Northern Lights

Published: 2-Jul-2009

It’s estimated that Northern Africa’s C&T industry, including Algeria, Tunisia, Morocco, Egypt and Libya, has a market worth close to $1bn and this is growing year on year. Nadia Di Martino reports on an increasingly prosperous part of the world

In 2008 Northern Africa as a region registered growth of 9% on 2007’s figures, according to ECM?calculations. However, it remains a challenge to figure out precisely the data and trends of the C&T market in this group of countries because there are no official C&T trade bodies throughout the region and counterfeit products, introduced via a variety of hard to monitor channels, are in abundance.

?Besides country differences themselves, most of the population in Northern Africa is not economically affluent and as a result of this people tend to buy illegal C&T products rather than the genuine articles. These can be as much as 20 times cheaper than the legitimate products. Local manufacturers are trying to react to counterfeits by raising their quality control standards and gaining certification such as the ISO9001 to attain credibility in national and international markets but it is still an uphill battle.

The mass market represents the only real alternative to counterfeit products, with affordable prices and the comfort of recognisable international brands. It’s the most promising channel in Northern Africa while premium brands aren’t popular as only a minute percentage of the population can actually afford them.

While Libya only has a small C&T sector, Egypt, Algeria, Morocco and Tunisia boast markets that are worth keeping an eye on. Morocco has many natural ingredients at its disposal while Egypt holds an enviable position as the gateway to both the continent of Africa and to the lively Middle East. In 2008 Tunisia, although only a small C&T market, reported an impressive 10.9% growth on 2007, the highest growth rate of the whole Northern African region that year.

Libya - A unique case

Libya is a quite unusual case. The country, under the authoritarian Colonel Gaddafi regime, has plentiful oil and gas supplies but has been in a period of adjustment for the last few years. Diplomatic relations with the US have been rebuilt after almost three decades in which the Northern African country figured on the US terrorism suspects list. The last official statistics for Libya, in any sector, date back to 2006. Traditional market research tools are rarely used in the country and information sources are practically absent giving little to go on.

According to the most recent available data, Libya imported C&T products worth t7.6m in 2006. Toothpaste was the most imported product with a market value of t1.3m, followed by lip products, deodorants and antiperspirants. Europe, China and Tunisia are among the key countries which Libya deals with in this area, according to ICE Tripoli. No export of C&T products is recorded and the Libyan C&T market is relatively small.

Egypt - Economic expansion

In the 1980s Egypt’s economy and industrial sector developed greatly and started to attract investment from foreign companies. Local manufacturers also benefited from this positive working environment. Almost 30 years later Egypt is the best performing country in the Northern Africa region, with a C&T market recording sales of t414.8m in 2008. Sales increased by a noticeable 8.8% over the previous year, despite most Egyptians dealing with tightening budgets. Poverty remains widespread in the country and many consumers still view cosmetics as superfluous compared to basic necessities such as household products for example. The mass market is for this reason the favourite channel in which cosmetics are bought, since the products are more affordable. Many manufacturers have also launched miniature versions of products, which Egyptians seem to prefer because of their more practical appeal and affordability.

Hair care is a key sector in the Egyptian C&T market, as in the Middle East as a whole. Egyptian consumers, who often have curly hair, have the need for products which have smoothing qualities. In 2007, hair care constituted 24% of total sales in the Egyptian C&T market with a staggering growth of 12% during 2006 alone.

Meanwhile, at the other end of the scale are depilatories. Women prefer to use the traditional halawa (sugaring) method in which a mix of caramelised sugar and lemon is spread onto the skin for hair removal. Because this method is cheap and effective women tend not to purchase depilatories, thus the market is small.

Large multinational companies play a dominant role on the Egyptian market. Swedish direct seller Oriflame has had great success there proving that consumers are happy to get advice in the area of cosmetics. Meanwhile, personal care giant Procter & Gamble was one of the first foreign companies to establish offices in Egypt and today P&G Egypt is becoming the main source of export trade in the Middle East.

There are also a number of small to medium sized local companies in Egypt, such as Nefertari, which do good business. The company offers 100% natural, handmade and earth friendly body care products using only Egyptian ingredients and contributes to community development by employing a predominantly Egyptian workforce. Other popular Egyptian companies include Fatiat El Ghad, Chantel (Qualy Beauty) and the Bel Clinic.

Morocco - A serene approach

In 2008 the cosmetics market in Morocco recorded total sales of t361.3m, jumping by 7.7% on the previous year. While value sales recorded growth, volume sales were slower compared to previous years. The rise of fuel prices and recent increases in manufacturing costs in the country have influenced this market greatly and look set to continue to do so.

Counterfeits also remain a huge problem in the country. Dounia Mounaouir, product manager at Beiersdorf Morocco, says: “Black market items in Morocco are still the first to reach the population.

?Apart from counterfeits, arriving mainly from China, we also have the problem of smuggling goods in this country, with the majority of these coming from Spain. Consequently only about 60% of cosmetics sales happen via the traditional channels unfortunately.”

But it’s not all bad news from Morocco. Mounaouir adds: “The world is facing a global recession but for countries like Morocco, that have already gone through many economic crises, it’s easier. The attitude is serene and so are forecasts and we are not expecting stormy times ahead.”

The Moroccan C&T market is reaching maturity at the moment and this is why many international companies are extremely focused on boosting their sales here. To do so, they are diversifying their offerings greatly by using original ingredients and manufacturing products with added value benefits such as toothpastes which whiten teeth at the same time as cleaning them.

Multinationals still dominate the Moroccan C&T market, with L’Oréal leading the field. However, local manufacturers have started to compete more actively but there are not many ‘made in Morocco’ type products that are exported. Local brands include Lesieur Cristal, a company that manufactures oil both for culinary and cosmetics purposes – this is a fairly common trend with Moroccan companies. Lesieur Cristal manufactures the Taous brand which sells soaps like Taous Lavande and Taous Olive. Taous, very popular in its native Morocco, is a natural product said not to cause allergies or irritate the skin, so is said to be ideal for sensitive skin, a growing market.

Another local company, Azbane Laboratoires, which also has a subsidiary in Paris, was founded in 1970 and manufactures cosmetics, perfumes and personal hygiene products. This family business, with a recently opened branch in California, exports its wares to Africa, the US, Europe, Korea and Japan.

“In Europe we distribute our Kaeline and Amalia brands, based on argan oil, but we also have our own line of cosmetics – Azbane Beauté. Exports represent about 40% of our turnover and this in total is over $15m this year with our annual growth standing at around 20%.” says Saïd Azbane, technical director for Azbane Laboratoires.

“The work we do providing toiletries to hotels is very successful for us and the company has ?signed contracts with most of the big chains including Sheraton, Holiday Inn and Hilton in the country.”

When looking at the retail channels, chain stores like the perfumery Marionnaud have entered the Moroccan market, gaining success rapidly while small perfumeries have also performed well. The mass distribution channel has seen business increase, thanks to the lower prices it offers. The toughest competition in this channel is represented by Marjane Holdings, with its Marjane hypermarkets and Acima supermarkets.

Mounaouir says there is definite focus when it comes to the main C&T trends in Morocco: ”There’s a huge request for whitening products at the moment both for skin and teeth. The best selling products are multifunctional skin care products like Nivea Crème and Atrix while recently there has also been more interest in personal hygiene products such as deodorants which is important in such a hot country as this one. In general, consumer purchasing power remains weak but things are changing. Women are starting to gain employment and consequently care more about their appearance because they have the income to spend on maintaining it. This also means that they have higher expectations from the products they purchase.”

Certainly the Moroccan C&T sector is a lively one and despite its ups and downs forecasts indicate that it will continue to grow steadily.

Algeria - Struggling to settle

Algeria has the majority of its wealth as a country from oil and gas reserves but despite this there are several factors hindering the full development of its C&T market. While in 2008 it totalled t226.1m, an 8% growth on 2007, these results were based primarily on high unit prices rather than a rise in consumer demand.

Most Algerian consumers have a low income and generally find it hard to justify spending money on C&T lines. More pressingly, ongoing political extremism is another issue that Algeria faces as a country despite the fact that since 2007, when there were a number of bomb attacks, the situation has been much calmer. But because of this instability, foreign companies tend not to set up sites or offices in Algeria. Products enter the country mainly as counterfeits or via the black market at cheaper prices, a story which is becoming ever more familiar.

There are local cosmetics companies operating in Algeria but their value share of the market remains far smaller compared to multinationals because their products are much cheaper. Among them, Wouroud Cosmetics manufactures soaps, body care, hair care and skin care products.

The rise of working women and families with both partners in employment is slowly changing consumers’ purchasing power. As a consequence, the latest trend in Algeria is a shift from the limited use of basic cosmetics, like soaps and shampoos, to the use of more sophisticated items. Middle income consumers are now becoming the target of many cosmetics companies and mass market brands at affordable prices do well, provided they make an effort to invest in marketing and distribution.

Tunisia - A different story

With an impressive growth rate of 10.9% during 2007, Tunisia finds itself in a very healthy situation. Different from the rest of the region, Tunisian women enjoy more freedom and are used to being in employment and shopping for cosmetics regularly. With a C&T market standing at t103.5m, Tunisia has been flooded by anti-ageing products in the past few years and this has given the market a real boost. Women in Tunisia are quite influenced by multinational advertising and this has helped to promote sales in turn. Consumers – women in particular – have even started to demand Botox procedures in the quest for younger looking skin. No surprise then that skin care was the best performing channel in Tunisia last year, with increasing demand for specific facial treatments.

Multinationals see that their offerings in Tunisia could reach a much wider audience and so have been targeting the country quite heavily. Tunisia is also dominated by multinational giants with Unilever and Henkel at the top of the list. Recently, local companies have also started to develop their own brands such as Laboratoires Jasminal and Nihel by Stuppem. And the country certainly doesn’t lack local manufacturers and a willing workforce even though any real challenge to multinationals is yet to emerge.

Tunisian company Maison de senteurs was founded in 2001 and manufactures body products with natural plant extracts based on oranges, jasmine and rose. It has recently launched Gamme Hammam, a line that tries to recreate the pleasures of the hammam, or Turkish bath, in order to relax and eliminate toxins. The line features the Savon Gommage Jasmine au particules de son soap, massage oils such as the Huile de Massage Myrte and gift sets for the complete at-home hammam experience.

As the battle against counterfeits and smuggling intensifies and the social role of women evolves, it is possible to forecast that C&T markets in Northern Africa will evolve. In particular, multinationals will invest more, making the mass market develop steadily.

Information has an essential role to play in the region as consumers need educating when it comes to purchasing cosmetics and toiletries. As long as big companies with big budgets want to invest in this group of countries, the future looks promising. And a bit of healthy competition between them can be no bad thing either.

Going back to nature in Morocco

Ingredients like argan oil and henna are indigenous to Morocco and are commonly employed in skin care and hair care products throughout the world.

Argan oil, which interestingly has no smell, is sometimes defined as the Moroccan liquid gold. It comes from the almonds of the argan tree which grows exclusively in the south west of Morocco because of its Atlantic climate and the specific type of soil found in the region. Here, in the province of Essaouira in particular, there are a number of co-operative projects where locals, mostly women, manually pick the nuts. It takes 40kg of almonds to produce 1 litre of oil and this means roughly 16 hours of work. Because of this effort, argan oil is sold as a luxury product in Morocco – it is both rare and precious and the tree from which it’s extracted is in danger of extinction.

Argan oil has been known for centuries for its cosmetic, pharmaceutical and nutritional benefits. It is said to stimulate cell renovation, restore skin barrier function and eliminate free radicals. It is used for its anti-ageing benefits and to moisturise the skin, is good for fragile or split nails and for dry hair to recover brightness and shine. It is also very suitable for body massage to soften the skin and is often used by masseurs.

Another ingredient from Morocco is Rhassoul (also called Ghassoul). This is natural clay extracted from the Atlas Mountains which stretch across Morocco, Algeria and Tunisia. Mixed with water, it becomes a very soft paste that absorbs grease and impurities. Like argan oil, Rhassoul has been employed for centuries in Morocco and is used for nourishing hair and skin.

The orange blossom flower, found in the southern city of Marrakech, is another traditional ingredient from Morocco. The flowers of oranges have been used for a long time because of their aroma and their calming and soothing properties as well as now often featuring in the production of fine fragrances.

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