, officials of both companies say. Unilever also produces some of its global brands through third party manufacturers, with Reckitt Benckiser doing the same partnering with local Haque & Company Limited.

Fresh race

Like VLCC, India's Emami Group is also manufacturing men's fairness cream in its Gazipur plant. The company's upcoming products include Zandu Balm, Menthoplus, antisceptic cream Boroplus and Navaratna hair oil, according to industry executives.

Square Group's division Square Toiletries Ltd., with an annual turnover of Tk. 5.5 billion, has investments in expanding its health and hygiene production base-part of personal care products range.

Malik Mohammed Sayeed, head of marketing at STL, said the major expansion will enable the company to scale up manufacturing of baby diaper and sanitary napkin, where it is already the market leader.   

Supply chain

While multinational companies mostly rely on local distributors to peddle their personal care products, some have their own sales teams.

Germany's Beiersdorf AG has tied up with ACI Group to distribute its Nivea brand products to retailers and the USA's Johnson and Johnson and India's Cavinkare have teamed up with Multimode Group's MF Consumers Limited to market their branded products locally. Indian Godrej also tapped ACI to market its hair care products while Dabur India has a joint venture with ACI to distribute hair oil and shampoo.  

Transcom Group is the sole distributor of L'Oreal whose products include Garnier shampoo, Maybelline mascara and Lancôme creams.

Although L'Oreal's market share in Bangladesh is not so big, the world's biggest cosmetics company by sales is opening up alternative distribution channel using VLCC outlets to boost sales of its professional product range, officials say.

In urban areas, cosmetics companies have also forged partnerships with superstores and convenience stores by deploying dedicated sales teams as new distribution channel. In mega-malls, Unilever and P&G have dedicated corners, where armies of beauty consultants offer tips in a bid to woo clients.

Rollercoaster exports

K.A. Farhad, head of exports with STL, said local cosmetics and toiletries makers are gradually expanding their global footprint and three have already broken into the international market.

STL has managed to springboard into more than 20 markets, including the UK and the US, he said.

Mr. Farhad said that Keya Cosmetics and Kohinoor Chemicals have gained foothold in India, Nepal and Bhutan markets.

While local cosmetics groups are trying to penetrate more markets abroad, exports are still insignificant. Shipment of personal care products dropped to 0.77mn in 2013 fiscal year after peaking at $1.06mn in 2012 fiscal, state-controlled Export Promotion Bureau (EPB) data showed.

Md. Abdur Rouf, a director of EPB, said small promotional budget is the main reason why Bangladeshi cosmetics companies are sidelined in the global race for securing markets.

"You need to win consumers. Multinational companies spend billions of dollars in ads," he said.

Officials of the companies, however, said 20 per cent depreciation of the Indian rupee in the past one year weighed on cosmetics and toiletries shipment to India and Bhutan, with Bangladeshi products losing competitive edge there.

Bridging gap

Despite domestic production, imports of cosmetics and toiletries remain robust, with Unilever and P&G being top importers.

Jahangir Alam, general secretary of Bangladesh Cosmetics and Toiletries Importers Association said last year, the country imported cosmetics and toiletries products worth Tk 40bn, with Unilever alone accounting for 80 per cent of the total.    

The bulk of cosmetics supplies comes from US, UK, Singapore, Thailand, China, India, Pakistan and the UAE's Dubai, said Mr. Alam, who owns Tri-state International, a top importer.

Rosy outlook

From Women's Heart to VLCC-every company in beauty business is upbeat about the growth prospects of Bangladesh’s personal care industry.

Ms Smriti said "Even males are increasingly becoming conscious about their beauty."

Mr. Ahuja agreed, saying: "We expect the Bangladesh market to maintain its growth momentum for quite some time in the future."  

Currently, VLCC runs two slimming, beauty and fitness centres in the city's upscale neighbourhoods and the company MD said they have drawn up an ambitious expansion plan, which includes establishment of more wellness centres, expansion of the distribution network and also the opening of a VLCC Institute of Beauty and Nutrition.

"So far, slimming services are our biggest business in Bangladesh," he said.


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