Following their highly successful London summit in February exploring the Chinese beauty market, BeautyMatter and the British Beauty Council (BBC) got together again—along with communications agency Spring—to find out more about another region that remains a mystery to many: the Middle East.
The conference, called Deep Dive: The Middle East Beauty Opportunity, gave attendees valuable insights into the best ways to crack open a market (including Africa) that international beauty consultancy, The Red Tree, says will be worth about $47 billion by 2027.
Fiona Glen, Head of Projects at The Red Tree, opened with some other appealing stats including, for example, that the average age in Saudi Arabia is just 32; expats make up 75% of the population in the United Arab Emirates (UAE); and that populations in some markets are large—84 million in Turkey, and 36 million in Saudi Arabia. Saudi Arabia also has impressive digital consumption at 82%, one of the highest in the world.
However, Glen warned: “It isn’t as simple as thinking Saudi has a really big population, so I’ve got to be there. You have to dig into the demographics, media usage, and then overlay aspects of culture.”
She admitted that getting accurate and consistent data for the Middle East was difficult, partly because the region is ill-defined; sometimes grouped with Africa, sometimes the numbers are for MENA (Middle East & North Africa), or for the six GCC (Gulf Cooperation Council) countries. “The region is intricate and fragmented,” she added.
McKinsey data for MENA show that fragrance and haircare are the go-tos with projected sales by 2027 of $5.4 billion and $6.1 billion, and CAGR growth rates of 11% and 12%, respectively. Only Western Europe will have higher fragrance sales, and only North America, higher haircare sales.
A notable feature of the numbers is that MENA will be the sole global region to have double-digit growth from 2022-27 across all beauty segments: fragrance, color cosmetics, haircare, and skincare at 11%-12%. This is a big opportunity for newcomer brands.
For them, the route to market is crucial. Glen outlined six channels ranging from offline retail, e-commerce, and D2C (direct-to-consumer) to spas, salons, and clinics. “Spa is huge in the Middle East and a key distribution channel, and similarly the salon. Culturally it is a social thing that people do together on a weekly basis, like people might go to the pub in the UK.”
Strategies within Strategies
The Red Tree’s Amy Ward, a brand consultant in the Middle East, added: “The Middle East has so many nuances by country. You may find you need strategies within strategies, and this can affect your timeline or budgeting.”
She said that while the region does “do luxury very well,” and there are some amazing brand names in the market, the streets are not necessarily paved with gold. Consumers are price sensitive, and “they really do know how to check that they are getting value for money.”
As for operating models, there are essentially three: distributor; brand-operated and joint venture; or direct-to-retailer exclusives. Ward noted: “Typically brands have a distributor. This is not simply a wholesale partner. In the Middle East, you are essentially signing your business over and they are managing your brand in its entirety in the region—they have a lot of control.”
Choosing the wrong distributor can be costly in terms of potentially having to pull out and clean up the market afterwards. So getting this relationship right from the start is critical. Ward cited some examples where it has worked very well: Dr. Barbara Sturm; 111 Skin, initially in spas before moving into retail; and Anastasia Beverly Hills, one of the first international brands to “just take over the market.”
A joint venture path, with players like Chalhoub or Al Tayer, can also be fruitful, and a good example is Charlotte Tilbury, a brand several speakers mentioned in their presentations. Ward said, “To the consumer, Charlotte Tilbury is, in every way, independent but is actually an Alshaya partner, which has given it immediate access to key mall locations and power in the market.”
Other brands like The Ordinary and Sunday Riley have entered exclusively via Sephora with some success, but will likely remain tied to the retailer. Department stores are not a huge opportunity in terms of volume sales, but they do “create great brand curiosity” according to Ward.
In answer to a question from BeautyMatter President John Cafarelli about the non-luxury opportunity, Ward said that pharmacy offers a volume route in, as does e-commerce. She said that while the market is luxury heavy, there is room at the value end of the spectrum, but brands need to make decisions on their positioning before taking that path.