• Thursday, July 18, 2024
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BusinessDay

Beauty product sales defy Nigeria’s economic woes, hit 15-yr high

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Retail sales of beauty and personal care products in Nigeria surged to the highest level in at least 15 years despite the country’s mounting economic headwinds, according to a new report by a global market research firm.

The report by Euromonitor International shows that sales in the formal market rose by 23 percent to $1.64 billion in 2022 from $1.34 billion in 2021.

“The inflationary conditions significantly weakened consumer spending power, leading many to reduce or stop spending on non-essential items. Therefore, while a strong rise in unit prices drove retail value growth, volume sales were challenged,” it said.

It said the majority of larger, essential categories saw retail volume growth as bath and shower, oral care, skin care, and colour cosmetics products are viewed to be essential by many consumers, particularly females.

“Despite a reduction in consumer spending power, retail volume growth continued to be positive,” the report said.

Read also: Demand for lightening beauty products surge as more Nigerians seek beauty routine

It said a growing urban population also increased the consumer base, while strong brand competition helped widen the availability of various brands, particularly affordable branded options.

“Although business is not like before as a result of the value of the currency, it is the cheaper brands that are driving the growth in the market,” Gbemisola Adebayo, founder and chief executive officer at Hegai & Esther Cosmetics, said. “I can’t even count the number of beauty brands that have emerged in the industry last year. And most brands are starting to be creative in their pricing strategies and marketing.”

She said even though it is not proven, beauty comes next after food and tech. “In Africa, Nigeria is number one when it comes to beauty.”

A breakdown of the report shows that skin care products contributed most to Nigeria’s beauty and personal care market with $382.7 million. Hair care recorded $270 million; deodorant, $242.1 million; and bath and shower, $229.4 million.

“Some product areas have seen strong dynamism during the year, as innovative products boost growth,” it said.

It added that this was particularly the case within the bath and shower segment where a range of new brands have driven growth in body wash/shower gel, offering products that exfoliate and provide skin whitening/lightening attributes aligned to consumer demands.

Read also: CBN tasked to look beyond orthodox method to control inflation

Two economic recessions in the last seven years have weakened Nigeria’s foreign inflows, resulting in a liquidity challenge in the country’s FX market. Last year, the naira depreciated against the dollar, dropping to as low as 448/$1 from 305/$1 in 2016 at the official market. It depreciated to 740/$1 from 455/$1 at the parallel market.

The FX liquidity challenge is also a major contributing factor to the country’s inflation rate, which hit 22.79 percent in June this year, the highest in 17 years, according to the National Bureau of Statistics.

“High inflation, primarily driven by the depreciation of the local currency against the US dollar, led to higher production and import costs. This saw manufacturers and importers raising unit prices, challenging consumer budgets,” authors of the report said.

According to Uchenna Uzo, faculty director at Lagos Business School, women will still want to look beautiful no matter how bad the economy is.

“They may not spend as much as they used to, but beauty products are increasingly being positioned as discretionary, especially for females,” he said.

He said a lot of beauty products are now priced in a way that they can still fall within people’s earning capacity for their essential goods, especially women.

“It is becoming a necessity for the younger ones, especially for those that have people who provide the money they need to buy beauty products.”

Africa’s biggest economy with a mostly young, urban, and female population means beauty products have plenty of scope for growth, especially in terms of exciting new products.

Of Nigeria’s 0ver 200 million people, about 49 percent is female, of which 53 percent fall within the 16-55 age bracket. Most ladies enjoy using beauty products, which are seen as an essential part of normal grooming.

Data from the International Trade Centre show that Nigeria’s imports of beauty or make-up preparations and preparations for the care of skin rose to $21.8 million in 2022 from $19.1 million in 2021.

The country imports most of the beauty products from Cote d’ Ivoire, China, Poland, Togo and Malaysia. The country’s exports also increased to $2.67 million from $1.70 million. Its major export destinations are Ghana, Congo, Libya and Mail and Namibia.

The Euromonitor report revealed that competition increased across most beauty and personal care categories, with leading players PZ Cussons Nigeria Plc and Unilever Nigeria Plc losing share, while smaller players gained ground.

“Local companies, such as Zikel Solutions Investment Ltd and Franemm Industries Ltd saw a solid performance, with a range of good quality but affordable brands on offer,” it said.

It said cheaper, imported brands also benefitted from the poor economic conditions, including players such as Milani from Milani Cosmetics Nigeria and NOTE from Note Cosmetics Nigeria Ltd.

“Other good performers included Evans Industries Ltd in bath and shower, and Albani Corporation in fragrances,” it added.